Founding stories: The moment 3 startup founders knew they had something special

by John Siegel
April 12, 2018

Part of what makes the tech community so compelling is that there is no singular, sure-fire path to success. The risk associated with spending thousands of hours on a venture can be incredibly intimidating, but where some see a potential for failure, others see the opportunity of a lifetime.

Rarely do founders get the opportunity to take a step back and admire what they have built, but that’s exactly what Built In LA recently asked of three local tech bosses to do. Here’s what they had to say about why they started up, the moves that ultimately paid dividends and the lessons they learned along the way.

 

appetize point of sale startup los angeles
photo via appetize

Few local tech companies possess a more “LA startup” story than Playa Vista-based Appetize, a leader in point of sale software. Initially conceived at a Lakers game, Co-founders Max Roper, Kevin Anderson and Jason Pratts lived and worked on their startup in a small apartment in Santa Monica for three years before it was time for the company to grow.

After securing $40 million in funding and moving into a brand new office, the Dodgers Accelerator alumnus has proven itself a major player in the sports and entertainment industry, helping millions of stadium visitors order food and beverages easily from their seats.

 

When did you have your “Eureka moment” to start the company?

All three co-founders were at a Lakers game in September 2011, and it was there where we saw a really inefficient, broken ordering process. We sat down before the game started and, like many other fans, our first thought was “let’s grab a round of beers.” It wasn’t until the second quarter that a waiter finally came by and took our order. It was in that moment that we started talking about how great it would be if fans could order directly from their phones and get food or beverage items delivered to their seats.

 

After that initial moment of clarity, what opportunities did you identify that prompted the team to found Appetize?

After that Lakers game, we realized that the enterprise point-of-sale market was saturated by hardware-first legacy players running on Windows operating systems that aren’t able to take advantage of what cloud and mobile technologies have to offer. So, we focused on building a software platform that was easy-to-use, hardware agnostic and provided centralized management for the operators.

Over the years, we expanded our product functionality and started to realize that the issues that plagued our first clients also impact education campuses, amusement parks, convention centers, zoos and aquariums and restaurants, really any property with more than 25 cashiers.

 

What were the early days like?

We stayed lean, mean and bootstrapped for the first three years while growing the platform and proving product-market fit. The three of us founders lived and worked out of the same apartment and essentially subsisted off Red Bull and Domino’s pizza.

One of our biggest struggles has been finding an office space we wouldn’t outgrow. We eventually moved to WeWork, then a garage in Santa Monica and a sublease in Playa Vista before finally landing on a 17,000-square-foot headquarters in Playa Vista. We wouldn’t be anywhere without a fully bought-in team of industry experts who see the opportunity to change the way folks order at the largest companies in the world.

 

What has the growth been like since the company really hit its stride?

Since closing our Series A in December 2016, we have grown the team to over 230 people — with 100 in our headquarters — and in January, we finalized our Series B.

 

Looking back, is there one thing you would have done differently? What’s one thing you would never change?

Looking back, we’re glad we didn’t take funding too quickly. We love our current investors, but early on we needed the ability to make decisions quickly, make clients happy and change products when needed without having to get approval. A lot of startups have come and gone in the last six years by taking on investors too early, which limited their ability to make early pivots and test to achieve scale.

The first two years at Appetize was all about learning the value of focus. At first, we were trying to be everything to everyone, and ordering for any type of business. The moment we started focusing on a specific industry — sports and entertainment — was the moment our products started iterating quickly and we started onboarding clients more rapidly.

 

burner team photo atwater village
photo via burner

Headquartered in the shadow of Dodger Stadium in Atwater Village, Burner is an app that offers users a privacy and identity layer for the smartphones. Like most companies, Burner’s current product evolved from something else, but unlike many businesses, its rapid ascent can be traced to a timely prank phone call.

 

When did you have your “Eureka moment” to start the company? 

There was definitely a moment early on when we knew we had something really special with Burner. We had been prototyping an app to help people connect via phone calls by posting their real-time availability. We were getting decent reactions and built a temporary number on top of it, so you could post to Twitter and other social networks as a kind of a public "office hours." Eventually, we evolved that into a standalone prototype we jokingly called "Burner."

When we took it to SXSW shortly thereafter, it was an instant hit. We ended up on a panel when a good friend (and all around lovely person), the late Ted Rheingold, pranked Foursquare founder Dennis Crowley with it. Then a New York Times reporter signed up on a "coming soon" page we created in our hotel room to deal with all the interest.

We got our first investment "soft circles" during that conference —  one of which came on a bus we were taking to the Salt Lick BBQ. The response was an order of magnitude more exciting than the feedback on our earlier prototypes — everyone we met had a use case for Burner.

 

After that initial moment of clarity, what opportunities did you identify that prompted the team to put momentum behind Burner?

Strategically, it was clear to us that a lot of the things we'd been involved with early on the web and 'web 2.0' — things around portable identity, personalization and privacy — were going to play out in all new ways in the mobile ecosystem. We've made a ton of progress with Burner, but we're still in the early innings of "smartphone numbers," and we still have a big mission to fulfill in giving consumers more control over their mobile identity and privacy. If anything, our mission is more relevant than ever.

 

What were the early days like?

One thing that I think is interesting about when we launched is that there were a lot of apps. A lot of mobile app startups were being funded and you couldn't go to a family dinner without getting pitched an app idea. There was a lot of hype, too. Quite a few companies that got funded, in retrospect, never really had a chance to generate the kinds of returns that VCs look for.

We decided early on to charge for our service and focus on growing a revenue-oriented business. We maintained that focus even after taking in VC funding. Our lead investors at Founder Collective are very aligned with our strategy and have been very supportive of this focus.  As a result, we have a real business today. Funnily enough, revenue and transactions are all the rage in the YCombinator set, we hear.

 

What has the growth been like since the company really hit its stride?

We track our growth on several dimensions, but I'm most proud of our evolution from a pay-as-you-go model to being mostly focused on subscriptions. Over time, we've seen a lot more business users and startup entrepreneurs, as well as people who have longer-term use cases. We've not only shifted the majority of our revenue to recurring, but also a large percentage of subscriptions are now multi-line or annual rather than monthly.  

On another dimension, the team has been growing as well. We just brought in a new CTO, Doug Sellers, who I've had the pleasure of working with for years. He's a great cultural fit for us and a real step forward in technical leadership as well.

 

Looking back, is there one thing you would have done differently? What’s one thing you would never change?

There's a whole category of advice that smarter, wiser people have given me over the years that — for one reason or another — I've had to learn the hard way myself. I wish I could have taken a few shortcuts along the way, but mostly, I'm pretty happy with our decisions and the approach we've taken to building our team and our business.

 

tamara mellon office west hollywood e-commerce
photo via tamara mellon

Headquartered in West Hollywood, e-commerce brand Tamara Mellon offers consumers a way to purchase luxury items without the insane markup retailers demand products of such quality. Founded by fashion icon (and Jimmy Choo co-founder) Tamara Mellon, the company hasn’t been without its challenges, but according to Mellon herself the chance to start fresh has led to new opportunities — and the digital focus is starting to pay off.

 

When did you have your “Eureka moment” to start the company?

When I left Jimmy Choo in 2012, I wanted to build a company that was, foremost, for women, by women. I also had a vision to do something no luxury designer had ever done before, and break out of the traditional retail model — even if that meant burning the rulebook I helped write. I’m proud of what Tamara Mellon is today: handcrafted in Italy, direct-to-consumer, and a platform to speak out on the issues women care about.

 

After that initial moment of clarity, what opportunities did you identify that prompted you to found the company?

The majority of luxury brands still operate like it’s the ’90s, when retailers controlled your fate and you designed to their calendar. Tamara Mellon is digitally driven and e-commerce only, which allows us to cater to the way women shop today. We’re also direct-to-consumer, which means that we can offer the best quality shoes without the six-time retail markup.

 

What were the early days like?

There was a brief first version of the Tamara Mellon brand before I launched this version. I didn’t stay true to my inner risk-taker, and I played it safe and got stuck in the traditional luxury business model. Eventually, I decided to admit defeat and start over. Now I’m doing it the way I should have the first time around, and I’m the most “me” I’ve ever been.

 

What has the growth been like since the company really hit its stride?

We’re two years in, and the business is already up three times compared to what we did last year. It’s incredibly exciting to see everyone’s hard work pay off.

 

Looking back, is there one thing you would have done differently? What’s one thing you would never change?

I’m human and I’ve made mistakes. My story is a reminder that no matter what life throws at you, you can pick yourself up, put on a killer pair of shoes, and be true to yourself.

 

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