0:00 - What is AptDeco?
0:45 - Why did Reham and Kalam start it?
2:30 - Were they considering other ideas?
4:45 - How did they prepare to start AptDeco after business school/the corporate world?
6:00 - Getting over the fear of starting
9:00 - Communicating that they're starting something to friends and family
14:00 - Starting a startup after business school
17:00 - Helpful learnings from a more traditional business education
27:00 - Early models of AptDeco vs today
31:30 - AptDeco's customers
33:45 - Brands and customer acquisition
38:25 - Learning how to do delivery
41:45 - Deciding not to warehouse furniture
43:30 - Ideas that didn't work and some that worked on the second attempt
48:00 - Analytics
50:30 - Being a NYC company in YC
51:50 - How to make the most of YC
Craig Cannon [00:00] - Hey, how's it going? This is Craig Cannon and you're listening to Y Combinator's Podcast. Today's episode is with Reham Fagiri and Kalam Dennis. THey're the founders of AptDeco, where you can buy and sell used furniture. They were in the YC Winter 2014 batch and you can find them at aptdeco.com All right, here we go. All right guys, well thanks for inviting me to your amazing office.
Reham Fagiri [00:23] - Thank you.
Kalam Dennis [00:23] - Thank you.
Craig Cannon [00:26] - What do you guys make?
Reham Fagiri [00:28] - We art AptDeco. AptDeco is a marketplace for buying and selling furniture, based here in New York City. We take care of essentially, the whole process from pick up and delivery to payment and everything in between.
Kalam Dennis [00:42] - Basically, we took Craigslist and just said to the trusted community of users, if you can make the pick up and delivery easy between two people and the payments between two people, you'd have something useful. That's essentially been the premise since we launched.
Craig Cannon [00:58] - What made you convinced that this could be a fully fledged product? Because I've seen all kinds of blog posts about the fragmentation of Craigslist, right? Some of it's succeeded as products and others haven't. What gave you the impression that this could be a thing?
Reham Fagiri [01:14] - We started out of our own frustration. Just having a really bad experience trying to sell our furniture on Craigslist. But realizing it's a big opportunity was we did a lot of market research to sort of test if this is something that people would be interested in, sort of the premise of the solution. Gor example, we would go on Craigslist initially and test, "Hey, with delivery." We'd actually just copy somebody's listing and just add, "Delivery" and just see how people react to it. We saw that, "Oh, there's definitely a big opportunity there. because people seem to be a lot more responsible "when you just add the delivery word to the listing."
Craig Cannon [01:57] - How could you know that if you hadn't created the original listing? You would dupe it twice?
Reham Fagiri [02:01] - We would.
Craig Cannon [02:03] - You would do one with and one without.
Reham Fagiri [02:04] - Exactly, yes.
Kalam Dennis [02:07] - The other thing, when we did our research, we saw was a 5th most popular category on Craigslist.
Reham Fagiri [02:13] - Furniture.
Kalam Dennis [02:13] - Furniture was the 5th most popular category. When we created an MVP and when we actually had launched the site that first day that we had the Frankenstein of a site, in 2014, we had a transaction the day that we launched it and this is with no earthly idea, really, what we were doing so you know, I just think all those signs kind of pointed to it. And then when we applied to YC and ultimately got into YC, I think that's when we were like, "Oh shit, this is real."
Craig Cannon [02:51] - Were you pursuing other potential ideas? Because the market research thing is much more of the business school approach.
Reham Fagiri [02:58] - Yes.
Craig Cannon [02:58] - It's a less common approach within YC start-ups, right? Were there other ideas that you were considering?
Kalam Dennis [03:05] - There wasn't any other ideas and you know I just... Reham and I wanted to work together for a long period of time. Quite frankly, it wasn't really that scientific and we weren't... I don't think we're the traditional founders in the sense that we weren't serial entrepreneurs, we come from a very traditional business background. But we're like... We took a lot of inspiration from Airbnb and other companies. We're like, "This seems very obvious." We kind of just took it and ran with it.
Reham Fagiri [03:40] - For us, our experience, we were so frustrated with what happened to us when we were trying to sell our furniture on Craigslist. Then we started kind of really, frankly, obsessing over like, "This is just really, really bad." That frankly, I don't think either one of us was ready at the time to start a business but we stumbled upon this idea.
Craig Cannon [04:06] - When you were ending business school, right?
Reham Fagiri [04:08] - When I was ending business school and Kalam... It was sort of like happened all at the same time. I was ending, I was finishing business school, coming back to the city to start a job at a start-up, not start my own company. I was trying to sell my furniture and just had a really, really bad experience and Kalam, at the same time, was also trying to sell a sofa and he also had a bad experience. We were just talking about it and were just like, "Why is it so bad?" Airbnb had just taken off, Uber had just taken off and everybody's just now doing this sort of "sharing economy" so why couldn't you do that with furniture? We just kept on talking about it all the time to the extent we're like, "Hey, let's just do this." You know, "Now is the time. We don't need more experience." That's really kind of how we... Happened, I would say.
Craig Cannon [04:55] - How did you psychologically prepare yourself to go off that ledge and not have the steady you know, Goldman paycheck? Because you also, from business school, do you have loans and things you need to cover?
Reham Fagiri [05:05] - Oh yeah, I still do. I'm still paying those loans, yes. I don't think anything prepared us for what we got ourselves into.
Kalam Dennis [05:15] - Nothing will prepare you. We were just kind of at the point where... You know, I think when we had kind of gotten to the interview point of YC and quite frankly, I was still kind of moonlighting. I was still doing my... I was doing this and...
Craig Cannon [05:29] - Consulting kind of.
Kalam Dennis [05:30] - In the evening and then doing... Working at L'Oreal and that's the only job I had ever had, I had never worked professionally anywhere else so I had... I was very, quite frankly, very happy at L'Oreal. It wasn't like I was... I had always had upward mobility and I loved working there, I loved what I was doing. I was very happy in that corporate environment and had a lot of experience and upward trajectory. We just saw this as an opportunity and then we said, at the end of the day, if we failed, it's not like we couldn't go back to corporate America or go somewhere else and we always were kind of confident in our skills but...
Craig Cannon [06:15] - This is super interesting to me because I 100% agree with you and I think that's true for most people at these super competitive jobs. They're talented enough to get the job, they could get it again. But how do you flip that switch to get over the fear?
Kalam Dennis [06:28] - When we got into Y Combinator, we were just like, "Okay." Actually, when we got to the interview point, then we were just like, "Okay, if we're... "If we get into YC, we got to do it." But you had already quit before. Kalam had already given his notice before we even got to... We had received the interview request but we hadn't been to YC yet for the interview.
Craig Cannon [06:55] - You didn't know you were in?
Reham Fagiri [06:56] - We didn't know we were in.
Kalam Dennis [06:57] - No.
Reham Fagiri [06:57] - But I had already... I'd decided not to take the job that I came to New York for and ended up just doing this full time. Kalam was moonlighting and essentially helped financing it. While he was working at L'Oreal and doing this at night and weekends. We just saw a problem that we became very intimate with and also the solution for the problem, we experienced it during the same time so when we had this really bad experience, trying to sell our furniture on Craigslist, I moved back to New York and I had my truck and Kalam borrowed my truck for that one day, listed back his listing on Craigslist saying, "One day only, free delivery New York City." That same day, someone gave him the full amount and showed up immediately, did not cancel, did not flake, was not sketchy, and so we were like, "Wow, this is... This is how you do it. You have to offer a delivery, you have to take care of everything, you have to make it simple." Ee saw the solution and that really helped us sort of... It fast forwarded our... I guess our process of deciding whether we should do this or not
Reham Fagiri [08:15] - because we had the problem and the solution at the same time and we were like, "Okay, we got to do it."
Craig Cannon [08:18] - Right, so you had that kind of positive feedback from a market.
Reham Fagiri [08:20] - Exactly.
Kalam Dennis [08:21] - And I guess we just felt it was a good kind of common sense solution, as well.
Reham Fagiri [08:26] - Yes.
Kalam Dennis [08:26] - As founders, is like we're very... We're probably more practical than most. And we're probably... We're probably kind of one foot in front of the other type of founders. Versus... I don't know, kind of in the clouds type. We're very practical in a sense and I think that we saw this as a very... Seeing it with our own eyes and seeing the opportunity, we thought of it as a very practical kind of solution to something that... Everybody has furniture, it's a kind of big problem. A lot of those kind of things were... Kind of fit within our... If I have to think back about it, now, through within our warehouse, this is something very tangible
Kalam Dennis [09:07] - and something that could be really useful.
Craig Cannon [09:08] - When you could kind of model it out and say, "Oh, this works." "This works."
Kalam Dennis [09:11] - Absolutely.
Craig Cannon [09:13] - How did you communicate that to your friends and family? From these prestigious jobs and schools and stuff?
Reham Fagiri [09:20] - We're still figuring that out.
Kalam Dennis [09:24] - You know what's funny? For the first time, I actually sat down with my father and I... We've been kind of in these conversations with investors recently so I showed him our investor back and I'm just kind of... Just taking him through the investor deck and I'm like... It's such a strange thing to talk about, raising a few million dollars or doing this and that it just, you know... A lot of times, quite frankly, it's just like you're talking... It's very hard to make it very tangible for... We're saying we're practical. They're uber practical. They understood it. I think when we first did this, back in 2014, I think there's a lot of... I wouldn't say just skepticism. It was just like worried. Just worried, you know, like, "Don't give up that good job." A bird in the hand is definitely the philosophy that my parents have and that probably most people have with that generation, and I would guess and speak on it. You know, you speak on that and they're... If you're had a story, it's like
Kalam Dennis [10:33] - you're going to do... Find a good job at a good company and you'd stay there and so this is... I think it was just so foreign. They were skeptical and worried, but at the same time, kind of supportive.
Reham Fagiri [10:44] - I'm from Sudan, I came to the US for college and so my parents still live in Sudan and so for them, the golden ticket is to have a job at Goldman. Not start a company and just work crazy hours and the whole thing has just kind of been crazy for them so they're finally wrapping their heads around it but I mean pretty much almost every phone call I have with my parents is like, "So, when is this going to be over?"
Craig Cannon [11:17] - Whoa.
Reham Fagiri [11:17] - It's just also they don't live here so they don't see the impact we're making. It's a completely different world for them so they just don't really understand it but they're supportive, which is the important part.
Craig Cannon [11:31] - But there's not a... Kind of a entrepreneurship narrative in Sudan?
Reham Fagiri [11:35] - Oh, it's huge. My dad has his own business.
Craig Cannon [11:38] - This is weird.
Reham Fagiri [11:38] - My entire family, my entire family. All my family members have their own businesses because the way they climb the structure, there, is there are no large corporations. Now, I guess there's a couple but most people are just small business owners. My dad has his own engineering firm, my aunts and uncles, most of them have either their own medical practice or engineering firms or architecture firms or what have you. That's the norm but I guess because probably they're business owners, they know how hard it is to run a business. If you have a job that pays well and you don't have to worry about covering everybody else's salary, why are you doing this to yourself?
Craig Cannon [12:14] - Right.
Reham Fagiri [12:14] - That's probably where it comes from.
Kalam Dennis [12:16] - I actually think in my... My parents, they're probably... Even working at L'Oreal was like a... Kind of a leap for them. They're more like a... Kind of like a good, stable government type of job, quite frankly.
Craig Cannon [12:31] - Oh, where are you from?
Kalam Dennis [12:33] - I'm from California. Yeah, from the Bay Area and so I actually think that they're like uber focused on stability and so where at that... I was never interested in those particular type of things and I was always interested in business and wanting to work at a company that was exciting and innovative. Even for them, I think that kind of seemed kind of like fluff and so this was even another level of really...
Craig Cannon [12:57] - That's such a weird generational thing because you would assume that even being from California, at least seemed like, "Ah, you go work at HP," or something but I guess not.
Reham Fagiri [13:06] - Didn't your dad work in the government or...
Kalam Dennis [13:08] - He did, yeah he did. He did and so... And my mom worked for the railroad, Southern Pacific so I think, you know...
Craig Cannon [13:16] - Super stable.
Kalam Dennis [13:17] - Exactly, super stable. Even a company like L'Oreal or Goldman Sachs that... Goldman Sachs still has a process where they... They go, I think their bottom 10% every year or something like that.
Craig Cannon [13:31] - Really?
Kalam Dennis [13:32] - L'Oreal's an extremely lean company or corporation so it's not a company where you can hide around and skate by.
Reham Fagiri [13:38] - You can't coast.
Kalam Dennis [13:41] - You can't coast and so that's never been the type of thing I was interested in, anyway.
Craig Cannon [13:46] - Okay. Did you go to business school as well?
Kalam Dennis [13:48] - I didn't, I didn't.
Craig Cannon [13:48] - You did not, okay.
Kalam Dennis [13:49] - I went to undergrad at Cork Atlanta, which is a historically black college in Atlanta, Georgia and I recruited for L'Oreal right out of undergrad and I was there for like 13 years.
Craig Cannon [13:59] - No kidding. Were you getting into start-ups in business school? How did this happen amongst your friends? That's been a pretty big shift from 15 years ago, if you went to HBS, it was private equity or consulting, but now, it seems like more people are going to the Googles and the Facebook type companies, right? When you were in school was that coming up?
Reham Fagiri [14:24] - Yes. Yes, it was definitely coming up sort of... There was definitely a shift where more... I went to Wharton and there were more... My class, there were more people talking about tech. Versus going into banking and finance. The market had crashed a few years before and a lot of people are just sort of exhausted from the financial industry and they were looking for something else. Was actually interesting. When I started business school, I knew I was always going to do something... Actually, one of my essays was about building a social enterprise. I didn't know what kind of social enterprise. I always thought it would be connected to Sudan or connected to Africa, in a way, but I always knew that I was going to start something at some point but I didn't think straight out of business school, "I'm ready." I needed more experience and that's why I wanted to join a start-up. When I was at business school, I saw this shift where a lot of people were asking me questions, people who came from finance, about tech 'cause I'm an engineer.
Craig Cannon [15:26] - Oh, right.
Reham Fagiri [15:28] - And everybody wanted to like, "Okay, well tell me more about tech." And like, "How do you be a product manager? How do you do this?" I'm like, "Wait a minute. "All these people are asking about tech and I'm trying to get out of tech. Something is wrong there." I really started digging deeper and... But I did definitely do a lot of start up sort of business plan competitions when I was in business school, talked to a lot of people who started their own businesses and just sort of realized, "Wow, all these people are... I mean, I feel like I'm as smart as them. They can do it, I should be able to do it." That really helped me and I think get further.
Kalam Dennis [16:01] - I was very fortunate to work on this, work on AptDeco kind of at that time because she was being immersed to kind of the start-up world, where I think I was quite frankly very removed from it. When I think about kind of where we are now and I think about pre-YC versus post-YC, just the tech environment, particularly in the Bay Area, I was light years away from that particular world and if it wasn't for Y Combinator kind of giving us a significant immersion into kind of the start-up world, I don't think that we... I don't think we wouldn't have... We would've had the progress that we've had. Definitely not because there's so many things that... You know, I think when we started this, we said, "We have a lot of business experience, we work at great companies, we've worked at great companies, we can just apply that knowledge and start this company." It's the furthest thing from the truth. Just what it takes to get from zero to 10 is a totally different... Zero to 100 is a totally different skill set than what we had acquired during our professional years.
Craig Cannon [17:17] - What were the outstanding learnings from a classical business education? Because there's this common trope that business school is a waste of time and even business education in a lot of start-up culture, right? People fall back on whether it's like PG's essays or lean start-up things. But I'd be willing to bet that there were super valuable courses that you guys took. If you were talking to other start-up founders, what would you pressure them to learn?
Reham Fagiri [17:47] - One of the things that I always think and I always joke with the team about is financial modeling and just being able... I've become pretty crazy with... It's not even financial modeling but just modeling. How do you model? How do you build projections? How do you think about business scenarios and sort of as you think about your next big project, how do you map that out? That was purely from business school. That's probably the biggest thing that I still use everyday, here.
Kalam Dennis [18:17] - For me, just analytical structure so when you're... How to structure looking at numbers in a way that makes sense. That's all I did at L'Oreal. I did my whole, entire professional career and so at first, it was not as applicable. When you're first getting your start-up off the ground, you just got to do shit and throw it and see what sticks and then do more of it and then, listen, you can analyze it later down the line. But at first, it's just like you just got to do a whole bunch of stuff, not in a scalable, manageable way.
Craig Cannon [18:54] - But you're doing the deliveries on your own, too, right?
Kalam Dennis [18:56] - Yeah. We were doing deliveries, we were going to people's homes, buying furniture. We're just doing all kinds of crazy stuff at the instruction of the YC partners and well then, you figure out how to take those kind of crazy, zany ideas and to make them into kind of scalable practical models of things that are repeatable in a scalable way. But after that, after you do that, you have to know how to view your analytics, set up a strong foundation to really be able to look and say, "Did this work? Did that not work? How do I continue to repeat this?" The other things that people don't talk about enough is just establishing a business culture...
Reham Fagiri [19:40] - Team management.
Kalam Dennis [19:40] - Team management, people management.
Reham Fagiri [19:43] - That's huge. That's a huge pitfall for start-ups is that they don't know how to manage people, they implode because they don't know how to deal with conflict.
Craig Cannon [19:57] - Shooter culture.
Kalam Dennis [19:58] - Yeah, they don't know how to talk to one-another. They don't know how to manage dynamics if there's conflict amongst one-another and so I think that's probably one of the biggest things that people don't talk about enough is just conflict management. People management is something that I think that we've been able to deal with. Hiring, firing, all those things are things that we've had experience with that are very tangible and very relatable to a start-up.
Reham Fagiri [20:22] - Even creating structure, I would say. Earlier on, sure, you're a tiny team, maybe you're three or four people. People sort of dismiss the idea, "Oh, we don't really need structure, "We can just talk to each other all the time." But having regular check points like weekly meetings and those type of things actually make a big difference or even team meetings where everyone comes together and talk about sort of whatever's happening next week or what have you. People dismiss that and these are the things that come from business school or come from sort of our traditional work experience that these are things that we've done every day while we were there, right? We've been able to instill that from an early, early, early on in sort of our business. It really helped. It helped sort of calm things down, to some extent, because it's crazy being in a start-up anyway so if you can create a bit of sense of...
Kalam Dennis [21:19] - Stability.
Reham Fagiri [21:19] - Stability, it goes a long way for the rest of the team.
Craig Cannon [21:22] - How would you structure that? Say a founder approached you and this is how you should structure your check-ins or whatever it might be? What's a framework you use?
Kalam Dennis [21:32] - We meet with our direct reports once a week and more if need be.
Craig Cannon [21:43] - Sure.
Kalam Dennis [21:44] - But once a week to just talk through what are kind of the strategic projects that they're working on. We just have our project list sheet that's public for everyone to see. A project list sheet in Google Sheets, simple stupid, and we have all of our strategic projects that people are working on. We touch on those projects and we have kind of tentative due dates. Sometimes you'll finish ahead, sometimes it'll take longer, it's more than you expected. We have those. We also have daily stand-up meetings where we just have a quick kind of touch basis in regards to what we're working on to keep the team kind of...
Reham Fagiri [22:18] - Engaged.
Kalam Dennis [22:18] - Engaged and collaborative. Then we have one time a week team KPI meeting where we review the over-arching numbers for the company, so that could be sales, unit sales, dollar sales, refunds, returns, positive and negative Yelp reviews. All those things that we have about once a week.
Craig Cannon [22:41] - When it comes to conflict, well, actually just dealing with conflict, not conflict avoidance, how do you do... Is that through the one-on-ones?
Kalam Dennis [22:49] - Yeah. It's through the one-on-ones and...
Reham Fagiri [22:53] - We do performance reviews. Even in our stage, we've been doing them for the last three... We've been around for almost five years but we've been doing them for probably three. This is our 3rd or 4th time. It's very simple, we didn't use a software or anything. We just created some questions on TypeForm.
Craig Cannon [23:13] - Which are what?
Reham Fagiri [23:16] - How do you rate this person's ability to deal with difficult situations or their problem solving skills or team management skills or...
Kalam Dennis [23:30] - Responsiveness.
Reham Fagiri [23:30] - Responsiveness. Things like that. I think there were 10 or 15 questions.
Craig Cannon [23:33] - Is it quantitative?
Reham Fagiri [23:35] - Yeah so it's a scale, one to five.
Kalam Dennis [23:37] - And it's 360 so...
Reham Fagiri [23:38] - Everybody reviews everyone.
Kalam Dennis [23:40] - Everyone reviews everyone.
Craig Cannon [23:41] - 50 people review 50 people?
Reham Fagiri [23:41] - No, no. So, this is our HQ team. 10 people.
Craig Cannon [23:45] - 10 review 10.
Reham Fagiri [23:47] - It doesn't take long. Then we review it and then even Kalam and I, ours are public so the whole team gets to see because we have to hold ourselves accountable as well so we find transparency's very important so we share with them the raw feedback.
Craig Cannon [24:06] - Now, are the reviews anonymous?
Reham Fagiri [24:07] - Yes. Very important.
Craig Cannon [24:09] - Yeah, that's tricky.
Reham Fagiri [24:10] - Yes.
Craig Cannon [24:09] - Yeah, that's tricky.
Reham Fagiri [24:11] - We compile the feedback. When you're writing written feedback, there's sometimes you can tell who's who but as the managers, we compile the feedback and try to anonymize it as much as possible. The form itself is definitely anonymous as well.
Kalam Dennis [24:28] - The one thing that, just to kind of harp on that again, that can't be... It's important to stress is just we're not afraid to... In a way that's developmental, not afraid to tell people when they're not meeting a particular expectation or they're falling below but to be able to do it in a way that's very constructive and I know that's just... I know that's from working corporate America, where you have to be politically correct and you have to know how to kind of structure feedback in a way that... In a way that is... That works for a company of that scale and I see a lot of founders struggle with that. I see a lot of them struggle with that and they'll just let something fester on and on because they don't... Because they're not... They haven't had kind of a professional training in conflict management.
Reham Fagiri [25:19] - Oh, for sure. Have you guys had to let people go at this point?
Kalam Dennis [25:23] - Yep.
Reham Fagiri [25:23] - Yes.
Craig Cannon [25:24] - What do you think founders get wrong in that department?
Kalam Dennis [25:29] - We've fallen victim to this. They wait too long, they... THey're not transparent, in terms of... Maybe they'll fire them at... Without really giving them the opportunity to course correct. As a manager, they'll bottle in like, "I'm so tired of this person doing XYZ." And they'll just hold it in for six months and then they'll just be like, "Fuck it, you're fired."
Craig Cannon [25:52] - Explode.
Kalam Dennis [25:53] - They'll explode and this person will be like, "Hey, I didn't even know I was doing something wrong." Those are kind of things that... I think those are some things that people definitely kind of the missteps. What do you think?
Reham Fagiri [26:04] - Yeah, those definitely are the two and we always, if it's performance related... Because sometimes, you're firing because "you're downsizing."
Craig Cannon [26:15] - Sure.
Reham Fagiri [26:15] - Or maybe the role no longer is needed and that's very different.
Craig Cannon [26:17] - Change direction.
Reham Fagiri [26:18] - But even if you're changing direction, engaging that person early on in the conversation so they understand like, "Hey..." And we've actually had to do that like, "Hey, this is where the company's headed. "It looks like we don't need this role anymore. "Why don't we put a plan together to see if there's something else you can do? If there isn't, then start looking for something else." Giving them that opportunity and being that transparent actually was... Was really, really... It's a very hard conversation to have.
Craig Cannon [26:48] - Sure.
Reham Fagiri [26:48] - But it's an important conversation because these are people that we really care about. We want them to also be successful. But in terms of firing in terms of performance, we always talk about, also, by the time you're fired, you should know that you're kind of getting fired because...
Craig Cannon [27:06] - You know it's coming.
Reham Fagiri [27:06] - You know it's coming because we've had plenty of conversations about performance, about expectations, about you not meeting expectations. If it's a shock, that means as a manager, you're doing something wrong. If they're surprised, that means you're doing something wrong.
Craig Cannon [27:21] - When it came to modeling out your product, in the early days, in the beginning, did you ever have negative margins?
Reham Fagiri [27:28] - Yes. We've had to learn what our margin... How do you actually compute your margins and what goes in all the different... The nuance of the transaction. It took us time to learn that.
Craig Cannon [27:42] - Okay, sure.
Reham Fagiri [27:45] - Our fees were just so low. We were charging... I think it was like 10 to 15% transaction fee, versus now, it's like 19 to 29%. And that's because we were not really thinking about margin at all, at the time, which is I think a lot of the issues of start-ups.
Kalam Dennis [28:06] - We thought we knew the cost but then you don't. Once you get into it, you realize there's another cost here, a cost there and so the model is just kind of the foundation and structure but for sure, it's going to change once you kind of... Once you really get into it. That's why I think YC's so good just about you just got to just do it. Just do it because there's so many things that... I mean I don't care how many amazing models you have or how much experience you have, when you do it for the first time, there's going to be some things that you're going to uncover that you weren't expecting.
Craig Cannon [28:35] - Totally.
Kalam Dennis [28:36] - And you got to be able to modify and change for that.
Reham Fagiri [28:38] - Early on, you can't be optimizing just yet for margins. But you know, doesn't mean that you offer your products for free because you still don't know what goes into it like what are the different variables, but once you've established that, "Hey, this is actually a product that works and people want it and they come back," then you need to dig into the data and figure out exactly what it takes to make a transaction, how much it costs to get a customer, all those things and then adjust your fees and prices accordingly.
Craig Cannon [29:10] - I was wondering, you had mentioned in another podcast about partnering up with another delivery provider early on. You guys are doing it in the very beginning, because you're like, "We're going to test if this is a product that anyone gives a shit about." Then you're like, "Okay. Getting this..." Going in the direction of product market fit but how do you even figure out that pricing? Did you just guess that people weren't going to be price sensitive and add an extra 10% on?
Reham Fagiri [29:39] - When we were working with the moving company, we just negotiated the lowest price we could negotiate and then it definitely did not work out because they ended up canceling a lot of our jobs because they get more expensive jobs and our customers were getting upset. Then we brought it in-house and we were just... We kept it at the same price, initially, and definitely at that point was negative margins. Then we actually ran A/B testing, in terms of pricing, to understand price sensitivity, and that helped us determine what is the... Really, the threshold for what people are willing to pay versus... It's kind of like a formula. You can sell more products and lower delivery fees and maybe your fees will cover the difference or you sell less products and higher delivery fees. We finally understand what is the right mix to make it work.
Craig Cannon [30:36] - Do you think that sweet spot is the same across cities?
Reham Fagiri [30:40] - No, I don't think it would be the same. But you'll have to wait and see, yeah.
Craig Cannon [30:47] - TBD.
Reham Fagiri [30:47] - TBD. But New York is... I think in New York, because people don't have cars, it's much harder, right? People are probably willing to pay, I would venture to guess, a bit more for delivery than in other cities. And maybe in other cities, people are willing to pick up things on their own, more frequently, potentially.
Craig Cannon [31:06] - When I lived here, very few... I mean I could count on one hand, my friends who had cars, let alone a truck.
Reham Fagiri [31:14] - And you know what? You do and any friend who has a car, you're always like, "Oh, this is the friend... When you're going to the Haptons, take me with you. or if you're going to IKEA, please let me know." Those friends are always very ... Have become very important, yeah.
Craig Cannon [31:29] - As you guys have aged now, do you... Have you gone up market? Or who are your average customers at this point?
Kalam Dennis [31:38] - The seller and the buyer side are different. We've got kind of two different customer bases. The seller is a little bit older. Let's say they were like 30 to 55 and maybe they're, stereotypically, they're married, maybe they're making room for a baby, they have higher disposable income, and for people listening who are kind of in the New York area, let's just say they're the Upper West Side couple, if you can imagine that. Then the buyer is Williamsburg, 25 to mid-30s...
Reham Fagiri [32:22] - First or second job.
Kalam Dennis [32:22] - First or second job and so they are aspirational so they're... Maybe they were buying IKEA, but AptDeco is now up for them to now kind of get West Elm or Restoration Hardware or Crate and Barrel and they get these really, really Design Within Reach, these really kind of nice brands from this higher end customer base. We kind of have these two kind of parties that we're kind of mashing together I think quite nicely.
Reham Fagiri [32:54] - In terms of your question about up market, we are... We're starting to see a shift where people are... There are more sellers who are becoming buyers, for example, which is, for us, it's a great indicator that we're also changing the way people shop used, which is important for us. If you have a higher disposable income, you probably... You can go, you can afford to go just buy the Restoration Hardware piece again but you're willing to come to AptDeco and shop for the same Restoration Hardware piece at 50% off because you're... For us, that's like a very big indicator. We're definitely sort of raising... Widening the age gap, for the buyer side. The seller side is much easier because any buyer who buys through us ends up selling through us, anyway, when the time is right. But seeing that shift from the seller side, for them to become buyers, it's really big for us.
Craig Cannon [33:54] - Interesting. What percentage of the sales are driven by big brands? How much of the stuff is like Design Within Reach, Restoration Hardware type stuff as a percentage on your site?
Kalam Dennis [34:06] - Around 65, 70% or at the top seven brands...
Craig Cannon [34:11] - Oh.
Kalam Dennis [34:11] - Huge. IKEA, West Elm, CB2, Crate and Barrel, Room and Board.
Reham Fagiri [34:22] - In New York, ABC Carpet and Home but it's only right here in the area.
Kalam Dennis [34:22] - In New York, ABC Carpet and Home so...
Reham Fagiri [34:26] - Restoration Hardware.
Kalam Dennis [34:26] - For us, that was a...
Reham Fagiri [34:28] - Design Within Reach.
Kalam Dennis [34:30] - This whole kind of understanding of brands was a big, "Aha!" moment for us, from an acquisition perspective, from a site merchandising perspective that these are the things that... The levers that drive acquisition and drive how we should be presenting and speaking to the site because these are things that kind of speak to... It's the easiest way to derive qualities is through brand.
Craig Cannon [34:54] - I would also imagine that's like a ton of organic search. Like people are looking for Restoration Hardware Couch.
Reham Fagiri [35:01] - Exactly.
Kalam Dennis [35:01] - Exactly.
Craig Cannon [35:05] - How else are you guys acquiring customers at this point?
Kalam Dennis [35:07] - We acquire customers through Facebook, Instagram, Google... Our original channel, we kind of did this backwards. Our first channel that we were able to figure out was actually Out Of Home subway advertising, here in New York City so... Which is totally backwards.
Craig Cannon [35:29] - Nuts.
Kalam Dennis [35:31] - Definitely not the traditional I think advertising for a start-up. That's why I think... My experience at L'Oreal with kind of Out of Home or TV advertising, all those things, I think kind of winged us to kind of go there and then we had to figure out the digital part after. It actually kind of, I think, speaks to kind of, I think quite frankly, our short-commings from the acquisition perspective, the things that we have to kind of learn as we went along. But now, we've had the time to kind of really figure these things out. But yeah so now we have a really diverse group but the majority of our customers now, they're through referral. Probably 45, 50% of our customers are through word of mouth, friend and family type stuff and so... Which is something we're very excited about.
Craig Cannon [36:17] - That's amazing.
Kalam Dennis [36:19] - How do you track a subway ad? Do you have a unique URL? Because I can't imagine people remember that to type in.
Reham Fagiri [36:24] - Coupons, coupon codes, we also asked people how they've heard about us like at check out or during the listing.
Kalam Dennis [36:33] - It wasn't the coupon because no one used it.
Reham Fagiri [36:35] - No, nobody used the coupon.
Kalam Dennis [36:35] - Nobody used it.
Reham Fagiri [36:36] - It was the, "How you heard?"
Kalam Dennis [36:37] - When we launched in 2014, our... Our traffic tripled after we did it.
Reham Fagiri [36:43] - You get to see it because it was the only channel.
Kalam Dennis [36:45] - It was the only channel we had.
Craig Cannon [36:46] - Seriously?
Reham Fagiri [36:46] - It was like this, pew.
Kalam Dennis [36:48] - Then we'd ask, you know... And when people were either listing a piece of furniture or buying a piece of furniture, like Reham mentioned, "How did you heard about us?" And it was very, extremely obvious. And it also... This is like a shout-out for advertising, but it also had a nice halo effect for our other channels as well. It's like a validator. It was like all this comfort like people have always assumed that we're much larger than we actually are because of subway advertising, no doubt.
Craig Cannon [37:15] - Did you do that with the YC money? How much did you have in the bank when you spent all that on subway advertising?
Kalam Dennis [37:20] - It was a risk.
Reham Fagiri [37:20] - Not a lot.
Kalam Dennis [37:20] - It was a risk.
Reham Fagiri [37:21] - Yeah. It was definitely less than 500k.
Craig Cannon [37:27] - That's a big chunk.
Reham Fagiri [37:28] - Yeah, exactly.
Kalam Dennis [37:28] - It was a huge risk.
Reham Fagiri [37:29] - It was like 50k... 50k for just one month advertising.
Craig Cannon [37:32] - One month of how many cars?
Reham Fagiri [37:37] - There's 6000 subway cars in New York City. We were in one in six.
Kalam Dennis [37:39] - One in six. With one ad in those subway ads. Now...
Craig Cannon [37:43] - Oh, you can't even like A/ the ad? You can't print a bunch of random ones?
Reham Fagiri [37:47] - No.
Kalam Dennis [37:47] - No.
Craig Cannon [37:48] - Oh.
Kalam Dennis [37:48] - One, one, and... You know, at the time, I was just very confident in it. I was like...
Reham Fagiri [37:53] - I was not. I was like, "I know this is going to work."
Kalam Dennis [37:58] - We hired a creative executive at L'Oreal I used to work with and had a great repour with and we hired him.
Reham Fagiri [38:09] - We still work with him on a consulting basis.
Craig Cannon [38:10] - Really?
Reham Fagiri [38:12] - Yeah, he's amazing.
Kalam Dennis [38:12] - We just kind of put out heads together and no A/B testing, did it.
Reham Fagiri [38:14] - We come up with a concept and he makes it look amazing.
Kalam Dennis [38:20] - We were literally kind of bursting at the seams from the response 'cause we didn't have... We did have the back end kind of... We didn't have the delivery operation to support kind of... Kind of the growth that we had at that time so.
Craig Cannon [38:34] - But that's what I also wanted to ask you about because that delivery operation seemed daunting for a lot of people. Did you hire someone with experience in that or you just like wing it?
Reham Fagiri [38:44] - We definitely winged it. That was quite a lesson learned. We probably could've benefited from hiring someone with experience earlier on, I would say.
Kalam Dennis [38:54] - Yep.
Reham Fagiri [38:57] - We didn't know what we were doing . Frankly, we didn't know what we were doing, we were just... You know, it was 2014, 15, we're bursting at the seems. We just needed to fulfill orders and we were just renting vans, we were not thinking of our margins, we were not thinking about how much it cost to do any of that. We ended up leasing long term leases? Eight or nine vans at the time, which is definitely premature because our business is cyclical or seasonal, excuse me, so... We didn't really think about what happens during the low season and then all these vans were just parked in a parking lot but we've learned a ton since then and we now, have our head of operations, who actually comes from furniture manufacturing, supply chain, she's done a lot of this type of operations so she's helped us a lot to get things in order.
Kalam Dennis [39:49] - And at the same time, from an intellectual property standpoint, what we've built, on the operations side... The way that our model works is so we don't warehouse anything. We only pick it up and deliver it in the same day.
Craig Cannon [40:08] - Same day.
Kalam Dennis [40:08] - We're doing hundreds of pick ups and deliveries, across three states and so the scheduling of these two people across... Across all these variables is very complex and I think that... That required some kind of, a little bit of a outside of the box thinking in order to be able to do that so what we've built is really unique and I imagine that building it from scratch and not having any pre-conceived notions in regards to how delivery and logistics works, in some ways, was helpful because it allowed us to kind of imagine something that I think is really different from what anybody's doing.
Reham Fagiri [40:55] - Yeah, that's true.
Kalam Dennis [40:56] - That's why our model is one that's... As compared to other kind of furniture, consignment models, is a lot more lightweight and a lot... Has the ability to kind of scale because we don't have these type of costs because we were able to imagine something really interesting from a delivery standpoint.
Craig Cannon [41:16] - Yeah. There's no kind of open source routing software that you're using? You just kind of rolled your own?
Kalam Dennis [41:23] - We looked for it. We looked for it.
Reham Fagiri [41:25] - We definitely looked but no. We ended up building everything ourselves so.
Craig Cannon [41:30] - Oh, okay. And so are you a CS engineer?
Reham Fagiri [41:33] - Electrical.
Craig Cannon [41:33] - Electrical Engineer. How are you vetting these engineers in the early days?
Reham Fagiri [41:39] - The early days, our team was still very small. But I mean I did a lot of software development at Goldman so. When I was at Goldman in the beginning, that's what I was doing and then I moved to product management and I ran a team of engineers so. I knew how to do that part.
Craig Cannon [41:54] - Yeah, that was possible. Okay. And then what about the choice to actually not warehouse. Was that obvious from the beginning?
Kalam Dennis [42:03] - That was always the plan from the beginning.
Reham Fagiri [42:04] - We never considered warehousing.
Kalam Dennis [42:06] - Never considered it.
Reham Fagiri [42:06] - Warehousing was not the obvious solution for us because we always thought that...
Kalam Dennis [42:14] - You're going to be kept by the space of it.
Reham Fagiri [42:16] - Exactly. It's kind of like if you used a Airbnb example, like building hotels versus making everybody's apartment a hotel. And so we always... Not that we knew that, we didn't think about it at that time but our model essentially is you can make every person's home a warehouse, pretty much.
Craig Cannon [42:38] - Your warehouse.
Reham Fagiri [42:41] - From the beginning, we were essentially trying to solve the Craigslist issue, which is you go to somebody's house and you pick it up from them and you pay them in cash. Then so why don't you just do that by paying them online and then somebody else picks it up for you. And so the warehousing part...
Kalam Dennis [42:57] - It was never a point of consideration.
Reham Fagiri [42:59] - It was not, yeah. And it still... Now it's not and it still isn't.
Kalam Dennis [43:02] - Now, for other reasons, we realized, it's cost-prohibitive. You can't... You can't, in our opinion, build a business model, a sustainable business model, by warehousing everything because you're going to always going to be capped by the space, the cost to cover it, someone is going to have to pay for it and ultimately, it would either be the buyer or the seller on the platform, who was already relatively price sensitive. It's a million reasons why, why, why, in our opinion, it doesn't work. There have been a lot of start-ups that have come and gone that have tried to do it that way and were unsuccessful.
Craig Cannon [43:39] - Were there other ideas that you thought might work and then it just absolutely failed, that you've tried out? For AptDeco itself? Well features.
Reham Fagiri [43:49] - Oh, yeah. Plenty. What did we try?
Kalam Dennis [43:58] - Man, there's so many.
Reham Fagiri [43:58] - I know. Simple things that intuitively should work. Offering photograph... Photographing for customers. Nobody wants to do that.
Craig Cannon [44:19] - So funny. If you took the Airbnb advice and you're like, "This was a huge growth this for Airbnb, this is obviously going to work for us."
Reham Fagiri [44:26] - Nope.
Craig Cannon [44:26] - Doesn't work.
Reham Fagiri [44:26] - Did not work. Offering cleaning services and all that type of stuff, nope, did not work.
Craig Cannon [44:32] - People don't care.
Reham Fagiri [44:32] - People don't care.
Craig Cannon [44:34] - Or they didn't want to pay for it.
Reham Fagiri [44:35] - It's also really discounted so if you go to the same company to do the cleaning, they'll charge you double. We negotiated very good deals and people were not buying them. We couldn't even keep the deals because we promised a certain number of cleaning jobs. So stuff like that. There was a ton of this stuff, stuff that you would think should work did not. People were not budging.
Kalam Dennis [45:02] - You know, another interesting thing too is that there are things that you think they'd work and they don't work and then you do them again and then they do work.
Reham Fagiri [45:09] - That's true.
Kalam Dennis [45:11] - Gor example, we were mentioning the acquisition channels and now we're doing Facebook and Instagram advertising, to date, is one of our biggest channel, advertising channels, and we hired a agency to manage our campaigns before and they were not successful. We hired this agency to do it... Well, we tried... They were not successful and we had the agency do it. A year later, so we weren't doing any advertising on it at all, a year later, we dust it off and we're just like, "Let's just like look through this and see if there's something to be learned from what happened when we tried to use these acquisition channels." And then we saw one campaign, "Oh, that campaign did really well." All the 15 campaigns there, see one that did really well. And we're like, "Let's just turn back on that campaign, let's just see what happens." And then we turned it back on and it continued to do well and we're like, "Well, why did this..." Then that just kind of spurred us really understanding our digital advertising channels. That was really the birth of it. Toward now, it's our most profitable, best channel and it's something that it took us, quite frankly, three, four years to kind of really figure out how to do it, you know. Sometimes, I'm like kicking myself like, "Ah, I wish I know what I know now." But it takes... I think the difficult thing with start-ups is it takes some time... It takes time to figure things out. Some things you have to figure out quicker, faster, some things, you really got to have some patience and one of our mottos now...
Kalam Dennis [46:55] - Mottos now is, particularly from a marketing perspectives is, "I'd just rather do a few things really, really, exhaustively well than just try to do a whole bunch of things to where I can't really understand the nuance and the detail of it to understand if it works or not." I think that that's kind of a big shift that's really paying off.
Craig Cannon [47:10] - It's also so hard with algorithms anyway, to figure out what you're doing well. But do you know what was it about that particular campaign? Was it the audience? Was it the content?
Kalam Dennis [47:21] - It was the content. It was an ad that was testimonial and when I look back, actually, on those campaigns, I'm a little embarrassed by them, to be honest with you, but this one was kind of testimonials so it just spoke, it just had quotes from customers, if I'm remembering correctly, and that did really well. The other ones were really off base, when I think about them now, in terms of their performance and the things we were doing. But you had to throw things out there to have them stick but then we started doing things to focus on brands and doing things like that. We started really looking at our kind of internal numbers, internal search terms and once you start becoming and really understanding your digital channels, understanding your search volume and landing pages, your click through rates, and if you understand those things, let's say whether they're through your website, you can just kind of flip it on it's head through your advertising and acquisition channels but it took us some time to really kind of understand that type of detail.
Craig Cannon [48:19] - What kind of analytics are you running on your site now?
Reham Fagiri [48:23] - In terms of like platforms?
Craig Cannon [48:23] - Tracking, yeah. Figuring it all out, like the flow.
Reham Fagiri [48:27] - We track everything, from clicks to even usability, we record videos, in the background, we track all our data, customer data, all of that and we have visualization tools that we use to visualize it and be able to manipulate it. They've been... It's been incredible. Since we've invested... We've invested in one platform, specifically, and that has completely transformed the way we do things. Because before, we were running SQL queries, right? And so that takes time. So not everybody... Actually, at some point, everybody in our team knew how to do sequel but... But it takes time because you pull it and then you have to manipulate it then you have to analyze it and then being able to just use a tool, a bit expensive, it made a big, big difference.
Kalam Dennis [49:20] - Is there a reason why you're not mentioning it?
Reham Fagiri [49:22] - No, I don't want to advertise it, I guess.
Kalam Dennis [49:24] - Why not?
Craig Cannon [49:24] - No free shout-outs?
Kalam Dennis [49:24] - Why not? Just talk, just say it. We use this tool, it's called, "Looker." It's super helful. It was great. It was a big... It was a big change and I mean I think that kind of opened... I think kind of opened our... Opened us up to more analytics in other ways. Kind of brought us home to our experience, our professional experience before starting AptDeco, to be quite honest with you. At least for me. At least for me, that was the case.
Reham Fagiri [49:58] - We were just able to dig into a lot of details that it was hard to catch if you were just manipulating Excel documents before. Getting to the nuance of brands by category and the time it takes to sell and who are these people and who are the people that are dropping off and why and what did they have in their cart and you visualize it all together so you have these crazy dashboards that can be super detailed then you can actually look at this data and able to make some... Sort of look at trends and make some conclusions and actually able to use it for marketing purposes or for updating the product or operations, even the operations, we've become a lot smarter. Even from our economics perspective, because we're able to look at all the nuance that goes into making a transaction, right? "Oh, okay, this is the revenue, but here's all the costs associated with it." You can see that all together, it makes a big difference.
Craig Cannon [50:56] - Especially for product people. Did you guys do the New York City back and forth during YC?
Reham Fagiri [51:02] - Yes.
Craig Cannon [51:02] - You did?
Reham Fagiri [51:03] - Every week.
Craig Cannon [51:03] - Was it worth it?
Reham Fagiri [51:05] - Well, yes. Definitely, it was worth it. So we didn't know that this is what we were supposed to do so we had rented out our apartments, here, and subletted our apartments and we went to Mountain View and I think... I can't remember if it was PG or...
Kalam Dennis [51:18] - It was PG.
Reham Fagiri [51:18] - It was PG? He was like, "What do you..." First day, he was like, "What are you guys doing here? You need to be in New York." We're like, "Okay." So we started flying back and forth every week for the three months. Yeah, it was pretty...
Kalam Dennis [51:31] - We would fly in Tuesday morning and then out Wednesday.
Reham Fagiri [51:36] - Wednesday.
Kalam Dennis [51:37] - Yeah, Wednesday.
Craig Cannon [51:37] - Dude.
Reham Fagiri [51:39] - Every week.
Kalam Dennis [51:39] - Every week, yeah. And after the end of the day, we like...
Reham Fagiri [51:43] - We crashed.
Kalam Dennis [51:43] - Crashed for two, three days.
Craig Cannon [51:45] - I believe you.
Kalam Dennis [51:45] - After the end of the day, we were... Finished.
Reham Fagiri [51:48] - But it was definitely because during YC, they kept on talking about, "Talk to your customers, "talk to your customers." And we're like, "What does that mean? What does it mean to talk to your customers? We do customer service." They're like, "No, it's not customer service. You need to somehow figure out a way to get in front of your customers." And...
Kalam Dennis [52:06] - I mean still, it was exhausting but it's the best advice we could've ever had.
Craig Cannon [52:11] - What else was helpful? Just kind of like wrapping up, I'm curious, we're about to start another batch. If you could give some advice to the people about to go into the batch, what would you tell them?
Kalam Dennis [52:19] - I would say all the suggestions and all the ideas, no matter how crazy or off base or non-scalable or hard that they may seem, just do it at 100% and do it in an exhaustive way. That's what I would say. The one thing I think that that was I think the key for us, really getting a lot out of YC is that every week, our partners were Paul Buchheit, Kevin Hale, those were our main partners at the time and they would have... You would sit in the group, the group office hours with all the other companies. You'll see that you'll learn that you guys are all in the same boat, all have the same problems to some level or extent and then they would give you this feedback or ideas and then by that following week, we were very diligent about having some legitimate responses to everything that they had said we should do and we just really took that to heart. We just ate it all up. We really dove in 100% and we were not above anything. That was really to our benefit. What would you say?
Reham Fagiri [53:50] - We took our learnings from corporate, in that way, and so we had our one-on-ones with the partners and we created structure so made sure that we set up the meetings every week because it's up to you. You don't have to set up meetings with them every week so we made sure we had reoccurring meetings for the duration of the program and we had goals or you know, like, "Here's our adgenda, here's what we have questions with, and here's what we're looking to get done." They would have suggestions and then the next week, we'll be like, "Well, here's the list of things we got done and here's..." We held ourselves accountable and made those meetings become, to some extent, the reason we're... To hold us accountable for them.
Kalam Dennis [54:34] - Managed up.
Reham Fagiri [54:34] - Exactly, managed up to some extent. And like the advisor would give... Sometimes, it's very specific, like, "You should try..." You know, I think there was one like, "You need to have a blog for SEO." But sometimes, it's just like, "You need to talk to your customers." And it's just like, "Well, okay. What does that mean?" And trying to figure that and distill it is also a big part of... Part of that as well.
Craig Cannon [54:59] - Awesome well if people want to try out AptDeco, what should they do?
Reham Fagiri [55:03] - Go to AptDeco.com.
Craig Cannon [55:08] - Thanks guys.
Kalam Dennis [55:09] - Thank you.
Reham Fagiri [55:09] - Thank you so much. All right, thanks for listening. As always, you can find the transcript and the video at blog.ycombinator.com. If you have a second, it would be awesome to give us a rating and review wherever you find your podcasts. See you next time.