Bootstrap? Venture capital? How should an entrepreneur fund his or her enterprise?
It's a question you need to consider before you start.
Jonathan Weins is the co-founder of Dah Makan, a business that creates healthy gourmet lunches delivered straight to your office in Klang Valley.
On this episode of Shopify Masters, he'll explain how they found, pitched and raised angel and VC funding to grow their food startup to over 40 employees and 25% growth month over month.
Listen to Shopify Masters below…
You always need to try to make yourself redundant as an entrepreneur—in whatever you’re doing.
Tune in to learn
- Why you should go through other entrepreneurs to reach investors.
- Which numbers are most important to VCs in the ecommerce space.
- What kind of companies are better off fundraising versus bootstrapping.
Show NotesStore: Dahmakan
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Today I’m joined by Jonathan Weins from Dahmakan.com, that’s D-A-H-M-A-K-A-N.com, which creates healthy gourmet lunch then delivers straight to your office, based out of Klang Valley, Malaysia and was started in 2014. Welcome Jonathan.
Jonathan: Hey, thanks a lot for having me.
Felix: Yeah for sure, tell us a little bit more about these, I guess the product … The lunch that you sell and the store that you started.
Jonathan: So we pretty much started Dahmakan in end of 2014, completely bootstrapped and at the very beginning everything ourselves so we quickly put up a Shopify website and then straightaway start cooking ourself, delivering ourself, pretty much did everything ourself. A very good traction and then grew from there. We then raised a couple of small entry rounds and then mostly also the VC round.
And yeah, built our business from … Changed from kind of three co-owners preparing all the food ourselves, delivering all the food ourself to have now a fully experienced kitchen team and a whole tech and marketing team to … Now we are on the 40+ people.
Felix: Wow that’s amazing. When you first launched, how many meals did you have on the menu?
Jonathan: It started pretty much in terms of the product was you had to pre order two days in advance. We had one dish per day so we were only delivering lunch. We would basically tally your order, order today for two days in advance and then we’d deliver between 10AM to 1PM. We couldn’t during that time specify the exact time we would deliver.
Now it’s … Now we have three different dishes that change daily. You can order lunch or dinner as well as pick a delivery time slot. It got a bit more convenient for customers.
Felix: Who are you talking … Who are you trying to target [Phoetic 00:03:07]. What did you see … What demographic did you see in the market there was being underserved that you wanted to go after?
Jonathan: We basically did … The whole vision was to make it very simple to eat, good food every day without the hassle of either driving around to find a restaurant that delivers or that sells good food that you can eat every day without any guilt.
But at the same still is affordable so initially we basically just arrived in Malaysia three to four weeks prior of launching. For us, obviously, given that they were many foreigners so two out of the three are foreigners. We wanted to make sure that we really target broad market so … It would have been easy to really just focus on the experts, but we tried to avoid that.
Therefore, it’s like … Initially, the customer acquisition was very much kind of on the street, going into certain coffee shops or waiting in front of a similar restaurant and trying to catch their first customers, speak to them, try to understand as much as possible about their daily problems to eat good food and when them on [Phonetic 00:04:31] on kind of before they adopt us.
Felix: So you were going to, essentially, alternatives that the … Your ideal customer was already going to, right? To these restaurants and everything and you were stopping them and just trying to get a better understanding of their … What they’re interested in buying and what they maybe were missing out … What they felt was missing in their current lunch options.
What were you exactly asking? How did you guys uncover that there was a potential market here? Was there competition already?
Jonathan: What we saw basically in [Try Kuala 00:05:08], there were a lot of different, very small players, maybe like home-based businesses. Say like, mother with two kids who then start to cook for their friends, maybe delivering 10, 20, maybe up to 50 meals every day to friends, family, and maybe their colleagues. We knew there was a market and we saw a lot of small players in this, but obviously we didn’t really know …
First of all, how big is the market? Who are the exact customers? What is the real problem we are solving? Initially, you could also, we could have been maybe just really nice food.
For instance, one very memorable experience was that we went into a coffee shop and there was one guy basically sitting kind of in the sun with this full suit eating a salad. He seemed like a very interesting person to speak to. So you just went up to him and asked him in a sense, what about the job? Why are you here? Where do you work? And found out pretty much everyday he walked 10, 15, 20 minutes through the sun just to get some kind of different food and there was also one of our already customers and he really loved it. He immediately told us, “Okay, I will order every day.”
At first we thought, okay, everybody tells you that. Everybody tells you that’s a great idea so we didn’t really have expectations he would do that. But he did it and he kind of brought all of his colleagues, ordered for his spouse, ordered for his parents, et cetera.
There was I guess also the initial growth. We got to the customers very organically, a lot of word of mouth. That helps. It helped us a lot to learn from customers as much as possible.
Felix: You mentioned that you started this business off by boot-strapping. Were you guys all working other jobs at that point? How did you fund the very early beginnings of the company?
Jonathan: It was pretty much self-funded. We … All three of us were on full-time. I think after roughly four, five months then we started to get our first angel on board.
Felix: You guys were already in the business full-time right from the beginning?
Jonathan: Yeah, exactly. ’Cause we initially was like, we wanted to test it as much as possible and therefore we decided to quit our jobs and try full-time and then kind of made it, would have made the decision after a couple of months if traction wouldn’t have happened. We imagined that I guess we would have to either pivot or go back to our jobs.
Felix: You already were doing the surveys so you could better understand the market. What did you want to do with an actual test? How did you know for sure that there was going to be people willing to pay for this? What was that initial testing that you guys were doing the very first few months to determine if it was going to be a viable business or not?
Jonathan: Yes, obviously because it’s food, it’s not so easy and because you could basically … Our biggest fear was in the sense that we serve good food and people just order because it’s food, because they like to try something new or because it’s something cool. You order your lunch on the internet. There was kind of … A bit harder to test, I think, than other products. For us, really, the proof of concept came through.
Two things. First of all, the organic growth and word of mouth that I mentioned. Also the frequencies so it’s not … The people that order weekly, maybe even daily some guys, so it was not like they tried it out one time, two times and then dropped off. Retention rate was an important part. Lastly, was simply because we did everything and none of us really had a professional chef background or any major cooking experience so that people really they loved the food and the service told us in the sense the food was important, but it’s not that we had early-on these like five-star hotel chefs that we have now. It’s also kind of important to have a little bit … More like amateur, yeah, food production sense.
Felix: You found that it wasn’t just about the food itself, it was … What about the service do you think people … That resonated with people?
Jonathan: I think what I described earlier it was quite inconvenient, I would say, initially to order. We had to pre order two days in advance and then we would deliver in a very wide time slot. From ten to 1PM. All of these things told us people really need this, and it’s not just something nice to have. There was pretty much … Very important part for us.
Felix: You mentioned that after a few months you felt like you needed … You brought on your first angel investors. What made you guys decide that you needed to raise this capital?
Jonathan: The main consideration was simply that … We saw the traction, we kind of inaudible 00:15:54] bent and fostered the proof of concept and then the three of us were busy full-time with operations. Going to the supermarket, going to the [Try went 00:10:43] market, to buy the ingredients, chopping vegetables until all afternoon, and then cooking until late night hours, until 4AM, we were sometimes roasting pumpkins getting up again at 7 or 8AM, finishing up the cooking and then delivering again.
There was pretty much almost no time to do anything else. There was … One of the main considerations to make it a bit more scalable and to especially free our time and then go to the next level and hiring experienced chef teams, et cetera.
Felix: You guys felt like you were just being stretched way too thin and you needed that investment to … Was it to hire people?
Jonathan: Yeah. Basically to free our time a bit, exactly.
Felix: How were you able to identify or find these angel investors? ’Cause I think that there are other listeners on … Listening to this podcast that are in that similar situation where they have kind of figured out a market, but they just don’t have the resources. Whether it means the time or money to get it to the next level.
How were you able to identify what kind of angel investors to try to go after?
Jonathan: It always depends in the country you’re in. They kind of have to … Also funding environment. For us was very much the first two angels were … The first one was a friend of one of my co-founder from ten years ago. There was definitely a level of trust. The angel had some interest-based goals and then the categories for [Phonetic 00:12:23] and also a bit more in just health and fitness segment. That obviously helped quite a bit.
Otherwise, I think … For us, the additional challenge was in the sense we [inaudible 00:12:34] in a new country so we didn’t have any network here. Otherwise, I think the best thing is really to try to find angels who have interests in the segment and try to get an introduction from a very warm, warmly person. Either an entrepreneur who has previously funded an angel or someone who knows the angel very well.
Felix: You not just looking for somebody that has money, you’re looking for someone that is already … Is reachable in some way through your network and also already working in the space in some capacity. Whether it means they have a company, in the exact same space, or they are very interested in that particular market.
What kind of preparation did you need to do before approaching an angel for an investment?
Jonathan: I guess that depends very much on the angel. In general for finding an investor, you have to make a strong case. You have to know you numbers. You need to be able to communicate a broader vision that you want to achieve. I think it’s especially important to know what the angel is looking for because on angel levels, I guess different than on sea level where it’s very much number-driven and kind of very similar in terms of the questions that you will receive.
An angel might be quite different because it’s more … Most of these guys have very much investing … On one hand, because they’re interested in the space and or in a particular angle. For us, it could have been food production, could have been the logistics angle because that’s also what we were doing on the tech side, it could be maybe also the country or the region.
At the end of the day, angels are investing in the team and in you. That’s kind of the biggest thing that-
Felix: Makes sense. You mentioned the VC’s are … The venture capitalists are a little bit different once you have a right to move onto the next stage beyond the angel investment. Talk to us a little bit about this. What other kind of differences have you noticed when you are … When you have pitched to an angel and got funding and now had to pitch to VC’s and have gotten funding.
Jonathan: The two big differences are … First of all, it’s a very different process. I need much more time to be able to raise for the VC because they … Most of these guys, they’re managing other people’s money so they have a much more structured approach there. They need to do due diligence. They need to get approval from their LP’s, from their limited partners. So it takes much longer.
They need to take all the boxes and then it’s very much stage depending. If you raise from the VC very early on, it’s more similar to an angel. But the longer … Or the later stage you receive VC investments, the process change a bit. You either … You might have some early-on traction. That’s great and it’s important, but early-on it’s really all about the team and about a vision.
The later stage the funding gets, the less important those factors become on the more important that you really have solid numbers.
So far, we raised two angel rounds and then we had a VC round, so it was not as early as others seek funding. The numbers are definitely important, but at the same time, also still it was very much about vision, very much about the team. It’s a trap. VC’s obviously, they … Some of them have different preference, but it’s always count to be questioned like, “What has been the traction? What has been the growth numbers?”
Depending on the funding environment also kind of profitability becomes more relevant. There was also quite interesting for us. The early conversation we had, one or two years ago, was all about growth. Now, we’re speaking again to VC’s for next funding round and unity can make it so much more important. Profitability or the potential path to profitability are much, much more important and much more frequent questions that pop up pretty much every meeting.
One year ago, two years ago, there was very different … I think the general funding environment has quite a big role also in terms of what VC’s are looking for.
Felix: Just to give the audience an idea of the amount of time something like this takes, can you share the timeframe it took for … From the first meeting to receiving the funds for both the angel investors and then the VC round?
Jonathan: Sure. The angel round was pretty much … I was very quick, it was a couple of calls basically. There was … Took like two calls within two weeks and then the angel threw over. After the meeting he looked at our operations underground and then right after the meeting he told us, “Okay, I’m willing to invest this amount,” and we started to discuss [Phonetic 00:18:03] et cetera.
The whole process was extremely fast. Took maybe three to four weeks until then we also got the money.
With the VC’s, took much longer. We basically were kind of … We started too late in a sense. We started approaching investors way too late. Still took roughly four to six months from the first time we approached investors until they … The money in the bank. That was even considered very fast, I know, but we’re starting much earlier. We’re now looking to raise another funding round and we’re starting now with the expectation to close in the next six to eight months and we kind of know we have to now go full-steam to make that happen.
Felix: Do you have to go through a lot of gatekeepers to reach the decision maker, especially when you are going after the VC funding?
Jonathan: It depends. It depends on what the initial contact is. If it’s … Definitely the most important lesson was definitely that warm introductions are the most important part. You basically … You find an entrepreneur that’s received funding. For instance, from this VC, then you kind of build a relationship or you get the introduction from this person to this kind of pitch first to the entrepreneur. Then the entrepreneur makes a warm introduction to the VC.
Most of the time, this would go straight to the partner or to the managing director. Then it’s a much faster process than if you trying to go kind of by the cold approach angle. You find someone on LinkedIn and reach out to them on LinkedIn, then it’s much harder and you will probably first speak to one of the decision makers. They will tell you, “Okay, here, please speak to my analyst or my investment manager.” Then you kind of have to work your way up and that takes much longer and it’s much more difficult.
Plus, most VC’s also they see that this kind of the first test for them in the sense of the ability of the entrepreneur. Can the entrepreneur find his ways straight to the decision maker or through [Phonetic 00:20:36] and through someone they trust, maybe someone they have invested in with. That’s kind of a very good sign for them first, for [Phonetic 00:20:47], for how well the entrepreneur can execute.
Felix: The entre– … The investor looks to see how resourceful that entrepreneur is. It’s interest that you’re saying that you want to go through other entrepreneurs that have received investments from these VC’s in order to get that introduction. When you are trying to reach out to these previous … I [inaudible 00:21:11] not previous, but these entrepreneurs, are they typically direct connections or do you have to … Did you have to build up to get to them too through other … Through your network?
Jonathan: It’s pretty much both. I really already know them. Maybe because they’re in similar segments. If for instance, for us, maybe they also are in food or food tech or in logistics or do something will the similar angle. Then I think it’s generally interesting to reach out to them and have a general chat. Otherwise, if there’s no direct relationship, then you know you can try to look for any other similarities.
The important part is basically … What this entrepreneur does is when he introduce you to their investor for instance, they have themselves have to be sure what you’re doing makes a lot of sense and could provide value to the investors. That’s very important.
Felix: The reputation is also on the line by making this introduction.
Jonathan: Exactly. You basically first have to pitch to the entrepreneur in a sense and then normally they’re actually helpful to introduce you to other … To the investor or other entrepreneurs who can help with introduction because everybody knows how hard it is to get funding. They have been there. They know if they help you know maybe one day you can help them in a sense. Therefore, normally entrepreneurs are extremely open to help. Very grateful to them.
Felix: When you pitch to an entrepreneur that is on your way to getting access to that VC investor, do you pitch them differently than you would pitch to the VC?
Jonathan: I think it’s rather similar. It’s not a such a direct pitch. It’s really more … Therefore it’s kind of with the timing that it takes. You really want to build up the relationship. If you now write an entrepreneur the same way you would write a cold email to an investor, it kind of has the same effect. In most cases, they will not be helpful.
They’re all right if you just tell them, “Hey, we’re doing X, Y, Z, can you introduce me to this guy?” They’re like, “Okay, I don’t know you. Why would I do that?” It’s kind of better as early as possible to start the conversation. Maybe ideally, speak about something else. See if you can in any way can provide value to them. Maybe see a great idea for their business or you see if something that can be useful for them.
Maybe saying for instance, they work in a very different space, they’re trying to do, I don’t know, crunch logistics and you have someone like a great software developer you could introduce to them. That’s something much better than if you just write them, “Hey can you introduce me to this guy?” That’s not so good. Otherwise, the pitch is very similar.
Again, given the reputation risk for them, it’s not just that you seem like a trustworthy person, it’s actually what you’re doing makes a lot of sense, but also that you kind of know that it’s relevant for the investor. It’s also the same thing if you approach investors in most cases it’s really about being really focused instead of trying to speak to as many investors as possible.
There was also a big lesson that we learned. If you see an investor with only [Phonetic 00:24:53] companies in their portfolio, then it’s rather unlikely that this guy will invest in you for instance in the food tech space. It’s better to go to an investor who has existing companies in the space or you know that they’re interested in terms of the sector and the industry that you’re in. That’s #1.
2 is in terms of cost-to-size it does make sense to speak to … If you want to get [Phonetic 00:25:19] funding to speak to someone who does serious B or serious C and they basically … All of the rounds, the previous rounds they have invested in, we’re all seeing in double-digit millions. That normally also means they need to deploy a lot of capital and for them it doesn’t … It wouldn’t make sense to invest $100,000 US dollars or something like that.
This stage is super important. Also, geography and other factors. It’s really about also to make a good impression also to the entrepreneur who could introduce you that you really know everything about this investor. You want to get an introduction to them at the same time. Industry-focus in terms of stage-focus, in terms of geographic focus, in terms of what they’re interested in, what they’re potentially excited about.
If your CVC has written about fitness or something like that and you can mention it in the pitch to the entrepreneur or to the VC, that obviously shows you did you homework and you’re now just randomly looking for introduction.
Felix: Makes sense. You mentioned a few different things earlier about what VC’s focus the most on. They were all kind of related to the numbers. So, profitability, you mentioned unit economics, you mentioned the path to profitability. Let’s talk about each one at a time. When a VC is looking at profitability, are they just looking at the raw numbers? What it is that they are … What should an entrepreneur be focused on when they’re building a company that they’re looking for for an investment. How should they look at their profitability numbers?
Jonathan: It depends a bit on the industry and the product, but especially for eCommerce, I think the funding environment has changed quite a bit. Profitability is important. It’s very difficult for a start-up early on to be profitable, but the important parts come if you have a clear path to profitability. Either you … First of all, you kind of know, for instance, the number of sales you have to do in order to break even. You can also justify that very much on the unit economics level so you know your different margins. You know your contribution margin. You know how much you made from each unit you sell and how many you have to sell in order to break even on different levels.
For instance, when do you break even before kind of operating, marketing, and tech? Tech investments. When do you break even before marketing, for instance. And when you overall break even even and/or cash flow positive.
Felix: Do you want to be in the situation where with the capital, with the funding that the investor is going to give you, it would … Not necessarily immediately … Have a direct on improving those numbers? Is that what they’re looking for? That their investment will have a direct impact on improving the numbers, the profitability, unit economics, and all those numbers that they’re looking at?
Jonathan: It depends on what the reasons you’re raising funding from them, right? I don’t think it has to be like this, but I think the key lesson really … The key message you want to convey is you have a clear path to profitability eventually and they kind of know that you’re not going to increase your burn rate [Phonetic 00:29:13] and then you might in a couple of months. You might have to look for full-on funding and maybe you didn’t really think about how you get that and you just sort of … You underestimate the funding environment. I think that that’s more important parts. Getting a bit risk [Phonetic 00:29:32] on that level.
Felix: Once you do get this funding from an angel or a VC, how do you continue to work with them after they’ve … All the paperwork is done, they’ve given you the money … How do you continue to interact with them?
Jonathan: It really depends on the type of VC. If it’s a VC or like [Phonetic 00:29:54] investor in general, they’re very different investors. Some of them are extremely hands-on. They’re really keen to help operationally and potentially with the strategy, et cetera. For instance, we had some of our investors, extremely help– … They’d be helpful in terms of making introduction to potential hires. They’re have helped basically to close high potential hires.
For instance, they’ve also called them, spoke with them, convinced them. From their perspective, what they’re doing makes a lot of sense, et cetera. Helped a bit on the selling part. Of course also for full-on funding. They can make a lot of introduction to other investors, again. They can help you with sharpening you pitch and your message.
At the same time, you have other investors who are extremely hands-off. Basically they … If they invest in 10, 20, 50 companies, it’s very difficult for them to be very hands on. It very much depends, but in general, I think especially as an entrepreneur you want to keep them updated. You want to maintain, further nurture the relationship. Make sure you keep them happy with the progress you made. ’Cause it’s a long journey. It’s very important to have a very good relationship with them.
Felix: I didn’t consider that they are much more than just sometimes the monetary value that these investors give you, is it possible to identify early on or even before you meet with these investors, what kind of value they’ll give you? Whether it be the introductions, whether it be the industry expertise, or whether it just be hands-off, here’s the funds and a very hands-on approach to work with you. Are you able to identify that before even approaching a VC?
Jonathan: The important part is really that investors do their due diligence on you and your business but it should also be the other way around. You shouldn’t just take money from anyone. It’s very important that you do due diligence on your potential investor. It depends on what situation you’re in, but that you choose your investor or your future investor very carefully and with a view … First of all, what’s your expectation? What are you trying to get out of them? Is it just really just the money or is it certain operation support?
Also with a view for future funding rounds. It always helps if it’s a big fund, if you see that they do full-on investments. Which for some VC’s for instance, they’re not allowed to make full-on investments or they have a limit of capital that they can deploy to a certain company. Those are all things you want to check out beforehand.
Felix: When you say follow on investments, you’re talking about subsequent investment rounds that they would contribute to?
Jonathan: Yeah, exactly. It also depends on the fund size, right? If someone has a lower digit million funds and they already invested quite a lot into your business, then the likelihood is very low that they could do full-on with subsequent rounds.
[inaudible 00:33:45] is due diligence that you do. Ideally, you speak to a couple of their portfolio companies. You could even write … In your investment process you could simply ask them, “Who are companies that you actively work with? Could I speak to one of them? Could you make an introduction to the founders?” They should be also quite willing to do that.
Otherwise, you can also go the other way around and just approach a company they have invested in, kind of reach out to the founder. Say, “Hey, we’re … We’re right now in discussion with these guys. Are you free to have a chat?” You try to find out how do they work with their entrepreneurs and try to get a feeling how the relationship is there.
Felix: This is all great insight into the investment world for eCommerce businesses. Now, for all the other listeners out there, can you talk a little bit about what kind of company … Whether the industry or the [Try stage 00:34:49] that they’re at … What kind of company makes the most sense to … Not makes the most sense … What kind of company is better off looking for investments? Which companies might be better off avoiding working with investors?
Do you have a clear identification for which ones are a better fit for investments versus not?
Jonathan: That’s a very difficult question. In general, you should also … Before you raise funding, you should really think about, “Do you want to raise funding?” I think that’s a very important conservation. The moment you take on someone’s money, you have an obligation and a responsibility and a lot of things might change. If you have been previously completely boot-strapped and you want to have the 100% flexibility in all of your decisions, and you want to be able to make a lot of pivots, then these kinds of things get a bit harder at the same time.
Obviously you can go much faster with what you’re currently doing or what you’re planning to do so communications is very, very important with your investors. I think that it’s something that you should consider beforehand. Do you really want to have an investor and do you really also need to?
I think a lot of businesses, for instance, also can definitely work without any investor, without any outside funding. I think they’re also some huge examples that never raised money and then went straight to IPO if that’s the goal. I think it’s really … It depends really on your vision and what you want to do.
For us, it was very much a view we wanted, on one hand, the operation support and we simply wanted to also go much faster. Therefore, we decided to raise funding. If you’re saying thintech or biotech or something with a lot of [inaudible 00:36:51] et cetera. I guess it’s also … It’s pretty much impossible. You can’t, you cannot self-fund it.
Felix: I realize that it’s definitely a question that has so many variables involved. It’s really … Also a personal question about where you want to take the company and of course some industries will require this kind of investment much more than other industries.
So now I’m wondering for you guys, when you did raise these funds, where they initially specifically for hiring staff? What did you need the money for right off the bat?
Jonathan: Early on was very much to, first of all, free our time from the operational. Every day tasks because we … What I mentioned. We pretty much did everything and obviously as an entrepreneur you have to think about what’s kind of the … What are my priorities? What other things I should be working on? What should I do?
In our case, cutting carrots or cleaning the floor was maybe not the most high-priority work or the best use of our time. Those were the kinds of things that we quickly then outsourced or basically hired staff for. The next thing was simply also for us to move from this kind of home-based business to have a really professional setup and setup a kitchen, hire really experienced chefs, et cetera. That costs a lot of money.
Especially in later rounds, the whole tech parts or different [Phonetic 00:38:36] basically that we’re not just producing the food but we also deliver it and we own the logistics part. We have to have very tight control over it so we’ve developed our own routing algorithm and quite a lot of sophisticated tech part on the back end, on the logistics back end. There we needed really great, smart developers who could help us build that.
Felix: Once you did free up your time, what did you guys want to focus on immediately once you were no longer doing all the cooking and you now have that time to focus on the business. What did you guys want to attack first?
Jonathan: The big part was to further … Talking with you early on was to really do much more customer research and discovery. We spent much more time really speaking to customers, feeling out what they want, and what’s the problem that you’re solving. I guess it’s a bit more on the positioning and on the strategic side. Then after a while, also, marketing and what I mentioned … To take part.
Felix: Speaking of the tech, I noticed once I went to the website you guys have an app as well for android devices and IOS devices. When did this come along? When did you guys decide to develop apps for … You had these two apps for you business?
Jonathan: Roughly one year ago we launched the first version and then now since six months ago we did the major overhaul of the app. We launched it in a sense.
Felix: What made you decide to go this route to create these apps rather than just having people go to the mobile website or the desktop website?
Jonathan: First, was because it was food delivery. The product, we want to make it as convenient as possible. We tried to also look for another order channel. Also, another way to remind people. On the website you can use email, et cetera, to remind people. At the same time, you’re also on the person’s phone and you can send push notifications. You can send SMS, et cetera. You simply have another order channel for them that they can easily access when they are on the go. When they’re in the taxi or on the train. There was, for us, important to have more potential touch-points with the customer.
Felix: Like these notifications or just being presence on their device rather than having them be reminded themselves to come visit you, you are always in their face. Maybe not intrusively, but definitely much more likely for them to see and be reminded to purchase from you.
If someone wants to … At least for your experience, how did you guys go about creating an app? It sounds like a pretty big challenge that is definitely much more technical than just setting up an eCommerce site. What was the process for you guys to create the application?
Jonathan: Much, much more complicated. For instance, our first website was really amazing. I was able to put it up myself. I learned a little bit html and a little bit CFS. I didn’t know anything about website and I was able to … Together with the help of [Phonetic 00:42:17] to put up a really nice designed, or at least from my perspective, nice designed. We had a well functioning website within I think it was one or two days and be ready to accept the first order. That was very amazing.
The whole apps, that’s much, much, more difficult. I couldn’t have done this so we had a CTO who then worked with the development company. Initially, we engaged a development company in India because we simply also … Funding were limited and we wanted to be very fast. This worked very well until certain point. Still took quite a long time. I think took six to nine months until we had first version where people could order.
However, then after a while it also it became more and more complex and then we moved to [Phonetic 00:43:14] and higher developers in-house, et cetera to be able to bring the app onto the next level. Again, much, much, more complex.
For us, the app is pretty much … We see a little bit different behaviors on the website. People they can … ’Cause you can pre order for our service and on the website people are pre ordering more for several days in advance. It’s more for those guys to sit down and then think a little bit about their schedule. Whereas the app is kind of the impulsive and last-minute. Therefore, it’s a bit different and quite complementary behavior on the different channels. Again, the app is much more complex to develop an app especially if you want [inaudible 00:44:05] native apps, you won’t have a nice experience. There are a lot of shortcuts you can try to do, but might make the experience worse and then backfire.
Felix: I think working with an outsourced development company can be … Can take much longer than you might anticipate and can cost a lot more than you anticipated. If you can, kind of, get a control of it early on.
So going back, I know that you have the CTO that handles this, but if you may speak from your experience, if you could go back, what would you do differently to make sure that the process can be as smooth as possible working with an outsourced development company?
Jonathan: I wouldn’t do much differently. One really good thing we did early on when we kind of let different companies, sort of freelance, compete. We set aside a small budget where we said, “Okay. This is just for testing out different freelancers, for instance, different developers.” We allocated maybe five hours or maybe ten hours per freelancer just for them to work on something that we could then easily compare across the difference freelancers and then make a decision who would be the best person to work with.
That’s important, I think, one important lesson we learned. It’s not just the quality they produce in terms of the code or whatever, but it’s very much the communications. It’s actually one of the most important parts of … It’s super important. You can have an amazing developer but if you cannot really communicate with him or her what you’re trying to, this will cost you a lot of headache and takes a lot of time and then it might be better to have someone who is slightly less competent on the coding part but completely understands what you’re trying to do. That’s much better. This communication part is extremely important.
Therefore, you should definitely test any freelancer you work with on that part there. How easy do you think it is to communicate with this person and how quickly does that person get what you need. There might also could be I can work extremely well with one freelancer and my co-founder couldn’t work with this person at all, it’s also a bit on the individual level.
Felix: It has to do a lot with the fit between the personalities of you and then the people you are working with, that you’re hiring. You mentioned that the company’s now grown to over 40 people since starting, tell us a little bit about this experience. ’Cause not a lot of entrepreneurs have the opportunity go through this to hire such a large company. What are some of the more difficult parts about scaling a business to over 40 people?
Jonathan: The interesting part is really that you always need to try to make yourself redundant as an entrepreneur in whatever you’re doing. Early on, you … For us it was this journey. Three of us were doing pretty much everything and then we hired someone for the kitchen or to just clean the floor and cut the vegetables, next part was to have someone who did the delivery. Next hire was then someone who was managing the kitchen. We gradually tried to give away more and more parts of our roles in order to be able to work on the higher value things, the higher priority task.
That’s something very difficult because often you like to do some things. For instance, you like to be very much involved in say the kitchen process, or you love to think about packaging, or something like that or you love to make a post on social media, or design a banner or something like that. You really have to think of, “Well, what does the company need or what does the team need me to focus on?” And be able to give this away and find people who can do it as good as you or ideally even much better than you. That’s the hard part to find the right people and to also identify what kind of people you need and what kind of tasks you need to give away.
Then, really build the entire company’s force. We’re first-time entrepreneurs, we’ve worked in start-up setups before, but I think this was also quite a bit change to really becoming a company instead of having this kind of home-based business or having a team of five where you trust everyone blindly and you know everyone since five or ten years. To having a really proper company setup and having to manage not just the company but also the people. To keep them motivated. To keep them inspired and engaged.
Felix: I love that philosophy that as an entrepreneur, as a founder, you really want to always make yourself redundant. To have people that can take over the roles, take over the responsibilities that you had early on. The more you iterate through that, the faster you can scale. The much more likely you can create a scalable company.
Speaking of the growth, can you give us an idea or how successful or how much the business has grown since starting?
Jonathan: We have been growing around 20–25% month to month when we started. You have times where you grow extremely fast and you have certain things you have to figure out to reach the next growth stage. There was also very interesting experience for us. What you see is a hockey stick that everybody talks about. If you zoom out, you will see it. But if you zoom in, you will see a lot of different extreme growth spurts and then a plateau and then another huge jump up. That’s also something that … Especially if you’re quite operationally heavy as we are, that’s something very interesting for me to witness that over the last two years.
Felix: For running this relatively complex eCommerce business, and has such a … With 40 employees, what kind of apps and tools or services do you rely on to run the business.
Jonathan: We constantly looking out [Phonetic 00:51:12] tools. I think the hard part is to get everybody on board to use it. We pretty much work a lot with the Google Drive or the Google spread sheets, et cetera. It’s quite interesting actually. You can also do a lot of things there that I previously didn’t know about. You can automate a lot of processes.
For instance, what we cannot build ourselves is an email sending through google spreadsheets so you dump into the spreadsheet all of the emails and things like customers when we need someone to send out rain notifications. We just copy-paste all the email addresses into google spreadsheet and then have the text and use google spreadsheets to send out customers emails to all of these emails. It’s something we can’t build ourselves.
Otherwise, we also use [Try Lex 00:52:10] for internal communications. A lot of WhatsApp nevertheless. Personally for me, [Phonetic 00:52:18] made the biggest difference. We can design documents online and you don’t have to print them. There was … It’s kind of silly in a sense, but for me, it freed a lot of my time of my time.
Felix: I guess there’s a lot of paperwork in your line of work then. What do you guys want to focus on this year? What are the goals for the business in 2017.
Jonathan: In 2017, it is an interesting year for us. We ran our … We signed our fundraising process to raise full-on investment. We have seen that in the last year we made a lot of progress especially on the logistics technology part. We’ll focus more on growth and [Phonetic 00:53:07] in Malaysia. Then we’re also looking to expand into another market. We are very excited for that.
Felix: Awesome. Thanks so much for your time again, Jonathan. So dahmakan.com again is the website, D-A-H-M-A-K-A-N.com is the website. Anywhere else you recommend the listeners go and check out if they want to follow along with what you guys are up to or what you’re up to.
Jonathan: You can check out our Instagram and Facebook if you’re looking for some nice tasty food pictures, otherwise definitely dahmakan.com is the right place to check out.
Felix: Awesome. Thanks so much for your time Jonathan.
Jonathan: Cool. Thanks a lot Felix.
Felix: Here’s a sneak-peek for what’s in store for the next Shopify Master’s episode.
Speaker 1: For me, it was one of the most important investments we ever made because you live with your logo forever or their reactions of it. If you get it right, it’ll pay off.
Felix: Thanks for listening to Shopify Masters, the eCommerce marketing podcast for ambitious entrepreneurs. To start your store today, visit shopify.com/masters to claim your extended 30-day free trial.
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