Commentator: From the campus of the Wharton School in San Francisco this is Startup School radio. Here is Y Combinator partner Aaron Harris.
Aaron: Welcome to Startup School radio live from Wharton San Francisco campus on SiriusXM' Business Radio powered by the Wharton School. I'm your host Aaron Harris. I'm a partner at Y Combinator where we fund early stage companies and work with them to make them into billion dollar businesses. You've heard about a bunch of our companies here on the air and you're heard about others here out in the real world. Like Airbnb and Dropbox. Every year we do a conference at Y Combinator called Startup school where we bring in great founders that we really love and have them tell their stories, and everything they've learned from the screw ups to the successes and everything in between.
On Startup School Radio we'll bring these founders to you on a weekly basis, broadcasting every Wednesday at 1 p.m. Eastern, 10 a.m. Pacific with the goal of helping anyone thinking about starting a company learn how to do it better. Coming up on today's show we have Marco Zappacosta, co-founder and CEO of the online community market place for local services Thumbtack. He's joining us to talk about how he went from living in his parents' basement to helping millions of customers across all 50 states.
Then we'll have co-founder and CEO of Boosted, Sanjay Dastoor, who's going come by and talk about how he's reinvented the skateboard with his electric longboard that has enough power to go all the way up hills even San Francisco's hills and break on the way back down. If you're thinking about starting a company or you're an entrepreneur in the early stages of running a startup and you have questions for us, we'd love to hear from you. You can email us at businessradio@SiriusXM. Be sure to follow us on Twitter @bizradio111 or follow me @Harris. So without further ado welcome to my first guest Marco Zappacosta. Marco, you're the co-founder and the CEO of Thumbtack, a truly amazing business, thank you for joining us.
Marco: Thanks for having me, Aaron.
Aaron: So let's start off with that little teaser where you went from living from your parent's basement, I'm sure the pride and joy of theirs at that point, to running a really awesome gigantic and growing company. What happened?
Marco: Well a lot of years spent between that apocryphal basement and where we are today. So I did live at home for the first nine months of Thumbtack, and then I moved into my brothers' house where we worked at it for another almost year before we rented our own house, before we finally got to an office sort of three years in, so we've progressed . . .
Aaron: So no one told you that there was such a thing called office space or what was going on?
Marco: Well you can't live in office space officially but you can work out of a home very well.
Aaron: It's a nice cost saving measure.
Marco: Very much so. When I look back and see sort of the burn rates that we had back then, there were sort of just comically low to the point where my co-founder and I got into a tiff over office chairs. Where he's one of this folks who gets a bit religious about their chairs, and I just didn't understand, and so he ended up buying his own chair because I couldn't stomach 450 bucks for a nice one.
Aaron: Has he gotten paid back at this point or?
Marco: He's okay, he's netted out.
Aaron: He's doing all right. Well hopefully you guys. . . I've been to your office. I think there are some pretty nice office chairs there now so I guess you guys have gotten to the point where. . .
Marco: Yeah, I've been converted. A comfy chair is a very important thing. Yes, so long as you're not dead.
Aaron: So Thumbtack, what is it?
Marco: So we help you hire the right professional for any project like painting your house or planning a dinner party, and we do that by connecting you with the folks who are available interested and bring you their profiles and all the sort of information that you need to make a confident hiring decision.
Aaron: So going from painting a house to planning a party is a really broad range of services, did you start out with the idea of doing that, of basically being able to find anything for anyone?
Marco: Yeah, which was admittedly a little naive, but we had sort of a philosophical reason and a practical reason for doing so. Philosophically the reason was we believe that this purchases or this sort of transactions are fundamentally the same. You're exchanging time for money. And so we believed like other online platforms that there would be a horizontal solution to serve them all. The more practical reality is we didn't have very much money, and we didn't want to have to sort of expend efforts that were simply applicable only in one category. We wanted to find solutions that were agnostic of category and actually geography as well.
Aaron: Sounds like a pretty. . . On the one hand I hear you like you didn't have sort of the resources to focus too much basically because you didn't want build things that only applied to a small spot, but if you are going to be all things, how do you acquire the things first, in this case service providers? Just saying you're going after, let's pick something, plumbers, you could say, "Okay, I know where the plumbers are, I can go find them. That's cheap." But saying you want everything, how do you get to the point where you actually have enough service providers to be useful?
Marco: Yeah. So what we've realized is that day one we couldn't sell them on having customers to offer because we didn't have any. There was no network to have at day one so what we had to do is provide something of value to them sort of independent of Thumbtack, and what we came up with was a simple tool that let them create a profile on Thumbtack and then publish that out particularly onto Craigslist where there were a lot of customers, but these folks were struggling to create good looking profiles and annoyed by having to do so every few days to re-post their ads, and so we gave them just sort of a simple marketing tool ultimately and that's something that appealed to plumbers to tutors to caterers because all these folks were looking for more customers.
Aaron: So you're early growth was kind of a byproduct of the useful tool. It wasn't like we know that this is going to be the thing that's going to attract all this different people. Hey some of our people we want could use this thing, let's see what happens.
Marco: Yeah, it was very deliberate. We wanted them to create profiles on Thumbtack to begin a relationship with us such that we could then attract customers directly to us, and create this marketplace experience. They want to get that going, we realize we had to offer value outside of our network and that's what we came up with.
Aaron: How did you reach out to the initial set of service providers?
Marco: So look, marketing in small businesses is a contact sport. It's not a build it and they will come phenomenon. You have to reach out to them, and so we found basically any and all channels available to us were ones we tried so direct marketing, email marketing, we tried doing things offline, we ran ads. . .
Aaron: Door to door?
Marco: We tried putting fliers up. Oh yeah, we tried everything.
Aaron: What worked?
Marco: So basically what worked was direct marketing both online and offline. So any time that we could either buy an ad or send an email or play something in the real world where we knew a professional would see it, worked well. Things that didn't work well were sort of generalized sort of banner ads or anything that sort of not particularly targeted.
Aaron: So what year is this that your starting this?
Marco: We're talking now 2009, 2010.
Aaron: Okay, so your ability to sort of do targeted ads online, what does that look like? Is it basically advertising on Google? Are you...?
Marco: Yeah, it's Google and it's emails and that's basically what you can do online.
Aaron: How long did it take for those experiments to start bearing fruit?
Marco: Well actually they kind of worked right away, and what we realized was it's not because we were marketing geniuses, it's because all this guys wanted more business. That's the fundamental. . .
Aaron: So it's pretty obvious.
Marco: Yeah, it's the fundamental sort of need of any small business, more customers, and so when we said, "Hey, here's a way that won't directly bring you more customers, but will help you advertise in a place that you already are but in a better more effective way," that really resonated, and so what the challenge was then sort of scaling that up.
Aaron: So was there a point in time where you thought, "Hey, we have this service providers signing up for profiles, maybe this is the business. Like let's just sign up service providers and maybe charge them for a website or something like that?"
Marco: No, that never crossed our minds. We really wanted to build a consumer destination. The fundamental sort of problem we set out solve was hiring a plumber, it is too damn hard, and it makes no sense that it's so hard given how easy the world has made buying books, or staying in touch with friends, and so that is what we set out to do and we stuck very stubbornly sort of stayed focused on that. So it was very much a means to an end.
Aaron: So at what point do you have enough service providers that it starts becoming useful to the consumers?
Marco: So about a year in . . .
Aaron: It took you a year.
Marco: Yeah and we probably had at that point maybe 15, 20,000 professionals. . .
Aaron: Scattered geographically or focused in any given area?
Marco: In the major metros is where they were clustered and what started happening was basically once we hit a critical mass of this professionals signed up in a given area, customers started finding us, either through word of mouth, either through the professional saying, "Hey, you can find me on Thumbtack," or through search, and so that began to attract customers directly to us. which then finally sort of helped us realize this dream of being a customer destination.
Aaron: I think it merits a moment just to think about the scale that we're talking about. 15 to 20,000 service providers is a really large number to get to in just a year for a startup that no one had heard about, and now you have all this people who have listed information with you or are looking to you as a potential source of clients at some point and some people might say "Oh, you have so many people. It's a self fulling prophecy, of course people found you," but it couldn't be further from the truth.
Marco: Yeah, most of these things have happened very deliberately. We've learned of these tactics maybe by accident or simply by meeting the right person at the right time, but ultimately this sort of growth was engineered.
Aaron: I think that a lot of people look at startups that suddenly hit the big time or start getting a bunch of press, and they assume that it was instant it was some sort of overnight thing, but underneath it there are years of work and you guys, I think intentionally and really intelligently, focused on just building the business and not getting distracted by press [inaudible 00:11:30]. You didn't care really about tech press or any of that stuff that I think people look for feel good, you were focused on the business.
Marco: That's right, I say internally that were six tenths of the way to being an overnight success. So more than half way, it feels pretty good now, but no, I think we were compelled and motivated from the start by the view of the inevitable, that it felt that the world had to find a better way to help customers hire professionals, and we felt like we were on that path. There was no one else that was obviously beating us or charging ahead, and so in our mind we just needed to stay focused on that and anything that wasn't helping us get there was a distraction, and so early on sort of press and all that was a distraction. So we didn't focus on it.
Aaron: Right. Does that change at some point? Do your strategies necessarily have to change as you hit certain. . . How many service providers do you have now?
Marco: We have close to a million who are active.
Aaron: All right, so you went from 15 to 20,000...
Marco: In like late 2009, 2010?
Aaron: So it took you a year to get to 15 to 20,000 and then in about four years you added a million essentially?
Marco: Yeah, we . . .
Aaron: That's awesome.
Marco: We almost had 15-20,000 a week now.
Aaron: Wow, do you look back the early days and just think, "Holy crap, remember how hard it was just to get that first?"
Marco: Yeah, well thankfully you forget, so you don't have that sort of frustrations.
Aaron: Like the fog of war descends you forget about the bad stuff?
Marco: Totally, it's the sensory adaptation. You're just living day by day so you forget what it was like a week or a year ago.
Aaron: If you are just tuning in with us I am Aaron Harris and you are listening to Startup School radio. We're speaking to Thumbtack co-founder Marco Zappacosta who's telling us a little bit about how helpful amnesia can be in pushing for a day to day startup. We're talking a couple weeks ago with Pete Koomen from Optimizely who also has been at this for years, has built a big company and he was saying, "It doesn't get easier, it keeps getting harder," and I wonder if you knew that it was going to keep getting harder or if you remember how hard it was I don't know you keep going.
Marco: Yeah, I don't know if he said this but I would certainly say this, well, it's certainly just as hard as it has always has been. It's more fun.
Aaron: It is.
Marco: So trudging through the desert while not having things really working is really not that much fun, but because you believe and because you're sort of committed to this path you keep walking and then there came a day and for us this day was three and a half years in, where finally the model really just clicked and at that point we started to just see crazy growth, we were able to attract a lot more investment. We were able to hire more great people and we have a whole new set of challenges but it's fun. It's fun to sort of think about how to build this business at scale, how to organize the team, how to get the word out about it and to continue to realize our dream.
Aaron: Has your job shifted from being focused on the supply and demand to being CEO of how many people you have working for you now?
Marco: So in the US we have 300 people and. . .
Aaron: That's wild.
Marco: And so I think my job has always been to focus on whatever is existential, whatever risk or problem is existential to us and in the early days it was absolutely building the network. If we couldn't do that, nothing else mattered. Then there came a day where we had to really refine the product experience to make sure that we were the best way to hire, and that took us a while to us to figure out and that was my focus, and then we had to think about and figure out how to make money. And so I was very focused and worked with the team to sort of put the business model in place that we now have and today the biggest challenge is scaling the organization. We have a ton of tactical and strategic sort of issues to solve, but the way that w'ere going to solve those is hiring more great people and organizing and empowering them and so that takes the bulk of my time today.
Aaron: I don't think I've ever heard it framed quite that way, the CEO's job is to focus on the existential threat right to the business and I think the way most people have sort of framed, the CEO's job is to hire, set vision and make sure there's money in the bank or something like that, and that's like kind of true but it's an approximation and really what that's saying is that yeah, it's the thing that could kill your company at each stage.
Marco: I think that's what deserves your attention. That's what scares me in the morning when I wake up so it's naturally what I'm sort of thinking about and trying to help with and work on.
Aaron: So as you've kind of grown and gotten further from I guess day to day operations of the market and of the business, do you feel like you've lost something in terms of being in touch with it or how do you feel?
Marco: Yeah so, you know what, it's double edged. So what I've lost is the sort of deep satisfaction of solving the problem myself and getting my hands dirty in the data, or with the customer research and sort of brainstorming a specific solution, but I have the great pleasure of reviewing and being sort of part of discussions with a lot of people who have done an incredible amount of work in solving these problems themselves. So I'm exposed to probably ever more than I used to be because I'm not sort of in the weeds. I get sort of jump in and two of these teams who are in the weeds themselves. So it's different but it's so satisfying to sort of sit down with people who really understand what's going on and are being so creative and sort of hard working and making things better.
Aaron: Just to uphold, just to reverse direction, go all the way back for a second, did you always know that you wanted to start a company? That this is what. . . and if you wanted to start a company, that this is the company you wanted to start?
Marco: No, we have I guess an atypical story. I don't know if there are typical stories in this world but my co-founders and I actually met at a nonprofit that we started and worked on together in college. It was an advocacy group in the social security debate and it was far away. . .
Aaron: College students with an advocacy group in social security?
Marco: Yeah, yep, and it was a world away from where we are now, but it was a startup and I think it was there that we as a group really came to realize how exciting and fun and motivating it was to build something out of nothing. To rally people around to share a dream and to just shoot for something big, and that was then the impetus to do it again. So this was not something I saw in myself from early on but it's. . .
Aaron: Why didn't you stay in the nonprofit world?
Marco: Well it's very frustrating not to be in control of your own destiny, not to say at Thumbtack we are sort of completely in control but we are much more in control than we were in this sort of big national political debate where forces really way beyond our control were really the drivers of what ultimately happened which was nothing, and so I think we wanted to have a big impact. We wanted to build something and we saw an opportunity to do that through technology and really build something meaningful there.
Aaron: Have you found any extreme differences in terms of working with your co-founders from a nonprofit perspective versus a business perspective? Are there key differences or is it basically the same?
Marco: I don't think so. Look, at the end of the day it's about figuring out what your goal is, aligning everybody around that, and figuring out who is going to do what to solve all the challenges that need to get solved to get there, and the set of challenges, the set of tactics certainly change given the context, but I think the sort of high level it's pretty similar and this was 2005. So we are nearing, it's actually this summer, will be the sort of 10 year anniversary of us working together which is kind of wild. I still seat next to my co-founder and it's the same guy from back then and I think we have learned a lot more about each other, a lot more about ourselves. What are our sort of strengths and weakness and at this point we have an incredibly effective partnership simply because we've been doing it for so damn long.
Aaron: Have you spent more time in the last 10 years with your co-founder or your wife?
Marco: It's close, you joke but we call it our work marriage and we both have significant others and they also respect the fact that we have work marriage, and I get in trouble at times because I use the word we at home and my wife will have to say "Wait, wait, wait, do you mean us or you and Jonathan."
Aaron: Well as long as you can keep enough separation I guess between those things but this is a really interesting thing about the all consuming nature of certainly starting a company, but I think that a startup is a beast unto itself right? Like it's certainly not a job where you get to go home.
Marco: No, you have to have almost an irrational amount of conviction and drive because if you were just looking for the best risk reward adjusted return to your time, you would go into private equity. You would not go start a company and that's a totally fine way of going about things but I think what we were looking for was a chance to do something outsized, and we knew that the odds were long but the journey is . . . you have to be excited about the journey and you have to be sort of motivated by that dream at the end of the road.
Aaron: I was talking to a founder a few weeks ago, actually at Y Combinator's Demo Day which is the end of Y combinator. It's when all the companies get up and they present to a room full of really smart people that they want to talk to and sort of their debut-on like experience. Their first going out into the world, and one of them said to me, "It's crazy but you guys have said" . . . or the program it said "the best way to impact . . . the way to have the most impact on the world is probably a startup, especially in a given period of time," and you did the nonprofit thing, you slog and you slog and slogged to try to effect change. . .
Marco: I would say had we actually been able to reform social security I think we would have made a gigantic impact too. Now, it failed but I think that is the sort of recurring theme across these two efforts.
Aaron: You look at Goggle or Facebook. Facebook starts in a dorm room in 2005 at Harvard and we're now, I guess 10 years later from Facebook and there's 1.3 billion people who use it every month, every month. That is an unheard amount of reach and impact.
Marco: You can argue Google and Facebook have as much impact on the world than most nation states. . .
Aaron: Yeah, easily.
Marco: And that is something that sort of only technology and software via this digital web that we now have is able to do. It wasn't always historically the case.
Aaron: Yeah, I think it's pretty shocking. It's funny, I was rereading a book called Snow Crash. I don't know if you have read . . .
Marco: Yeah, Neal Stephenson.
Aaron: By Neal Stephenson. I was rereading it last week and he wrote in the late '80s in 88, 89 and he envisions the future and it's Science fiction, and he is talking about the Internet, but he calls it the metaverse and it's this virtual reality metaverse, and everyone kind of uses it and it's all virtual reality but really it's just the hackers who really use it, and I think that in the early days of the Internet that made sense that it would just be sort of the technical elite that used it, but now everyone uses it for everything. From checking their email to finding a plumber or . . .
Marco: It's disappearing right. With Thumbtack as a great example do people think they're using technology or the Internet or the web to solve this problem? No, it's just how you do it and you don't get wrapped up in the technical details, it's sort of disappearing into the background of everything.
Aaron: Yeah, it's really just the way things happen. Your phone isn't really an Internet connected device, it's your phone and yeah, it can call you a car or schedule a dance instructor or plan a party for you, and it's just there.
Marco: It just works.
Aaron: It's totally mind boggling, I don't know. I know that this is what I do everyday and we're in the middle of reviewing applications for the next Y combinator batch. It's like seeing all these ideas and you're like "Oh my God, this could be a world changing technology that literally wouldn't have been conceivable or certainly not conceivable in anything but the realms of science fiction years ago." So one of the questions I love to sort of find from people, especially people who have been at this for a while, is your challenges have shifted over time, and you talked about the existential threats and now you think the existential threat is around this hiring and making sure the organization can go. Is that the only existential threat or is there another challenge that you see coming up that is like the thing that's going to focus you for the next year or years?
Marco: Yeah, so the reason I'm focused on this of hiring and organizational piece is because I think that's how we solve the more fundamental existential issues, and for us there's ultimately one and it's about consistency. So marketplaces are in the business of delivering liquidity, to connecting you as a buyer to the right seller each and every time. That's why people still use Craigslist. It's not because it's pretty, it's not because it's safe, it's simply because it has a lot of buyers and sellers, and so our challenge given the localized nature, the cross category nature of what we do is being able to deliver a high quality experience each and every time, and that is partly simply having enough professionals, it's improving the product experience so that it meshes with the underlying needs of that category. It's about extending the experience so that we get you all the way to done so that is our focus. It's consistency, it's reliability and it's super hard.
Aaron: Yeah, to even talk about being able to deliver a consistent experience from a million unique service providers, these aren't pieces of software that run the same every time, these are people . . .
Marco: That's right.
Aaron: Who are interacting with millions more people requesting the service. Every single one of those interactions can blow up and for you to be able to . . .
Marco: That's right and we joke internally that we wish we had an HCI challenge, a Human Computer Action challenge, but the truth is we have an HCH challenge. We have to mediate communities of humans through our software and through our application.
Aaron: That is an awesome awesome challenge what you've done. I don't know. I've always been super impressed with Thumbtack and what you have pulled off. Marco is going to stay with us and continue our conversation with Boosted Sanjay Dastoor who's going to come by and talk about the fun of simple electric vehicles like he's creating to move around your neighborhoods better no matter what city you're in. You're listening to Startup School Radio on Business Radio powered by the Wharton School SiriusXM 111. I'm Aaron Harris, your host, and we will be back in just a few minutes.
Commentator: You're listening to Startup School Radio powered by the Wharton School. Here again is Aaron Harris.
Aaron: Welcome back to Startup School Radio on Business Radio powered by the Wharton School SiriusXM channel 111. I'm your host, Aaron Harris. I'm a partner at Y combinator and I have been speaking this hour with Marco Zappacosta, CEO and co-founder of Thumbtack. Marco, thanks for sticking around.
Marco: Absolutely.
Aaron: And I'm happy to welcome my next guest, Sanjay Dastoor. Sanjay is the co-founder and CEO of Boosted where their first product is an electric skateboard . . . longboard actually, I should probably use the proper term, that has enough power to get you up the hills of San Francisco and break you on the way back down, but the vision is a lot bigger and more awesome than that. So I just want to turn it over and say Sanjay, thanks for joining us.
Sanjay: Thanks, Aaron.
Aaron: So tell us a little bit about Boosted, where did it come from and how did you build like . . . why did you build an electric board?
Sanjay: So Boosted came from something that we wanted to build for ourselves which is how a lot of great ideas start. Two of us were students at Stanford in graduate school, we worked in robotics labs. We worked with modern motor and battery technology, the same kind of stuff actually that has enabled drone suddenly to become possible when they weren't five years ago, and we wanted a better way to get to campus and me and my friends we like to ski and snowboard and kitesurf and motorcycle and w'ere okay wearing a helmet on our way to work. So . . .
Aaron: You have a lot of options for travel.
Sanjay: Yeah, so whatever is most fun, right? So we ended up . . . my co-founder John builds an electric skateboard out of the parts that we used in our lab basically and what happened was the gas vehicle industry has fueled a lot of the electric vehicle industry. So if there is a big market for gas cars and a lot of people work on electric cars same with motorcycles, ATVs, stuff that you can already buy, but not a lot of people said, "Hey, how can we apply new technology to platforms that weren't big with the gas engine on them?" Skateboards happen to be one of them and so a lot of technology that was out there, was lead acid batteries, big motors, they were heavy, they were bulky, they weren't cool. So John built one and we knew we were onto something because people would chase him around campus asking where they could get one, and they just made getting on campus, getting . . .
Aaron: Did they catch him?
Sanjay: No, usually not. Although the first one didn't have brakes so it also required a little more skill to ride.
Aaron: I think when some people hear about this idea of like an electric skateboard or electric conveyance their brains immediately jump to Dean Kamen segway which promised us that it was going to revolutionize the world of personal transportation. I think it's safe to say it didn't, but you guys are tackling this from a different angle which I think is super cool. So do you remember when that came out? Did that influence you at all? What did you learn from that kind of failure I would say?
Sanjay: At the time I just remember there was a lot of hype and then I remember that it flopped and it's actually a really sad thing that's what Dean Kamen is known for because he's built a lot of realy great things . . .
Aaron: He built the insulin pump.
Sanjay: He built insulin pumps, he built the first robotics competition but a lot of people go to him and say, "Oh, you are the Segway guy". Anyway, the interesting thing was I just finished reading a book . . . rereading a book this Past Christmas break called Reinventing the Wheel which was this journalist who had shadowed them and talked about what things had gone well, what things have gone wrong . . .
Aaron: On the Segway specifically.
Sanjay: On the Segway, yeah, and his book proposal was what got leaked and created all the hype. It was the thing John Doerr and Steve Jobs were saying he were going to change the world, Jeff Bezos, all those people were hyping it up. So that was part of the proposal for the book. So the book ends where that hype thing starts. Because then they said, "You can't keep doing this." Anyway it's a really interesting idea but actually one of the things that Paul Buchheit from YC talks about is you eventually want to build something that everybody is going to really love and you can either start by building a horizontal slice of that, or a vertical slice, either build something that everybody likes or a few people really love, and so one thing I think in hindsight we think we did well with the longboard is that we built something that doesn't appeal to everybody but the people it does appeal to just can't get enough of it, they really love it.
Aaron: So if that's the model you used where it's thinking like, hey, we're just going to do something that a few people really love, how can you possibly have confidence that there is more than just a hobby there?
Sanjay: It's a good question. Basically what you have to do is kind of tease out . . . you have to read between the lines basically on how people use it, what they find really appealing. If people use something . . . a lot of great companies started out as something that looked like a hobby or a product that seem like a toy initially.
Aaron: Microsoft and Apple are both pretty good examples of that. Microsoft was Altair BASIC which was a programming language for a small number for hobbyist and Apple was the home brutal computer club, they like built the board. They built little tiny computers that no one really could use except a few people.
Sanjay: Exactly, so I think there's two things that we've looked at that give us some confidence this could be a much bigger thing. So one of them is what are the things that are changing in technology and there's a few things that have been changing and are going to continue to change in that area. So one of them that that's pretty popular now is lithium battery prices. So as more remote control hobby toys all the way up to electric cars start using lithium batteries as the way our smart phones and laptops do, the cost per kilowatt hour, the cost per mile of range of those batteries is dropping, and so the projected cost for a battery from the gigafactory that Tesla is building in Nevada is going to be around 100 bucks per kilowatt hour as the estimate, and so that's a 100 bucks for 60 miles of range with a light vehicle.
Aaron: How much was it five years ago?
Sanjay: Five years ago it was maybe around $800 to $1000 and so it hasn't been dropping like on a [inaudible 00:33:32] but it's been dropping steadily over time because there's such an incentive to get those costs lower. So that's one big thing. The other one is connectivity so being able to connect a phone, being able to connect a cellular radio to light vehicles means that you can update the software over the air, you can teach people how to use it. You can make an entirely new user experience because now someone has a screen and it's connected and people can share their routes, they can connect to other riders, we can fix bugs remotely. So you see with Tesla, for example, they can do a recall according to the regulations it's called a recall but it's just a software update instead of having to bring all the vehicles back to the dealership for a reflash.
Aaron: That's wild.
Sanjay: Yeah.
Aaron: A couple of weeks ago Tesla updated their software to give every single car they've sold the ability to automatically route. Like adjust your route so that you never run out of charge. So you always hit a super charging station and they're saying there's going to be another software update this summer that's going to give their cars the ability to drive themselves.
Sanjay: Yes, crazy.
Aaron: It's crazy. You don't have to buy a new car, they would just update the software.
Sanjay: Yeah, so there are certain products like cars actually where the best day you use that product is the first day and every day after that you kind of get used to it becomes normal. . .
Aaron: It depreciates.
Sanjay: It depreciates right and so the way the way to sell you a new car is to get you to sit in one and you drive it and six months later you are habituated to it again, but some products like your phone have gotten better over time because they get new apps, people develop things for them, they get updates, they can connect to things they couldn't connect to before. So I think it's actually going to be a huge shift not just for us but for a lot of hardware products that the connectivity will enable things. Some things people talk about today and some things that we haven't even really scratched the surface of.
Aaron: Yeah. Marco, how do you think that about that? About the fact that the software can change all the time and that's the thing that stays new. Do you constantly refresh what Thumbtack looks like and the experience to like keep it new and interesting or is that a different experience?
Marco: So the motivation isn't necessarily to make it new and interesting but to make it better and it changes five, six times a day. Now globally, we're not changing the whole experience but we're tweaking little parts, we're sort of trying a new experiment and that's the reason we've been able to cumulatively make as much progress as we have been. Because we don't have to do this monolithic pushes and then wait a long time to get feedback, you can be incremental and you can say, "Hey, let's try this out, let's learn, let's play, and let's get feedback," and that's how you very quickly validate your hypothesis and move forward.
Aaron: I think that makes total sense. It's not about just making it new, it's making it better for the customer, but that incremental iteration which is so easy in software in a lot of ways. Sanjay, you can't do that with a new board, right? I mean, every time you make one you have to set up production lines, and all source and design and engineer. How do you think about iteration or let's go back to the beginning and say, okay, so your friend who would be your co-founder like build this thing, how do you go from that first prototype to deciding, hey, we're going to make this a business and then how did you figure out like what the hell the first Boosted board would really look like?
Sanjay: So the fast iteration thing was something we actually got really pounded into us when we were in YC. It was a given for a software company, and so for hardware I think one of the things that's let people build really interesting new hardware platforms is that you get a lot of great things off the shelf now. So you can get a processor with a full development environment for like 30 to 40 bucks, you can get Bluetooth radios, cellular radios, you can get motors and batteries and everything. So it's really amazing what you can build and iterate with without having to develop all this custom stuff. So that's actually the initial way that you can iterate and I think it allows the early prototypes to iterate fast.
Then when you get to production obviously, like you said, you got to tool up and you can't change things that often but, then if you design your system to be extensible then you can effect things. Like for example, we can make the board, the skateboard we have, easier to learn how to use. So for instance, the on boarding process that people have if they have never boarded before, we know the tutorial, the software, the motor control software all of those things are things we can change with a software update. So like Marco was saying, you can update and iterate that with a select group of people instead of just pushing it out to everybody and push these updates out as long as you have a platform that supports these updates.
Aaron: That's so cool, it used to be that a hardware device, like you said, it was a hardware device, and so companies didn't really think about an iterative cycle, they thought every six months or a year or two years . . . Remember when we all spied our new computers, it was all right, every year there was a slightly faster model out there. That was basically the improvement. It was all just still running Windows and that was basically it, but with a piece of connected hardware . . . okay, you can't get as rapid an iterative cycle as you can with software on the hardware itself, but between the hardware and the software you're deploying for that iteration is as fast as anything out there.
Sanjay: Totally and there are certain things like a rough list I've thought of is if it has a screen, a rough list that if it has a screen, a processor, a camera or depends on high speed connectivity like a modem of some kind, those things tend to have very fast upgrade cycles. So think about your phone, think about a GoPro, a lot of those things from a year or two ago are already obsolete, but the upgrade cycle for a car is 7 years or 10 years, and so I think the software changes are going make it a lot more.. You're going to get a lot interesting features added to the car every year, every six months the way Tesla is doing, even though the model may not change.
Aaron: Do you think that's going to stop people from buying as many cars or pieces of hardware, are they going to say, "Hey, this one is good for 20 years, it's made better and the software updates it's like a new car whenever I need it and it's just getting better for me?"
Sanjay: That's actually a big issue with the car companies and anything that has a long upgrade cycle. Is that the car businesses are actually not very good businesses if you look at the normal matrix that you'd measure a company by. They spend a lot of money acquiring customers, their market cap is a fraction of their revenue. Because they spend a ton of time convincing you to buy the new car and then 10 years later you may or may not buy from them again. So your lifetime value . . .
Aaron: There's no real customer lock-in like it's . . .
Sanjay: Exactly and there's so much competition that the margins have drooped to be very slim.
Aaron: So how do you think about it? You're someone running . . . now granted the board which is your first product isn't the same upgrade cycle as a car or something like that probably, it's not 10 years, but how do you think about your customers and keeping them happy and keeping them buying from you?
Sanjay: Well yeah, I think that what we are going into with this light vehicle market is totally new. Like you're [inaudible 00:40:38] going to be able to build light portable vehicles for cities for neighborhoods for campuses that are very inexpensive to own and operate . . .
Aaron: Can you give me some examples of light vehicles?
Sanjay: Yeah, things like the skateboard, like a scooter, something with a handlebar, things like bicycles. I think we're just starting to scratch the surface of what electric bikes can do and a lot of people have been looking at electric bicycles as taking a bicycle and just like adding a motor to it, but not really thinking about the whole . . .
Aaron: It was a big nasty battery or a little two-stroke.
Sanjay: Exactly, so what can you do with software connectivity to make it easier to ride or make it harder to steal, or make it less work to maintain? Can you make a vehicle that people can use for all sorts of things you wouldn't even have thought of. So I think because it's a newer market the saturation problems are problems we're going to get to later.
Aaron: You're be like Ford Motor company in 1904 or 5 or whatever it is and not today.
Sanjay: Yes, exactly, that's the idea, like the model T had some crazy market share and basically built Ford for decades . . .
Aaron: And they didn't change it. He didn't lose, it's an interesting story in the annals of innovation where he builds the model T and then doesn't change it for like 10 years until they release the A, and that time Dodge shows up and GM shows up and they build these innovative companies that are producing different things to meet the customer demands.
Sanjay: Yeah, they sold the model T I think for at least 20 years I want say somewhere there.
Aaron: 20 years.
Sanjay: And the cumulative revenue from that one product was enormous at the time. It completely changed. There's a reason all these car companies came into being too because it was such a big market. And today if you build the bestselling car in the world you have 1% market share.
Aaron: What?
Sanjay: Yeah, because there are so many different options out there so . . .
Aaron: The Corolla?
Sanjay: Yeah, things like the Corolla, things like the Civic, the Taurus from 10 or 20 years ago was the bestselling car for all the Camry.
Aaron: 1% market share, that's it?
Sanjay: Yeah, that's the best you can hope for. I mean, that's great but . . . and the cost of developing a new car today is several billion dollars just for one model.
Aaron: That's crazy. I would bet that Tesla has a larger market share in Silicon Valley.
Sanjay: Definitely.
Aaron: 1% you can't avoid getting one.
Marco: On the Peninsula they sell like... 11% of new vehicles sold are Teslas.
Sanjay: I wouldn't be surprised, and it's funny too. You see people using them and you see what's really exciting about a Tesla and that's that it's a better car, it's not just that's slightly different or it's marketed better or something.
Aaron: No, it is fundamentally a better car, having driven it, I don't own one though I'd love to, but having driven it, it is the best driving experience I've ever had. If you're just joining us we are talking to Sanjay Dastoor of Boosted and Marco Zappacosta of Thumbtack here on Startup School radio. I'm your host Aaron Harris and we've been talking about sort of innovation in the vehicles industry actually. We're getting a little broad here but how people think about it and how people buy the things that get them from point A to point B and how that changes over time. So we're just talking about how great it is to drive the Tesla which is an electric vehicle and Sanjay you started out . . . again, just going to go back to this because I think it's so fascinating, you started out with this hobby board, this electric board and a couple of people liked it and a couple of people wanted it. How did you know that it was actually a company? What changed and how did you go from there to saying it's not just about the board?
Sanjay: So one of the pieces of advice we got early on in YC actually was we were going to launch Kickstarter and crowdfund our first production run of boards because people we excited about it, but a lot of people said they're excited about things and then when push comes to shove, are they going to really pay for it or use it?
Aaron: Getting people to put their money where their mouth is is an important thing.
Sanjay: Yeah, that's huge. And one of the downsides of Kickstarter is you can launch something and then take months or maybe over a year to fulfill it. So you don't actually get your product in front of users and actually find out if they use it the way they think they will or if they are as excited . . . are they going to use it for five minutes and put it in the closet or they're actually going to stay engage with it?
Aaron: It goes back to this hardware iteration cycle thing it's even longer because now you're just selling something that doesn't really exist yet.
Sanjay: Yeah, exactly, and actually a lot of hardware companies end up in this kind of limbo state or this kind of purgatory state where you get enough traction because you get a wide audience with something Kickstarter that you have to now fulfill a few hundred units, but it's not enough that it's really going to go beyond that. Like you kind of get this big marketing burst from Kickstarter and then it just drops to almost nothing after that. So anyway, so the advice we got is to build five boards and sell them first before we launched anything else and they said . . . this was P. G. and Sam and they said, "If you guys can't sell five, then you know that something is wrong and if you can't grade them you already have users using they can tell you what they like and don't like. One it was really easy to find those five people and two they loved it . . .
Aaron: Who were the first five?
Sanjay: So the first five were Garry Tan at YC, Aaron Iba at YC as well, Rob Moller [SP] who I think one of our employees met in a bar randomly, Rob Trice who was an investor we met at a product expo who just said, "Hey, if you ever sell one of those give me a call." He gave us his card and so we called him months later and said, "Do you want to buy it?" and he said, "Sure." And then Julian Mann who we knew from Stanford, he's actually one of the founders of Skybox Imagining, and he was so excited he's like, "Can I pay you more for the first one?
Aaron: How much was the first one?
Sanjay: $1200.
Aaron: $1200. How much is the skateboard?
Sanjay: That skateboard was 300 but you can get one as cheap as a 100. So I think they saw that it was a little bit different than that. The funny thing is someone like Garry didn't board before and then someone like Julian boarded almost every weekend. Snowboarding or kitesurfing or something. So we got a good mix of people and we saw them . . . especially because it broke all the time initially whenever we would take it back for repairs they would say, "Hey so when I'm I getting it back because I miss it. I'm using it a lot."
Aaron: And that's super interesting, had you waited until the Kickstarter delivery you would have all this broken boards out there and all these people complaining who probably wouldn't have been as friendly to you but you had it in the hands of like friendly people who liked it so they were a little more forgiving.
Sanjay: Yeah, exactly and we discovered things that were unexpectedly bad. So, for example, we used remote control airplane batteries and chargers and these charges have to work with a bunch of different kinds of batteries and so you have to . . . little screen and some buttons and you have to select what kind of battery it is. It's multiple connectors, nobody wants . . . they just want to plug something in like they do with their laptop and have the light turn green and say, "Okay, now it's done," but you don't think about that when you are buying something. That's not the first thing in your mind. Like "How does this thing charge?" So we found that the charging system we'd initially use people didn't like it and so we learned, we made a list of all the things we want to change if we wanted this thing to actually be like really delightful to use.
Aaron: So how long did it take you from selling those five boards to launching the Kickstarter?
Sanjay: So it took about three months or so. So we sold the boards early in the summer and then we launched a Kickstarter early in the fall.
Aaron: And was the Kickstarter design the design that you were basically pitching on Kickstarter substantially different than those first five?
Sanjay: Not really. The boards we used to showcase, like to make the video and everything, were the boards that we sold but some of the things we promised were things that addressed the issues that we had learned from those first users.
Aaron: I don't think most people appreciate how fast that is, to go from like A to build five boards of a thing that has never existed before. That's awesome and then getting to the point where three months later you're saying, "Look, this is what it's going to look like. We also know we have the engineering ability to build it and we're going to deliver it in how many months?"
Sanjay: Well we had initially promise about eight months.
Aaron: What did it take?
Sanjay: It took a bit longer. I think it took about 14 so we were about six months late.
Aaron: And how many orders did you get?
Sanjay: We got about 350 orders initially.
Aaron: That's awesome.
Sanjay: But the interesting thing is we were also one of the first campaigns to try asking for more than a $1000 for something like Kickstarter.
Aaron: Really?
Sanjay: Yeah, a lot of people hadn't done that. We weren't even sure if we would, if anybody would trust people they'd never met on a product they never tried to put down more than a 1000 bucks for it.
Aaron: That's a crazy thing. Marco, you were telling us earlier about how you initially got people in, they didn't have to pay you anything, right?
Marco: No, they didn't have to pay anything.
Aaron: Do you think you would have gotten thousands of contractors signing up if you would have told them it was a $10 fee up front?
Marco: No, we were lucky to have gotten 10.
Aaron: I think that's sort of an illustration of I think the power of the idea of what you were selling and also the reach of the Internet where you can reach these people who I'm guessing were not all your neighbors, right? They didn't know you. They were just people who were like, "Holy cow, that's one of the coolest things I've ever seen. I want a Boosted board."
Sanjay: Yeah, yeah. It's a challenge for software because a lot of people . . . so much of the software you get today is free, like really great software, that people kind of assume that software should cost nothing and so . . .
Aaron: Everything by extension everything should be free.
Sanjay: Yes, no, with hardware people still say, "I pay some money, I get a physical good." The tricky thing with hardware is it's really easy to end up early on. Something like I think it will cost about a few hundred bucks to build this, but then it turns out you have to add in safety certifications, and then you have to redesign this part to be reliable and then your cost climb and then you end up with your margins getting a little . . .
Aaron: So let's talk about this because I think this is one of the hardest things that you did and one of the best things you did where you actually had to change the price in the end. . .
Sanjay: Yeah, it was . . .
Aaron: How can you possibly go back to 300 people or whatever and say the price is going have to be higher?
Sanjay: So what happened was actually we shipped those boards at a loss, those 350 boards, but what had was happened was after the Kickstarter ended we said, "Hey, a bunch of people said they just missed it. We'll just have a signup form on our site and people can go there and sign up, and if they're interested getting a board we'll tell them when a board is for sale." And we said it was going to be about 1300 or so but we weren't sure but we weren't really clear that it was a rough thing. So people treated it like hey I'm pre-ordering and locking in my price and that was our mistake to not be clear about that, but we weren't really . . . it wasn't running in the back we weren't really checking it. So while we developed the board we got a lot of people just signing up and saying hey I'm on the wait list.
Aaron: How many?
Sanjay: Thousands and thousands and thousands of people and they were just really inspired by what we were doing and they thought was exciting, and they thought it was cool and then when we actually finished building the first boards it just turned to cost way more. It was because of all these design choices we've made. We decided to use an automotive grade, battery instead of a hobby battery, we decided to build a lot of like safety circuitry ourselves and write all our software ourselves. So all this cost added up and we use all metal components for everything and they were CNC instead of being plastic . . .
Aaron: Did you just go to . . . I remember actually talking to you about this and we discussed how to do this fast and it was just goin to have to go to them and tell them, like explain why it's more now.
Sanjay: Yeah, so we explained it, we published a blog post, we got a fair bit of flak and actually the people who were most upset were the people who really wanted it, and they went on social media and they were really upset about it, and so in the spirit of doing things that don't scale, we actually called them and gave them our cell phone numbers and said, "Call us and talk to us" and we explained. Actually a lot of the people who were most upset ended up buying once they heard why.
Aaron: That is one of these examples of how important it is to be upfront and honest with your customer is something that I think can't be said enough times and to turn those angry people into happy people. I think it's a testament both to the greatness of the product of what you're building and also the way you treat your customers which is I think key.
Marco, Sanjay, thank you both so much for joining me today. This was an awesome show. We went software, we went hardware, we went services, we went electric vehicles. It was more than my head could really contain right now. If you want to find out more about Thumbtack or even better book some services for your home, check them out at Thumbtack.com wherever you are in the United States you can find some great stuff there, and if you'd like to buy a Boosted board or find out more about Boosted, check them out at boostedboards.com. This has been Startup School radio broadcasting from San Francisco every Wednesday at 1 p.m. Eastern, 10 a.m. Pacific. Thank you for joining us today and a special thank you to my senior producer Lisa Mantineo and our associate producer and engineer Dion Simpkins. Be sure to tune in next week where I'll be joined by some really great guests. You've been listening to Startup School radio on Business Radio powered by the Wharton School siriusXM 111. Thank you so much and have a great day.
