Pitch two, day two. Here's a startup playbook that VCs love. Take an unsexy industry that nobody in tech has noticed yet and build super sexy software for said unsexy industry.
But those industries can be a tough bag of nuts to crack. Today's founder is trying to sell software to an industry so old school it makes door-to-door vacuum sales seem fresh. Jason Vigo. is calling on convenience stores.
Yes, the humble corner store with its snack cakes and beers and resistant owners who don't want any of this newfangled Silicon Valley nonsense. You'd need an army of door-to-door salesmen to sell these guys, which is decidedly unsexy to VCs. Will the investors slam the door on this founder, or will they be down for some late-night snacks and smokes with ordinary folks? I'm Josh Muccio.
Welcome to The Pitch, where real entrepreneurs pitch real investors for real money. 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 Eleven Tribes Ventures. Hi, I'm Charles Hudson, managing partner of Precursor Ventures. The pitch for Bev's is coming up after this.
Bring it. Hi, everyone. Hello. Jason, nice to meet you.
I'll sneak around this way. Nice to meet you. Yeah, Jason.
Nice to meet you. Hey, nice to meet you. Hi, everyone.
I'm Jason Vigo, the CEO and co-founder of Bev's, and we're on a mission to power the snack and drink industry through convenience stores. I assume you've all been to a convenience store or liquor store at some point in your life. What technology do you remember seeing when you went in the store? Maybe tap-to-pay, maybe? A Slurpee machine.
Rarely, but sometimes, yes. Yeah, a point-of-sale unit. Point-of-sale? Yeah. Cool.
That's pretty much what you'll see across the 150,000 convenience stores in the U.S. and the 1.2 million convenience stores globally. And there's a ton of restaurant technology, companies like Toast, Chao Now, etc. The problem is none of that really works for convenience stores. The other big factor is that these stores are really reluctant to technology in general and outsiders.
We really know this customer in this market because my co-founder has owned and operated convenience stores for 38 years. He literally is our customer. And we built Bev's, which is a SaaS platform that helps convenience stores stock the products that their customers want and then easily sell those products in-store and online.
Today, we have 330 stores using the SaaS platform. We're going 21% every month. We have a 95% conversion from free trial to paid subscription, and we have a 99% monthly retention.
And today, we're raising $1.6 million that we're going to use to acquire 2,000 convenience stores, build six more product integrations, and reach a $3 million run rate ARR before we raise our next round. Well, thank you. Welcome. Can you talk a bit more about your personal story and why this is something you're really excited to be working on? So prior to Bev's, I started a software platform for dog groomers that failed quite miserably for a lot of reasons.
But I've always been really excited about helping a specific vertical and especially SMB. The second is I've known my co-founder, Victor, who I just mentioned, since I've been a kid. So I met him when I was six years old. We were neighbors. He was my basketball coach.
He calls me in 2019 basically saying, like, no one's building anything for convenience stores. Like, we got to do something about it. And it felt like this perfect opportunity to team up with my kind of close friend for a long time and solve the problem.
So there's 330 stores using the platform today. Can you walk us through, A, if there's any like specific geographic concentration and then B, like how you onboard? So 88% of our stores are in California today.
In terms of onboarding them, we've built everything to be self-reliant. So we have a Zendesk integration that allows them to walk through the entire steps, pick what e-commerce apps they want to use, what do they want to order inventory, etc. And we still get calls and we still get messages. But it's surprisingly minimal for what you would expect with a really not tech-savvy customer. What percentage of people start the free trial and then cancel?
5%. So 95% conversion. I see. And then we're keeping, like I said, a 99% monthly retention. We've lost 13 stores in the last nine months.
So super strong retention rates, which even bears the question of, should we be charging more? Should retention be that high? A lot of questions, but yeah, 95%. Can you talk about pricing? We charge $70.
$79 per month to use the SaaS platform. Where we're increasing our revenue is we do advertising partnerships. So we'll work with brands and use our solution to advertise their products through the platform to the store, and they'll pay us a monthly rate. Then actually right now we're doing $44,000 in average monthly revenue from advertising partners. But yeah, $79 a month for the SaaS and then ad partnerships.
Sorry, you're making $44,000 per month off of ad revenue? Yes. And then- How much are you making off the SaaS revenue?
$25,000. Oh, interesting. How do you think through your customer acquisition strategy?
Talk through that process. So we're inside sales driven, but there is an outside sales component, but overarching, we're sales driven. We've tried marketing, we've tried different mechanisms, but today I can consistently add stores through sales.
It's a pretty quick sales cycle, usually a couple weeks. What we'll do is we'll start calling a territory, close deals over the phone. And then we will supplement that with outside sales, physically send the person to go meet the stores that were like right on the cusp.
And then they almost always, when a salesperson goes to a location, they'll get other stores that they didn't plan to meet or things like that. So inside sales driven, we know how to scale that up and each salesperson can get 20 convenience stores every single month consistently. Unfortunately, I have a pretty close competitor in the space called Mercado. They're doing inventory for...
markets, independent grocers, and bodegas. And they've picked up on this as well too, where they're able to digitize revenue for offline stores. And now they're seeing all this data and able to do wholesale buying. So for now, I'm going to sit out for the rest.
Cool. Yeah. Can you talk a little bit more about how much you previously raised or what the timeline's been on that? Yep.
So we've raised $930,000 total to date. That came in a few chunks. So we did a $300,000 family and friends round in 2019. We were a very different company before this. We were an alcohol delivery marketplace, if you're familiar with Drizzly.
Yeah, we were Drizzly copycats. $300,000 went toward that business. That's gone. Then we bootstrapped.
We did an accelerator, raised $25,000 from that. And then we did a pre-seed round summer of last year. That was a $605,000 round at a $5 million post money on a convertible note.
So how much equity do you own as the founder? So I have 14%. 14%. 14%? Yeah.
Oh, you have 14%. Our founding team together has about 70%. So it's a combo of me, my co-founder, Victor, and my CTO. Victor transparently owns the most equity for a couple reasons.
One is he started it when I wasn't ready to come on. So I am co-founder, obviously, but I wasn't there in that year of really getting it built. The second, really the biggest one, was when we pivoted, he paid me. personally a salary because I couldn't live off no salary at all. And so the agreement was you could have more equity and I need money to live off of.
And here we are. Jason only owns 14% of his company. Founders have had the door slammed in their face for less. Literally, this happened on last week's show. All right, time to grab some Sour Patch Kids and pizza flavored combos.
When we come back, the founder equity saga continues. Welcome back from the corner store for ads. Jason was crushing his pitch until he dropped a number that triggered the investors.
He only owns 14% of his company. Also, that army of salesmen he's gonna need, that's a problem too. Here's Charles. You mentioned, I think quite clearly, this is a sales-driven company. Do you envision a world in which there is more of a self-serve or is there a bigger role for marketing?
Or do you think just given the nature of the customer, even as you grow your customer base, sales is still going to be the primary customer acquisition vector? It's going to be sales-driven for a while. What I like about that, though, is it is controllable for us.
Yes, there are humans and things like that, but we're not relying on Google Ads or someone to control that. We can get people and sell it. But I do see the trend slowly, and the more our brand builds, I'm absolutely sure we can do big marketing efforts and get people to apply inbound. Is there any difference in selling to the independents and the small chains? Is that sales motion any different?
It depends. Independent and small chain, 71% is represented. That's who we're targeting today.
There's a blend in the middle of that. We acquired a 23-store chain last month. That was an independently operated store chain.
Quite a similar sale. They definitely try to negotiate us harder because they have 23 stores and they have a little more power, but that's more of the independent sale. Then you have franchise models that are getting really interesting. So actually today we have 7-Elevens, Circle K, Shell, Chevrons on our platform.
Very few. With those, it's tricky. They can onboard just as an independent because they really run their own store, right? But what we're finding is to really get all of them, we're going to have to go to these local franchise. model.
So I think short answer to your question is it's relatively similar. So we've talked to like a group like GetGo, they have, you know, like 400 stores, things like that. That is a different conversation when you get to corporate. So I'd argue it's not like chain, it is, are they a corporate or are they more like independently operated franchise?
The corporate typically requires certain things. They're going to want POS integration. Another thing would be like we, depending on if they sell hot food or not hot food. So just little features like that, all very buildable. But today it's, we can go plug and play.
pretty much any independent or small chain, not a corporate yet though. Thank you. Super complete answer. I think you have a really excellent retention number.
I'd be curious to hear more about the 13 stores that left. Why did they leave? Yep, so I can give you sort of exactly why all of them left.
There was an outage in Coachella weekend that caused a few stores to leave. Even though it wasn't our fault, it was one of our e-commerce partners, we get the blame. Another couple is we had a store sort of a middle California, no e-commerce orders because there's just nobody ordering from those places. It's not enough ROI for the platform.
Those are the two most common. And then I'll give you the third one, which I think is funny, but it's only been like two stores, is I'm fairly confident they were afraid to say no to our salesperson where they were just like, I just need to say yes so this person stops talking to me. It's only been a couple.
It's a good salesperson. Yeah, a couple stores, right? Yeah, like two out of 330. Yeah, it's just like, yeah, not there. And that's going to happen, right?
We want them to be aggressive. What valuation range are you looking to raise on? So we're doing a $9 million post-money valuation cap, another convertible note, raising the 1.6, and we have 1.3 committed already.
Oh, nice. So it's coming along. Thank you. Not a fun time to raise money.
I really liked this. I rarely meet people with this level of extemporaneous ability to talk about every facet of their business in a level of honesty and detail. Honestly, it's quite impressive.
Thank you. Your command of the business. But I'm going to be out.
I think I visibly winced when I heard about the cap table, just because it's clear to me you're doing so much. Yeah. And it's not even just the absolute amount of ownership, it's the amount of ownership. combined with what I think the business is going to need on the capital side.
If this was something where I was like, oh, we could probably do this skinny, it's a lot of marketing, it's a lot of inbound, but I think you were honest and correct in what it's going to take in the intermediate period to get your customers on board. And I just worry that given the current level of ownership and what I think it's going to take, I just think you're not going to get the reward you deserve for your effort. So I'm out, I'm really sorry. Can I ask you a couple questions? Absolutely.
Yep, so one question would be if... Cap table adjusted fast. Would that affect your decision?
It would, yeah, it would. I think that's doable. So Victor and I, like I said, we go way back. If I called him after this and was like, we're going to close the round, you need to literally send me 5% right now. I could probably do that overnight.
So I'll say that's the one. The second is, I think if I showed you the model, sales driven sounds expensive. It's not as expensive as it sounds. So for us, the 1.6 million gets us a 3 million run rate. And we're- on the cusp of profitability.
If that affects your decision, those two are actually a feel-good. I don't have an exact number in mind. I'm happy to have that conversation. I also want to respect the fact that Victor put in real money.
This isn't phantom ownership. He really put up real cash. He put up real cash, yeah. But that adjustment would change my decision if we could get to a level where the balance felt better. I'm a pass as well, actually.
I think we have some background in our fund working in the... convenience store space. So one of my colleagues at Eleven Tribes has owned and run convenience stores. And there's a lot of, it's just gnarly. It's just gnarly getting into all those different spaces.
And so I, man, your control of the business is incredible, but more from a getting into that convenience store space perspective, it's going to be passed for us. Yeah. I think what would be exciting to me is a business model that was more focused on either the retailer or the brand partnerships. It complicates the customer relationship if you're like retailer first, but you're also selling to them. And so I think like that monetary aspect can complicate how you think about going through both like product development and then also like the sales cycle if you're selling to two different customer bases.
So for that reason, I'm out. But I was incredibly impressed. And I do hope that you get more equity in the business. Thank you. Yeah, well said.
Have you ever had a conversation with Victor about your equity? Yes. And what is his perspective on that?
That I deserve more equity. I mean, transparently, it's just not my focus right now. It's like, I'm hearing it now more as we're closing this round.
You're not the first people to sort of mention something similar. But it's to me, it's like, it's never, if I had one percent or something like that, that'd be like horrible. But it's a meaningful chunk.
And to me, this is like, we're here to... change this industry and win. And there's an emotional piece to this where I was literally couldn't afford, I was in my MBA too.
So it's like, I need to get paid. And for someone to pay me out of their own pocket when the company wasn't making really money yet, to me was meaningful why it's here now. I can guarantee that there will be transfer and I just haven't spent the time because I want to see success over my personal equity.
So here are my thoughts. I am... Out for now, for all the reasons that Charles cited. But I think you've been incredible.
And if there were a few modifications here, then I would be in. So one is, I do agree with this general sentiment that I think you need to be rewarded. Thank you. You are raising this round also, so you're putting in the work in capitalizing this company.
I think you have to be at least at 20%. A lot of things are psychological and maybe you're okay with things now, but as you go along and everybody gets diluted down, you're going to feel less excited about the company as things go on. I don't like it when people end up feeling bitter about their own companies. So that's thought number one.
The second thing is convertible notes are generally all over the place, so I would definitely want to see what the details on that look like. But I think if you can solve for those two things, I would be very interested in investing in this round. Awesome.
I could almost guarantee I could have that 6% from Vic directly, but actions speak louder than words, so let's see if I actually do it. You can see if you believe it. My question would be, and obviously this is not a commit because there's no commitments yet, but I guess where would you play?
I guess both of you. We would do like probably 50, something like that. We would do 50k.
Cool, just because we're getting close. Especially given what you have left. We're getting close. Okay, very cool. All right.
All right. Cool. Good job, man.
Awesome. Yeah. Really nice to meet you.
Nice to meet you all too. Nice to meet you. Yeah.
Wow. All right. That was impressive. Yeah. It was like every single question, he was like, boom, boom, boom.
Also, there's this other thing you should consider. And he was like, the direct numbers on it. I was like, this is very good at communicating. Very detailed.
Yeah. Why? I'm just curious, why 20?
in your head 20%? I was going to say 22. I was like 6 to 8. I was like, because he's going to get more dilution. I mean, I would have wanted to ask for more, but I don't know. It's a tough question too because he has this close relationship with this other person who's clearly done meaningful things for the business.
And funded his MBA. Totally. Yeah, that's the thing.
I think it would be different if it was just sort of like funny money. Oh, I started a year. Yeah, no, it was real.
This is a real, that was a real sacrifice and I think that's to be respected. Yeah, I agree with that. It's well said. Do you think you'll come in if it's 20? I would be happier at 22, but I'd probably do it at 20. That's very specific.
Yeah. We might do a quick turnaround. Okay, quick turn. We do need you guys to leave so we can set up his mic. Yeah.
Jason left the room with $100,000 in commitments, I think, from Elizabeth and Charles, if he can get more equity from his co-founder, Victor. Jason seemed very confident he could get that equity. But conversations around ownership usually aren't that straightforward.
We caught up with Jason a few weeks later to see how it all went. You can hear that on episode 120 of The Pitch Podcast. Link in the description. And I want to say a quick thank you to everyone who's been liking and commenting on our videos.
Apparently, that's something I'm supposed to ask you to do, but you're doing it on your own, and we really appreciate it. We'll see you in three weeks on The Pitch Show.