Pitch for day three. Sup, pitches? This is our season 10 finale, and we're running an experiment on you. You all know we do some light editing on this show, but many of you have asked over the years to hear a pitch in full with no editing whatsoever. The time has finally come to satisfy that request.
I never thought this day would come. We've recorded well over a hundred pitches. And never before have I thought, yeah, let's just roll the tape.
But yeah, let's just roll the tape. I'm Josh Muccio, and you're listening to The Uncut Pitch, a real founder pitching real investors for real money in all its glory. Hi, I'm Paige Fendorti, founding partner behind Genius Ventures.
Hey, I'm Neil Bloom, managing partner at Analog Capital. Hi, I'm Elizabeth Yin, general partner at Hustle Fund. I'm Mark Phillips, founder of 11 Tribes Ventures.
Hi, I'm Charles Hudson, managing partner of Precursor Ventures. The pitch for Handle is coming up after this. Is that an entrance music? Yeah.
That's a song. Yeah. All right. Hi, everyone. Hey.
Chase Robbins. Charles. Nice to meet you. Hey.
Chase. Hey, Chase. I'm Mark. Mark. Nice to meet you.
Elizabeth. Nice to meet you. Neil.
Nice to meet you. Thanks for your time today. Thanks for being here.
Thank you. Of course. Of course. If you've used a delivery service recently, you probably know this. Delivery fees continue to go up.
Delivery times continue to go up. This is the reality for the 20 million college students that are using delivery services for convenience products. Delivery services simply can't execute on the speed, the price, and the selection that consumers expect for daily use consumables.
On the other hand, conventional retail convenience stores typically are not so convenient. They often don't have the selection that consumers want, and in many cases, they're becoming pricey as well. This is why I built Handle. Handle builds vertically integrated dark stores adjacent to college campuses. We deliver a curated set of 700 SKUs to students on and off campus in an average of 12 minutes, and we deliver them profitably.
Our average ticket is $17, and we net $4 in contribution margin per order. We launched this service at USC in September of 2021. We've since expanded to University of Oregon, University of Alabama, and UC Davis. We're here because we're raising a $3 million seed round. This is a large market. There's 10,000 universities in the United, sorry, there's 500 universities in the United States with over 10,000 students.
And there's another 500 internationally with over 10,000 students. Our stores generate more revenue and a higher margin than a typical 7-Eleven. And so we see the future is very bright for our business.
So if this is interesting, I'd like to answer your questions. I have a question. Well, thank you for welcome. Thank you.
I guess one of my questions is if you're profitable, like from the jump, why do you want to raise venture? Mainly because we're profitable on a unit economics basis. Our stores, we've actually brought our first two locations to cashflow positivity.
So our flagship market USC is producing $10,000 per month in profit. Our other stores are on track to do the same. Our store at University of Oregon is also operating at breakeven right now.
Our store at USC got to that 10K per month figure after only 12 months of being open. And our Oregon store got to breakeven after seven months. So we're here raising venture mainly to accelerate our rate of expansion. We're raising this $3 million. Half of the funds will be used to launch 11 additional markets, bringing us up to 15. And the rest will be used to build out a corporate team and invest in engineering.
Can you, I'm just, I invested in a business that was somewhat similar, pivoted in something else. I'm just curious, like I think about GoPuff and Frigida More and Gorillas and like, that was the story of kind of lighting money on fire. A hundred percent. Customer acquisition. Can you talk a little bit about, not to steal Elizabeth's normal question, but can we talk a little bit about the economics of how the deliveries work?
I'd love to. I'd love to. So a little context on myself. When I was a freshman at USC, I actually sold my first software business for 300K. I used those.
my own money to open our first location. And so from day one, we had the spirit of profitability in mind because obviously I didn't have the luxury of just burning VC money. With that spirit, we've done over 60,000 deliveries and we've focused on refining these unit economics over time. So the keys for us and compared to a go puffer.
Gorillas is that we know exactly who our customer is and we know exactly where they are and we know exactly how to target them. So our customer acquisition cost is actually under a dollar. If you compare that to a Gorillas, for example, you know, they're spending $50 plus to convert a customer that's going to churn after one order, for example. And so our customers, in contrast, have over eight orders on average, and we've only been open for 18 months. So with time, I see that expanding a lot.
And what's the skew? Is it all non-perishables? Like what's the...
That's correct. Less than 1% is perishable. We do carry certain products like sliced fruit or protein packs, but the vast majority is zero spoilage, you know, over a year of shelf life because we plan for also the seasonality of the business.
When summer comes, when winter break comes, we drop to about 47% of our general revenue. And so we want to make sure that we're not carrying product that's going to end up causing losses down the road. So talk about your supplier base. So as you think about the perishables and the non-perishables, how many suppliers are you sourcing from? And will that change based on the locale of the schools?
A hundred percent. It does change depending on the geography. We're sourcing from over 20 suppliers and we're using the exact same suppliers for the most part that traditional conventional retail stores are using like Cormark, Kehi. I don't know if you're familiar with the industry, but it's the same ones that McLean, you know, these are the ones that... Ta-da.
7-Eleven, for example, are using. Absolutely. I live 10 minutes away from Kahee's headquarters.
And so you mark up on the products themselves and then you charge for delivery. That's correct. We charge a flat $199 delivery fee. And we never surge that. Most often, we actually use that as a growth lever to incentivize purchasing.
One dark store per university? That's correct. And so how much revenue are you doing right now? So we're at a $1.2 million run rate. We expect with our current locations, We're projecting that at maturity, which is about three to four years after opening, stores can do $2 million in top line and $500K in profit per year.
And if I understand the timeline, so in 2021, you launched this when you were a student. Correct. Are you still a student?
I'm on leave. Okay. And then you said now it's not profitable, but have you raised money already or are you funding it still? So in early 2022, we raised a $1 million pre-seed round. mainly from angels.
That was a safe note at a $7.5 million plus money cap. And so we use that money to essentially launch a couple more campuses and we still have a significant amount of cash remaining. Can you tell us a bit more about the team or like what your burn rate is today? Sure. Sure.
So our burn rate is generally less than $10,000 a month. So, you know, I have tried to position our business in a way that, you know, if the venture funnel got cut off, we could survive indefinitely. I have a smart question.
Is that net or gross? That would be net. Okay. And so regarding the team, we have four employees, including myself, that are working full-time on the project or on the company rather. And we have at each store, we have a store manager, we have a growth manager, and then we have a fleet of W2 delivery couriers.
Are they mostly students? It's all students on the delivery courier side. And then for the management of the stores, we target recent graduates because they understand the market. Yeah. Have you heard of a company called Envoy Now?
Yeah, they actually came out of USC. I know. That's why I bring them up.
Yeah. Did you ever talk with Anthony about that business? I have actually tried to get in contact with Anthony, but haven't been able to make the connection.
That's the company that I backed. Oh, nice. And I have backed Anthony and his new company. Vinovest?
Vinovest, yes. That's awesome. Oh, I didn't know that was his back up. But Envoy Now is actually a pretty phenomenal company.
I think... before we backed Envoy Now, I was very averse to the space for the GoPuff reasons and all that. But the funny thing about college campuses is it's very enclosed as a community.
And I think that's an insight I didn't have years ago, but it makes the unit economics easier because everything is happening in this dense area, right? That's exactly correct. And we talked to some investors and they have this reaction of like, oh, you're on college campuses.
You must just be using that as a early market in any year you're going to be in cities. And for us, maybe long term, we go into cities, but really the bread and butter of our business and where we make the bulk of our money is on the college campus. And it's a massive market in and of itself.
Yeah. Yeah. So actually, that would be my next question.
Like, my hope would be that you stick to college campuses. Right. But what is your where do you think this goes? Like, how do you think about expansion?
So expansion, I think that we focus on our core competency, which is delivering to college students. One of the beautiful things about our business. And one of the key enablers of our unit economics is that our customer acquisition cost is so low. And so you ask yourself, why is it so low and what are we doing differently? In my opinion, the beautiful thing about the business is that we are actually leveraging the atomic networks of our existing employees.
So our delivery couriers, we intentionally overstaff. Because they turn into brand ambassadors. And then they go in and bring their own community inside the school onto the platform. And we've seen the data and the direct correlation between hiring new employees and new customer signups. You talk about the size of the market.
So if you did stay hyper-focused on college campuses, and let's start with just domestic, can you unpack what that would look like from a total adjustable market perspective? Definitely. So there are 500 universities in the U.S. that we've identified are viable markets for this. And if you just do the napkin math, our average store at maturity is going to be doing two million a year. So it's a billion in revenue.
And then it's about 25 percent of that. It's about a half a million in profit per year per store. So that's like the total addressable market in the United States. Yeah.
Can you talk a little bit about like competitors that you seems like Envoy? Now, I'm not as familiar with their story, but I'd be curious to understand like. One billion in revenue is capturing 100% of the market. Who are the other competitors in the early stage?
So there are a number of companies that are attacking the college market at different ways. Even incumbents like DoorDash are doing different initiatives to try to access the college market. But there are pretty much no other competitors that are delivering the product that we're delivering. Personally, I think that DoorDash is serving a different need for college students because the need that we service is an impulse purchase. Customers are not buying groceries from us.
They're buying items that they're consuming as soon as they receive them. Yeah. And we're also not serving hot food.
We're not serving meals. So, you know, there's adjacent players, but they're not competing one-to-one with what we're doing. That makes sense. I mean, I feel like I was in college a couple years ago, and it was like the nearest CVS was like a 10-minute drive, and I didn't have a car.
So I was like, am I going to Uber to CVS to buy something for like $3? Probably not. So, yeah, and then I just would. go with the alcohol.
You could use the handle. I mean, what are like the top five or ten things that people. So we actually sell a lot of bottled water, funny enough. So bottled water is one, an assortment of snacks, popcorn, chips, candy. And then we also in certain markets carry tobacco and alcohol depending on the licensure and what we're able to acquire.
So that's one of the factors we look at when we're expanding. Currently, we have. alcohol and tobacco at University of Oregon. We have tobacco at USC. We have alcohol and tobacco at University of Alabama as well.
We just got approved and we're about six months out from alcohol at USC. Nice. 500 universities, you said? In the US with over 10,000.
Okay. Doing $2 million a year. Correct.
So it's not a billion, right? That's a hundred million. Am I doing my math wrong? No, it's a billion.
It's a billion. 500 times 2 million. Yeah, it's a billion.
Okay. Yeah. Got it.
Sorry. Yes. All right. Thank you.
All right. No worries. Trying to do math after a long day. We're missing our calculators. I know.
I've been here for a while. Chase, I'm curious. So you're taking a leave from USC, it sounds like. So talk to us a little bit about the motivation here for you. You're a one-time successful founder already.
This is your second go at it. Why take another bite at the apple? Why continue to do this thing instead of going through college?
I love the process of building a company. I find it incredibly fulfilling to be able to employ other people, particularly students, because it's a demographic that I have a lot of empathy for. I also just love the experience of building a brand, particularly a brand that my peers admire and the product development. I actually spent time at Apple working in product design as well as an intern. So I have a passion for product.
I have a passion for ops. This has been, it's kind of like an incredible puzzle puzzle that you have to put together because we have a warehouse where we have also built, you know, in-house inventory management software. We have a customer, we have couriers, they have a courier app. So it's kind of this orchestration of all these different pieces that I find incredibly fulfilling to build. I also just love capitalism.
And I love, I just love competing. You know, I've been an athlete my whole life and now I feel like I can be an intellectual athlete as well. Yeah. Yeah.
Is this an app that students are downloading? That's correct. Off the app store.
So you're managing this app and a courier app? That's correct. Okay.
And we have... internal administrative dashboards. I actually built all of our tech. So I'm kind of a software engineer by trade.
But yeah, so we have application for our couriers. We have an application for our customers. And then we have internal kind of administrative dashboards, order management, software, et cetera.
So a few learnings from Envoy now, just from being afar. I think one, market was really great. Market pull was really great. And the unit economics were really great.
Things that are the flip side of that, I think managing students is hard. Everyone is kind of young. No one has ever really worked.
And then as you expand into different campuses, you need a really strong GM at each of the campuses. Tell me about your hiring. What do you look for?
How do you test and train your GMs? Are they also students? a little bit about that. Yeah.
So regarding hiring for our GMs, it's a mix of students and recent graduates. But that's also been a key area of learning for us throughout the process of, you know, going through GMs that have not succeeded and going back with the team and really analyzing that. What are the factors that we could have identified in the interview process to prevent this from happening again?
So that's a lot of learning that we're doing right now. But currently, our interview process is multi-stage interview. Everyone on the corporate team does blind interviews for final candidates.
We also do personality testing to make sure that they're going to be compatible for this type of role. You know, we're managing these teams from afar because we have distributed warehouses. We're in California.
And so ensuring that we get candidates who are self-starters, self-motivated, that are in it for the right reasons has been critical. And I think we're getting really good at identifying those characteristics. So what kind of people become your GMs of your other locations where you're not and how are they incentivized?
So. We have really, we're only at four locations. So there's not one, you know, defining characteristic that's emerged, but it's a mix of people who have started as delivery couriers and have just shown incredible grit and drive. And we've promoted them up. One lesson I've learned as a founder is just like promoting good people really quickly and firing bad people really quickly as well.
We also have people who have approached us and said, Hey, I really want to bring this to my campus. I'm not at a campus where you're currently at. And so we take them in and we say, okay, are you sure this is not an easy endeavor? We bring them out to LA where our flagship store is.
We train them in the store. And so then it just goes from there as well. And your question about incentive.
So we have recently rolled out a new comp structure where they're actually being held accountable to the store level P&Ls. So they're able to kind of define their earnings by what the net income of their store is based on the percentage of revenue. So for example, if you're doing 10% net income per month, you can get a $3,000 bonus for that month. that's a lot it is it's a lot I'd imagine for your for your employees that's a big that's a big bonus yeah it's a huge bonus but for us you know if we're doing 10% net income we can definitely afford to incentivize them that way and these warehouses are all off campus or any on they're all off campus they're campus adjacent so we're actually an average of 2,000 feet from our customer So we've kind of done the geospatial analysis on that.
We've gotten really good at identifying low cost real estate that's proximate to student housing, as well as third party student housing that's really just apartment buildings off campus. Do you have to do any registration with the schools or deal with the schools at all? We don't have to deal with the schools at all.
And one thing that a lot of investors don't realize implicitly is that in the evenings, because of COVID, schools have gotten incredibly tight around who's allowed on campus. So if I'm a USC student, After 10 p.m., I actually can't get a DoorDash delivery, even to the building I'm in, much less my door. Because we're using students, they have student IDs, they can get in at any time, and we're able to deliver the best customer experience compared to anyone else.
Yeah, that's super interesting. If you didn't raise any venture funding, if let's say it all dried up and wasn't there to be had, how would you grow this business over the next 12 to 24 months? What would that look like?
It would really look like probably slimming down our... ambitions from a engineering and a corporate standpoint and just focusing on getting our stores as profitable as possible. You know, right now, because of how the market has been, we're doing this balancing act of growth, but also profitability. We would go all in on profitability, obviously, and say, OK, maybe the customer doesn't need the order in 15 minutes.
Maybe they need it in 20. And we can use the lever of our staffing costs to increase the profitability of the stores. So there's a lot of different levers we can pull. Um, but, you know, I will say as well that we have two. funds that are interested in leading the round.
So I'm optimistic that we'll close the round at this point. And how much, just going to that point about speed, how much of it is, to Paige's point, it's just as convenient at 30 minutes as it is at 15 versus the timeliness? Yeah. So we've done some testing and we've done analysis around delivery times and return rates for customers. And right now we see that if we get above 20 into the 25, 30 minute range, we do see reduction in returning customers.
But I have a hypothesis that this may just be due to customer communication. If we set the expectation with the customer that it'll be there in 15 minutes and it takes 25, they're going to say, this is not a consistent service. But if at some point we need to say, hey, this is a 25 minute delivery service, we may not see that same, you know, churn.
So is your messaging on campus like 15 minute delivery then? That's correct. So that's like that becomes in... In the model where you switch to profitability and you're seeing longer lead times for delivery, then you'll have to change. Is that like your core messaging overall as a company now?
It is, but I will just say that at USC, our average is 12 minutes and we're profiting $10,000 a month. So I don't see it as a necessary step. But I was just kind of playing out a catastrophic scenario. Yeah, yeah, yeah, yeah, definitely.
I was just curious about like, is that a core aspect of your messaging? And if so, like how difficult would it be to change that if you're, you know, would that be breaking like the core promise that you made to your customers? I would say that my intuition tells me that it's not hypercritical. Obviously I can't say without running tests, you know, I'm a very, I try to be very data-driven in my answers, but... You know, there's still significant value that we provide to the customer in that the experience is really friendly.
You know, we get feedback from our female customers, especially that, hey, you know, it's 11 p.m. and I'm trying to order snacks. I don't feel comfortable walking to the CVS. I also don't feel comfortable with some 1099 coming into my apartment or coming up to my apartment. They take a lot of comfort in the fact that, hey, this is someone that I probably have class with.
And this is a service that all of my peers are using. So I think there's a lot of value that we deliver beyond just the speed. Yeah, and the trust aspect.
Exactly. Cool. I missed the answer. Charles asked about how many SKUs.
How many do you have currently per campus? Per campus, on average, about 750. Has that grown over time based on people requesting items that aren't there? Or what's that like? It has grown.
We've done experiments around going to 1,000, 1,100 SKUs or 300 SKUs. We have found that 750 is kind of a sweet spot. But it's actually an interesting customer behavior. We've run the tests on where the add to cart events come from in our app. And, you know, it's similar to many other like grocery delivery apps where you have like a breakdown of categories.
50% of our add to carts come from the first five products in any given category. So I do think that over time, as we collect more data on what the customers are demanding, we could slim down inventory. It feels like you're very like data-driven approach to running your company.
I'd be curious to understand like what are the current tests that you're running? And like, yeah, what are the current tests that you're running? Yeah, so I can give you an example of one test that we've been working on recently is we call it like the VIP customer experience, which is that when a customer signs up, if we right now, our customers, we have about a 50% conversion from signing up for the app and placing their first order. And so we came to this question of like, how can we increase this?
So what we've done over the past two weeks is every time a customer signs up, we have we break them into two different cohorts. One of them gets a text message from an automatic automatic system that says, hey, my name is XYZ. I'm the manager for this location. I'm also a poli sci major.
You know, we try to humanize that interaction and then say, if you have any questions, let me know. You have X amount of dollar store credit in your account. The other cohort. We actually have our managers manually send them a text on their phone because the blue bubble, we have a hypothesis, makes a difference.
You know, if it's green, customers pick up on like, hey, this is obviously automated. And so, you know, jury's still out on that. We're collecting the data, but that's the type of experimentation we're doing.
That is funny. Have you looked into using the little bots for delivery instead of people, humans? Yeah, we have.
We actually, we're very close to launching a trial with one of the businesses that operates these, but ultimately the technology. in my opinion, is just not there yet. I don't know.
Where are you from by chance? Here in San Diego. You're from San Diego.
Okay. So if you've been around USC, if you're familiar with the area, it's not a most safe area for delivery robots. So just given that, we decided, hey, it's not worth it. And we've also looked at the cost per delivery for these robots. Generally, it's around three to four.
And for us, we're already spending only about 370 to deliver with our existing workflows. And, you know, with scale, that cost comes down. And so if we rely on these delivery robots, we're locked into that. And we want to use that as a profitability lever.
I was going to say, if you are interested in talking to someone who's built a delivery robot business, we invested in a company called Prof Gym run by Deepak Sarkar, who sold Chabotix to DoorDash. And I'm sure he'd have some learnings in that space because I think they focus pretty heavily on like college campuses. Yeah, I actually see the future for kind of robotic delivery.
us is most likely drones when that catches up um mainly because they're going to be able to circumvent a lot of the foot traffic and like you know car traffic that is what's slowing down most of these robots today but obviously faa and all that is yeah so i have an investment in a company that's doing this at airports called at your gate i'm familiar yeah and so they started adding a human plus bot that would follow because they started batching deliveries and they just felt it was too much to walk back and forth to the one spot they're doing like restaurants. So they're running all over, not yours, but how is batch ordering a thing? Like how much is that kind of taking up the time of your delivery people?
So when you say batch ordering, can you, I guess, yeah. Like how can your delivery people actually do batch deliveries or they have to do one at a time? No.
So every time they leave the warehouse, they're generally taking six to seven orders. That's where we really, because we pay them hourly, we're not paying them per delivery. That's where we get the cost efficiencies from is that, Hey, I'm leaving the warehouse with six. people. And ideally, they're in three buildings that are right next to each other.
You know, that's our ideal scenario. And as we scale, the geography gets more saturated with orders, and then that incremental cost goes down over time. Have zip lines across the dorms.
Exactly. That's next. A bucket with a rope.
I mean, so going back to the Envoy Now thing, I think my takeaway from that experience is actually I really like this business. I think the questions that I still have in my mind are actually all around personnel, because the other question I was going to ask you is around attrition. Like, you know, students graduate.
And so even if you have someone really good, then they leave. And then the other thing also is eventually you will, quote, age out of this demographic, right, if this goes really well. So how do you end up managing sort of the overall? operations.
And I mean, I have to say there is a real advantage in being a student or being in this pure demographic in starting this kind of business. And that was what Anthony found. Unfortunately for him, the reason why Envoy now no longer exists is, you know, he had some personal health issues. And by the time he sort of got over that, he's no longer in this demographic. So I'm kind of curious for your thoughts on that and the personnel and that sort of thing.
A hundred percent. So. Our sample size isn't big, obviously, at this point, but I can speak to like our manager at University of Oregon is a really great example.
He came to us when he was a student and loved the business so much. You know, we gave him a little bit of equity compensation and then we put this new compensation structure in place. And he passed up, you know, big four consulting jobs to stay and run this location at Handle. And so I think that's a testament to the kind of type of character that we're building.
But I also think that as we scale, you know, let's say in 10 years, for example, I'm completely, you know, I'm an old person. You won't be that old. Don't say that.
No offense. Compared to some of us here. It happens quick. Let's say in 10 years, I have kind of lost my empathy with the customer, right? I think that a core competency that we're going to develop over that 10 years is identifying talent really early and being able to develop them.
Mainly because that's going to be a skill we have to master if we're going to scale this business. And so I think it's going to be a continuation of that. Finding the talent that's fresh out of college, highly capable, highly driven.
And like I said in the beginning of the pitch, promoting good people quickly and making sure that we still have our ear to the ground, so to speak, on that demographic. So your GMs right now, are they all not students? Like either they've dropped out or have graduated or are some of them like doing studies?
It's a mix. Some of them are doing both. So the hourly expectation that we set with our GMs is 30 hours a week.
So, you know, it's it's not. quite full time. It's definitely a lot for someone to be a student and do it at the same time.
But that is kind of a filter in and of itself because the people who are going to be willing to take that on are the exact type of people that we want running the stores. So there's a significance like 30 hours a week specifically versus like 40? We are actually taking steps to minimize the hourly requirement on the manager, mainly because I think that it opens us up to have talent that is incredibly committed to school and may say, hey, I can't take 30 hours away, but I could take 20. We want to make sure that we are a potential employer for that type of person.
And so the ways we're doing that is all around using technology to systemize the operations of the store. For example, scheduling was a huge burden for our GMs in the beginning. We built a scheduling algorithm and we don't worry about it anymore. Inventory management in the beginning was a big burden for them.
We've built tooling around that so that the handlers, that's what we call our delivery people, can essentially do the whole inventory management system through an app and the GM doesn't really have to worry about it. So that's kind of the philosophy we take. So the GM in Oregon, however, turned down consulting jobs.
That's correct. So that person's only working 30 hours though. So he's a bit of an edge case because we also have moved him into kind of a hybrid corporate and management role because we really didn't want to lose him.
But we also can't justify paying him the same salary without him taking up other parts of the company. So at scale, more than not are going to be students probably working those 30 hours. Students or recent graduates.
I mean, who are maybe looking for that first full-time job. Exactly. I think for the driven recent graduate, uh, it represents a really great first step because you can imagine like, Hey, I managed a team of 60 delivery people and I managed a $2 million a year P and L coming straight out of college that opens up your job opportunities significantly where you go from there. And then how do you, what's the, what do you move up from AGM is like region.
help open new schools? So it's something that we will explore as we get bigger. You know, we haven't had to face that yet, but I definitely see that the retail playbook has already been written in.
Anyways, you know, like we have locations, locations exist in regions. We should have a regional manager. So we're not trying to reinvent the wheel in those ways. So most likely that we have had our manager at USC actually now leads all of our expansion.
So, you know, like I said, I'm a big fan of starting people off small and, you know, promoting them as they succeed. You mentioned equity comp for the GM. Can we talk a little bit about the equity composition of the cap table as it stands today? Sure, sure.
So, like I said, we raised. 1.1 million in safe notes. Those are at a $7.5 million cap. So, you know, those technically haven't converted yet.
We haven't sold any priced shares. I currently own roughly 80% of the company. We have a 15% employee stock pool, and then we have some advisors and various other places it's gone. Cool.
And then what terms are you looking to raise the 3 million on? Sorry if I missed that earlier. Yeah, no, no worries.
So that is going to be a $15 million pre cap. Okay. On a 1.2 million run rate?
Correct. Okay. That's GMV? Correct. Do you have flexibility on that?
It would be difficult because we do already have kind of like verbal conversations with two funds that are willing to lead at that price. So I kind of have no incentive to go below it, to be honest. Yeah, no, it makes sense. Well, I was just asking if it was flexible or not. Yeah, I mean, maybe in other terms, if there were some other terms that you were interested in, but probably on the price now.
What other terms? Yeah, now that I think about it, probably nothing. I mean, if you want to write a $2 million check and you want a board seat, then we can talk about that. Oh, wow.
There you go. Probably. They haven't issued you a term sheet yet, though. We're expecting a term sheet in the next couple days.
Oh, okay. Can you say from who? I can't.
I can't. Sorry. What do you think? I can give you some demographic info.
So one of them is a. Pretty large institutional fund from San Francisco. Another one is based on the East Coast. It's a syndicate of kind of ultra high net worth people.
What do you think your burn rate goes up to? It's tough to say. We can lever it however we want.
It really depends on how many locations we want to launch, how fast. Right now, our plan is to launch 11 locations over the next 18 months. To give you an idea of opening a location.
It's roughly 60K in upfront investment to get the licenses, build out the store, purchase the inventory. And then it's roughly 60K burn over the first kind of six to seven months to bring that store to break even. Back to something Elizabeth said. So it's a $1.2 million GMV run rate?
So that would be GMV plus delivery fees. Okay. And on the GMV, what's the take home for Handle? You know, what's the actual revenue?
So in terms of net... income or I guess gross margin would be appropriate. We're doing roughly 30 to 40% right now per month.
Yeah. Okay. And that's just on a portion of the 1.2 because there's delivery fees included in that as well. Correct. Correct.
That's including. So we typically don't use GMV because it's like more useful for marketplaces. For us, we typically just talk about top line revenue and kind of our take.
And so that includes kind of delivery fees. We also have a subscription product where customers can subscribe for $5 a month and be able to waive their delivery fees. So it does kind of mix things up.
But wait, can we do the breakdown of like the subscription and then like what the revenue is? Yes. Yeah. So the subscription is a really new product. So it makes up like less than 1% of our revenue.
Okay. Wait, can you say it in like dollar amounts versus percentages? For sure.
For sure. So thanks. So we've done to date, we've done 1.2 million. in top line sales. On that, we've spent roughly 600,000 on inventory sold.
That's like our cogs. And then when you add in the pick pack delivery labor, that's about 20% and the rest is take for us. So, you know, roughly 30%. But then you add in a couple other fees, you know, we have credit card processing fees and things like that. It takes us closer to 25. Yeah.
So 25% of 600K. 25% of 1.2. Yeah, 25% of 1.2 is total gross margin to date.
But 600K is just inventory. Roughly 300K. Roughly, yeah.
Okay, cool. Yeah. So, sorry, just to clarify. Please.
I just want to make sure it's clear. Okay, so is this 300K per month or is this to date? That's to date. That's to date.
Okay, cool. So I really love this business, especially since I've had a seat in the arena before on this. And I think you have an amazing background.
You've already gotten a lot of lessons learned from your first business and have done well. So I think you're thinking about everything in the right way. I think you're very crisp and knowledgeable about the levers of the business and what you need to do.
And I like how you think through optionality around the burn versus venture, etc. I think you sound like a fantastic entrepreneur. I think for me, the valuation is really pricey. We're pre-seed investors, and I realize you've actually made a lot of progress and are probably not what I would call in pre-seed.
So from the perspective of the fund, we'll be out. But I think, you know, given where you are with your fundraise, if you end up, you know, raising a price round or whatever this is with those funds, I would love to see if I might be able to write a very, very small personal check. Okay. That's great to hear. Yeah.
Thank you so much. I appreciate your time. I'm basically in the same boat as Elizabeth. It's a little out of spec just for our fund model, which has more to do with like the constraints of our model than what's fair to you.
You've got people interested. I think it's hard to argue with legitimate interest. So good for you on managing dilution really impressive articulation of the business and i think you're doing everything you can to maximize the hyperlocal nature of the business i think it's going to be super successful thank you so much yeah i'm in pretty pretty much the exact same boat but um i don't know i think it's really incredible what you built so far in the learnings i think some of the things that really stood out to me was um how data driven you are and like how quickly you've been able to iterate and like you know A lot of the deep statistics on like usage and I think like the tests that you're running are really interesting.
I think similarly for me, the valuation is a bit too pricey. But like you said, like you have interest at that. So it makes sense to stick with that valuation.
But similarly, I'd be interested in putting in a very small personal check. So happy to try as the round comes together. Thank you. Yeah. I was just kind of thinking about your questions are really pointing on the personnel piece because I'm thinking back to at your gate who really struggle about utilizing their delivery people who they've hired full time on staff are kind of sitting around waiting for orders to happen.
A little bit of a waste of utilization. Does that come up at all? Yeah, I'd love to speak to that. So one of the great things about our model is that because we're employing students to do the deliveries, they're not expecting any amount of hours. So.
What we actually do is we do demand forecasting over time, and then we scale up our labor up and down in three-hour increments. So a certain three-hour chunk may have four delivery people working, and then the next three-hour chunk may have one person working. And that's just to optimize, like you said, delivery, person utilization. That's like our key metric.
How varying is it per campus? It depends on the maturity of the campus. But I would say the ratios stay the same.
It's more of a... timing throughout the day thing. So when we launch a market originally, we're only open from about 4 p.m.
till 12 a.m. And then as the store develops and we generate that demand, we end up at 10 a.m. to 1 a.m.
And so you can imagine in the morning we have low staffing because that's not a ton of demand exists there. And then as the day ramps up, we peak at about 11 p.m. when we may have five or six delivery people working.
And then it kind of ramps down a little bit over time. Interesting. I'll give you some unsolicited advice on the personnel thing, because I actually think that's the part that's the hardest about this business.
It's, I think, harder than other. Hiring people, of course, is always hard. But I think it's especially hard in this business because you have people coming and going.
You know, some people devoted to school, other people not so devoted to school. Students have never worked before. You have all these variables. And then you're doing this all remotely across campuses.
After you raise this round, I would really recommend that. you know, if you're not already doing this, you as the CEO, like fly to every location and really spend time and even potentially like hire somebody to do sort of a 360 with the existing teams just to make sure you have all of those down pat and operating like machines. And as you expand like to these 11 other locations, obviously everyone always wants to step on the gas pedal, but I would be a little bit cautious in how you step on the gas pedal because it's really easy to mess up. Over extend, for sure.
Thank you. So just one thing I'll speak to on the Envoy Now piece, because I think that you're absolutely right to be kind of pulling from those learnings and pattern matching. One significant advantage that I see is that we're actually using W2 labor, even though it's part-time.
I could be wrong, but my understanding is that Envoy Now was kind of using impromptu 1099 student labor, like, hey, I get a notification. Oh, this person wants me to bring a granola bar from this place on campus to the other place. That's very different from how we operate.
You know, we're staffing and scheduling people weeks in advance. And so we do eliminate a little bit of that friction. But I think you're spot on in your feedback.
Thank you. I'm going to have to be a pass as well, which makes me sad because you came in here with just incredible passion and control of your business. And it deserves to grow and it will inevitably.
Right. It doesn't have. to do with our opinions or decisions.
So I'm a pass as well. I just want to encourage you to think through as you bring on investors. I mean, the business strikes me as one that capital infusion is great, but you've got something here, right?
And it will grow with or without that capital infusion. And I think the hyperlocal nature of it and not growing too fast is actually what's going to make it most dynamic, right? So even as you consider what those term sheets look like, just hold on to that perspective that you've had.
in growing it over the last couple of years because I think that's what made you unique. Thank you. Thank you for your time. Yeah. Thanks for being here.
Yeah, of course. Yeah. I'm unfortunately going to have to pass too. Super impressed, but I just keep getting hung up on the valuation, which is unfortunate because also I have this feeling it's like, you know, what does it really come in at?
Let's see what those term sheets come at and let's talk if it's different. But that everything else is like, this is super interesting. It's just that blaring number out there that says these numbers just don't match.
but obviously I've looked at business in other places like this so I'm going to be helpful in connecting you to other founders who are doing this to share notes what's the one that's happening at UC Santa Barbara there's a version of this there Starship? yeah they're using the delivery robots interesting well congrats sorry I have to pass here but if terms change when actual sheets actually come in For sure. I think I'd be interested to look if they're lower. Okay, great.
Awesome. Thank you all for your time. I really appreciate it.
Thank you. Great job. Thank you.
That darn valuation. I know. It's just high. How do you think about valuations as a function of GMV versus actual take-home?
I feel like I look at the businesses that I've done at that valuation in the past and they've had much higher revenue. Yes, for sure. That's really how I think about it. And why are you not investing? It's just off.
Yeah, I realized I didn't get to it. So, I mean, it's just off thesis for us in terms of what we're looking to put our money into. So, food delivery in that space isn't something that we're... Focus on participating in. Got it.
Sorry, I didn't articulate that. I realized. No, it's fine. Cool. Elizabeth, I know you have to run, but any other last, just literally price for everyone except for Mark who doesn't like food delivery.
It's really high. I think he also needs people that will buy into what Mark said, which is this like patience. Like, I think he needs the right people with the right orientation. I agree with that strongly. I don't, I don't.
he needs to raise capital. I think it's a great business. I feel like there's a world in which he takes cash on a higher valuation and then gets pushed in the direction of grow as fast as possible. 100%.
That's what I'm like. And I don't know who these people are that he's raising. Yeah, he's better off optimizing the campuses he has and really making them very cash efficient, huge revenue generators before moving on to the next campus. But I feel like so many investors are fixated on, let's expand all these campuses. As fast as possible.
That is not a way to necessarily grow the business. And I think people are worried about market share or whatever. It's been how many years since Envoy now has started?
I think there's plenty of time. So you think like the 10K a month in cash profit that he's spending out from each of his locations, like that's not efficient enough? Yeah, I think he can probably improve SKUs.
Yeah, let's know. He can. grow more business on each campus.
He can really make sure he has the right people in place, add more processes and tech to make the, just improve the unit economics on each of the campuses he currently has. So you don't think speed as defensibility is super important in this business? I feel like it's a different kind of speed. It's like optimization speed for making the best product possible at the four campuses and then scaling up.
Well, but Elizabeth's points around personnel are huge. I don't think speed leads to quality personnel either. You have to establish yourself on the campus and find the best individuals to work with. So super impressive guy.
Yeah. Again, great control of the business. So well done. Yeah, you guys picked a lot of great companies.
Thank you. What were we today? Three for six?
Four for six? Depends on what happens with Bev's. Yeah, we'll see. I guess Angel checks in this one. Yeah, we'll see.
Potentially. We'll see. Potentially.
Enjoy. We'll see. Cool. All right, man.
Good job. Thanks for having us. That's a wrap.
That's what they say in the business. Thank you for spending the time with us. And thanks to Rich Smith for providing the tequila shots that the investors took moments before that pitch. Chase walked out of the pitch room with angel commitments from Elizabeth and Paige.
But before either of them could write the check, Chase sent an email that made the whole deal fly off the handle. Hear what happened on episode 126 of The Pitch Podcast. Link in the description.
Remember to like, comment, and subscribe, and hit that bell. See you on next season of The Pitch Show, dropping February 2024.