Story of Bunches Ep 3

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Aaron: [00:00:00] Hey, I'm Aaron. In today's episode, Derek will be talking through the turbulent acquisition of his first startup and how it created a path for a new adventure. Enjoy this episode of Starting Bunches.

Hey, what's up

Derek: everybody? This is Derek, your host here at Start Something Founder and c e o of Bunches. For those of you who may want to meet other listeners, ask questions about the bunch of story or really any of our other episodes, you can join the Start Something Listener community@onbunches.com slash start something.

As a reminder of where we left off last episode, we met Tom, who's my co-founder here at Bunches. We were working together at a consumer FinTech company called Exec at that tome, and some of his other friends had started. Things were going well. I had by this time become c e o along the way. We had launched in the New York City area, had tens of thousands of users, but they weren't going well enough to be quite honest.

Some decisions made early in the company were catching up. To us. It was [00:01:00] hard to raise money with a messy cap table, especially in that very frothy VC environment that existed in in 2017 and 2018. We had traction, but. But things just weren't there. And, and added with that, you know, the messiness in our, in our governance and, you know, some cap table issues was really difficult to raise a Series A.

But then where we left off at the end of last episode as a part of the cliffhanger, we had received an acquisition offer. Our first B2B customer had made an offer to acquire us. And before I start to go through that deal, you know, we were making money. Essentially by repackaging data and then giving access to B2B clients.

To reach out and acquire new customers. And so the way that it worked exec was fundamentally a budgeting app and you as the end consumer, you would tie your bank account data and therefore your financial data, your spending data to exec and we would help you categorize it, keep track of your [00:02:00] budgets, et cetera, while at the same time providing all of this in kind of a really easy to use, easy to navigate application, that also included the social feed so that you.

Kind of spend with your friends, so to speak. We were super aware of privacy and, and kind of the data that we, we had, et cetera. And so we did a really good job in protecting user privacy while at the same time building a social kind of feature on, on top of that data. But on the back end, on the B2B end, we actually repackaged that data so that meers.

You know, acquire new end customers for their businesses. And so what that would look like is primarily deals and offers. So we would use data and spending data to match small businesses, hospitality, you know, restaurants, et cetera, to potential customers that were end users of the application. And we could send them a notification, Hey, you know, so-and-so's coffee shop is giving you a dollar off if you show up over the next three.

[00:03:00] Right. And so the end user, our consumer benefited by, you know, getting financial deals, the small business, you know, would actually benefit from acquiring a new customer. And then, of course, uh, bunches benefited by nature of, of connecting both the consumer and the business. Our first B2B customer, they were actually a roll up company.

Of a bunch of different hospitality and, and lifestyle brands. Not only did they have kind of multiple restaurants throughout the New York City area of like tacos and, and kind of a lifestyle taco brand. They also had an upscale gym that was opening. Um, and they had upscale convenience stores kind of throughout office buildings in, in New York.

And so, you know, our initial kind of engagement with them was providing data and those kind of service. To them across those brands, which was stellar for us. And it, and it worked fairly well, a almost too well, right? So the, our first B2B customer made an [00:04:00] offer to acquire us. It was primarily an equity only deal, but given our options at the time, it was a pretty good deal, to be honest with you.

The problem with the entire acquisition, frankly, was me. I didn't wanna do it. I, you know, to be honest, had my doubts about the leadership that we were walking into. You know, yes, I would be joining that leadership team, but fundamentally, I questioned a lot of the strategy, a lot of competence, uh, of that team to, to execute.

And I had my doubts about it. Uh, I didn't. Think or believe that the equity in the deal would be worth a ton over time. And, you know, so I, I didn't value the, the deal highly at all. I tried passionately as the CEO of Exec. I tried passionately to find other options and we did have other options. The, the, the best alternative in my.

Was actually an acquihire option by Max Chen at a firm. I met with him in, in San Francisco for a little over an hour. We hit it off immediately. We're both cut from very similar cloth engineers who [00:05:00] are entrepreneurial in nature, and shortly thereafter, I had an opportunity to become a, an entrepreneur in residence.

At his VC fund. Hard, valuable, and fun based in sf, but to be honest, didn't take that opportunity. My board didn't like it, and I was too loyal, almost to a fault, to the board of the exec. Don't get me wrong, like. Our board at Exec was unbelievable. It was amazing. And, and I would wish every entrepreneur to have a board as loyal, as wise, as founder, friendly as as the board at Exec, they were all strong leaders and strong business leaders in their own right.

And I have nothing good to say about each and every individual on that board. And even collectively, the, the board there, they had our backs, but during this period they were rightfully looking after the good of the company and not just me as an individual and. You know, they pushed to have this hospitality company acquire us.

They, they felt that it was their best chance success in the long term. And so we ended up being [00:06:00] acquired by this multi-brand hospitality company in New York. The goal of integrating our app and, and data with their brick and mortar business. And honestly speaking, like in retrospect, there was a massive opportunity there.

And, and to be honest, I, I, I, I think there. You know, imagine a data-driven membership club for your entire life. A single membership that could provide access to meals like tacos or, or sushi or you know, you know, whatever, like fine dining at at night. That single membership could provide access to food, to workouts in a gym owned by the same brand Convenience.

In your, you know, kind of lobby in your office building if you're working in a city like New York or Chicago or Boston, et cetera. You know, the opportunity was certainly there, but you know, unfortunately my concerns over the leadership team there proved to be validated. I tried my best to be a team player and, but honestly, I got really frustrated.

I tried to do my job and to do it well. I just became jaded [00:07:00] very quickly. I saw squandering the opportunity we had when I, I observed this happen in real time, and so there was nothing very little really i, I could do about it. I, I would try to express my opinions and as patient a way as possible, but for someone wired like me, this was just a form of excruciating torture, to be honest.

No, it sounds like at this point, You know, I hated the leadership team and, and you know, just fought them for everything and, and things like that. And that's not necessarily true. I mean, to their credit, they, they saw this jaying happening. They tried to alleviate the dissatisfaction. They, they really did.

But you know, all of. All of that was on a relational and personal basis. And the changes that I believe should have been enacted were professional and, and corporate. And so the reality at, at the end of the day was that I was miserable. And, and not just me, Tom, who was also a part of the acquisition, was miserable.

Others who had come over to the company via the acquisition were [00:08:00] miserable. And, and honestly, I, I think it was unspoken, but a lot of the. That were there even prior to the acquisition. They saw the writing on the wall as well, and so, You know, we tried to get the job done, but it was increasingly difficult to work in a traditional industry.

Again, for me, it, you know, they were primarily a real estate and hospitality company, and I, I do love the hospitality space. I spent a large part of my early career working in the ho hospitality industry, and, but at the same time, you know, we were coming from a super fast-paced, high innovation environment, you know, wi within the tech sector, and it just, It, it wasn't there.

The, the compatibility wasn't there. And so very quickly, I, I started simply, and I'm not entirely proud of this, but you know, I started simply biting time. I don't really know in retrospect what the, what the end game was for me, to be honest. But that's when I started to get really serious in thinking about, um, bunches as a, as a business, not just a product, not just a weekend kind of project that where I was coding.

And we'll get to that in the next [00:09:00] episode. It wasn't, wasn't just a project or a project anymore. I started thinking about it as, as a potential business. It was all I could think about in my spare time. I, I talked to fellow creators and, and creators that I knew around New York City about their challenges.

I'd read about the creator economy. I, I went in pretty deep, and so meanwhile, day to day things weren't really changing. Increasingly, the leadership and I, we went past dissatisfaction to pure disagreement. I. They also frankly disagreed with Tom on a lot of things. And so on Halloween we had a meeting in the CEO's office.

I distinctly remember it. And you know, we quote unquote mutually parted ways. And after this meeting with one foot still in the office, Tom made a, a now infamous yell between the two of us. He said, we we're up out of here. Months of emotion, it was condensed into that single yell, that single word, and then a wave of.

Followed by a small [00:10:00] semblance of panic, we were now unemployed. And that's for the next episode here on Start Something. Thanks for listening, everyone. We'll see you next week.