20VC Exclusive Fast's Domm Holland on What Really Happened at Fast Were they really Burning $10M per Month Where did Bolt Succeed Where Fast Did Not What is It Really Like To Have Stripe Invest in your Company

Abstract
Summary Notes

Abstract

In this episode of 20vc, host Harry Stebbings interviews Dom Holland, founder of the recently closed startup Fast, to candidly address the company's high-profile failure. Holland discusses Fast's burn rate issues, media misrepresentations, and the impact of having Stripe as an investor. He refutes the notion of excessive spending on marketing and events, attributing the majority of the company's costs to staff wages and benefits. Holland also reflects on the challenges of scaling a tech business in a complex and fragmented e-commerce landscape. Despite the setback, he expresses a strong desire to continue building and solving problems, drawing on lessons learned from Fast's journey. Throughout the conversation, Holland emphasizes the importance of team and product, and while acknowledging the pain of public scrutiny, he remains focused on moving forward.

Summary Notes

Introduction to Fast and Dom Holland's Journey

  • Fast is a highly discussed company due to its recent closure/aqua hire.
  • Dom Holland, the founder of Fast, joins the podcast to provide his perspective on the company's story.
  • Discussion includes what went wrong with Fast, the truth behind reported statements, and the experience of having Stripe as an investor.

"Now Fast is likely one of the most discussed and written about companies of the last month with their recent closing slash aqua hire."

The quote introduces the company Fast as a focal point of the conversation, particularly due to recent significant events affecting the company.

"And so today Dom Holland is joining me in the hot seat for an exclusive to discuss what went wrong, what statements reported are true, which are false, what's it like having stripe as an investor and so much more."

This quote sets the stage for the interview with Dom Holland, indicating that the conversation will delve into the challenges and experiences faced by Fast, including aspects of its relationship with the investor Stripe.

Microsoft for Startup Founders Hub

  • Microsoft offers a platform to assist startup founders with various resources.
  • The platform includes Azure credits, GitHub, mentorship, productivity software, and training.
  • It is free, open to all, and requires no funding to apply.

"The platform provides founders with free resources like Azure credits, development tools like GitHub, mentorship resources, productivity, software training and so much more."

This quote summarizes the types of resources provided by the Microsoft for Startup Founders Hub, emphasizing the comprehensive support offered to startups.

Pipe's Financing Solution for Startups

  • Pipe is a platform that allows startups to finance growth without traditional loans or venture capital.
  • It turns recurring revenue into upfront capital and is suitable for various industries.
  • The service is fast, flexible, and does not involve loans, dilution, or restrictive covenants.

"Pipe is a completely new way to finance growth without taking on restrictive loans or diluting your ownership with vc money from vcs like me."

This quote explains the unique value proposition of Pipe, highlighting its approach to financing that avoids the drawbacks of traditional loans and equity dilution.

Legy's Equity Management for Startups

  • Legy offers equity management solutions for scaling teams.
  • It helps startups understand their cap table and share ownership, engaging employees and facilitating investor discussions.
  • Legy provides dashboards and scenario modeling tools for employees and investors.

"When you really understand your cap table and share ownership, you motivate and engage your team and have more transparent conversations with investors."

This quote emphasizes the importance of transparent equity management in motivating teams and communicating with investors, which is what Legy aims to facilitate.

Dom Holland's Entry into Tech and Startups

  • Dom Holland started programming at 14 and has been building technology for a long time.
  • He created his first e-commerce store at 15 and has been involved in tech before it was mainstream.
  • Holland's first startup was Tow, a non-venture backed, on-demand towing business in Australia.
  • Fast, his second startup, was venture-backed and is the main subject of discussion.

"First, I've been building for a long time. I started programming when I was about 14, so that's about 20 years ago now. So I've been building stuff for a long time, building software and hardware and whatever else."

The quote provides background on Dom Holland's extensive experience in building technology, setting the stage for his credibility as a tech entrepreneur.

The Controversy Surrounding Tow

  • Tow faced a contract dispute with the Queensland government over unpaid services.
  • The government did not pay for $17 million worth of tows and impounds, leading to a two-year legal battle.
  • The dispute resulted in Tow's failure due to financial strain and left subcontractors unpaid.

"We were doing a lot of work for the Queensland government... They wanted one company to manage everything... But there was a contract dispute and the government didn't want to pay for about $17 million worth of tows and impounds that we did for them."

This quote details the specific issue that led to Tow's downfall, highlighting the financial impact of the government's refusal to pay for services rendered.

Reflection on Fast's Downfall

  • Fast's burn rate was too high, especially in the last two quarters of 2001.
  • Market conditions worsened, making fundraising difficult for companies with high burn rates.
  • Fast's shift to the enterprise space did not scale quickly enough to support its financial needs.

"Our burn was just far too high at the end. Over the last two quarters of 2001, we basically doubled our burn... Any company with high burn was having issues fundraising, and we were on the high end of high burn."

This quote identifies the critical financial misstep for Fast, which was an unsustainable burn rate that ultimately led to the company's inability to secure further funding.

Business Challenges and Closure

  • The company faced a mismatch between scaling burn rate and revenue growth.
  • There was a need for urgent capital infusion, leading to the sale of the business.
  • The firm Aqua hired some staff and shut down the remaining operations.
  • The outcome was considered sad by the team, who worked hard to avoid it.

"And so in the end, after about four months of being out in market fundraising, we ran a process and sold the business."

This quote explains the final decision to sell the business after unsuccessful attempts at fundraising.

Misconceptions about Spending

  • The majority of the company's expenses were related to staff costs, including wages and benefits.
  • Marketing spend was lower than expected, with occasional high-profile events.
  • The media's portrayal of the company's burn rate was exaggerated.

"The vast majority of our burn came directly from people like, well over 80% of our cost space was just wages, health care benefits, over 80%."

This quote clarifies that staff costs constituted the bulk of the company's expenses, debunking the notion of excessive spending on marketing or other areas.

Overstaffing Issues

  • The company overhired, particularly in customer success and partnerships, planning for future growth.
  • The aggressive hiring was part of a board-approved plan.
  • The high burn rate was unsustainable, especially in a non-bull market.

"We had a customer success team that was just too big for what we needed at that time."

This quote acknowledges the issue of hiring more staff than necessary at the time, contributing to the high burn rate.

Media Misrepresentation

  • The media reported a higher burn rate than was accurate.
  • Revenue figures were also misrepresented by the media.
  • The company never experienced the levels of burn reported in the media.

"Our Burn was much, significantly lower. We've never done $10 million a month of burn before."

This quote refutes the media's claims about the company's burn rate, emphasizing that the actual figures were much lower.

Public Perception and Building in Public

  • The founder's high-profile and outspoken nature may have influenced public and media perception.
  • High-profile figures are inherently polarizing due to varying public opinions.
  • The founder has no interest in being high-profile for its own sake but sees it as a consequence of building impactful products.

"Every high profile figure is polarizing. There simply aren't people who are high profile and not polarizing."

This quote reflects on the inevitability of polarization when one becomes a high-profile figure, regardless of their intentions.

Handling Media Criticism

  • The founder chooses not to read articles about the company, whether positive or negative.
  • Focus remains on the mission and work rather than public opinion.
  • Media tends to amplify both the rise and fall of companies and individuals.

"Years ago, I stopped reading. Reading the articles. The good or the bad doesn't matter."

This quote shows the founder's decision to disengage from media narratives to maintain focus on the company's mission.

Team Layoffs and Management

  • The founder prioritized keeping the team together until it was no longer feasible.
  • A firm was chosen to acquihire the company based on its ability to absorb a large part of the team.
  • The founder personally delivered the news of layoffs to the team.

"Literally fought for months and months and months to keep the team together."

This quote indicates the efforts made to avoid layoffs and the eventual acquihire as a solution to preserve as many jobs as possible.

Communication Challenges in Remote Settings

  • Remote communication tools such as Zoom are essential but not ideal for conducting one-on-one interviews due to practicality constraints.
  • Personal engagement with each team member is challenging to achieve in remote work environments.

"It would be lovely to hold one on one interviews with every single person, but unfortunately, it's just not a practical exercise."

This quote highlights the limitations of remote communication tools in providing personal interaction, emphasizing the impracticality of one-on-one interviews for every team member in a remote setting.

Perception and Reality of Having Stripe as an Investor

  • Speaker B refutes Ryan Breslow's implication that Stripe's investment leads to the downfall of companies.
  • Strategic investors can add complexity but are not the sole reason for a company's failure.
  • High operational burn rate was identified as the primary cause of the company's failure, not Stripe's involvement.
  • Alternatives to partnering with Stripe, such as banks, may have offered different benefits but were not necessarily a better path.
  • Speaker B would consider working with Stripe again, citing benefits from the partnership.

"Having too high a burn is what killed our company. There's just no other way to put it."

This quote clarifies that financial mismanagement, specifically excessive spending, was the main reason for the company's failure, not the influence of strategic investors like Stripe.

Analysis of Competitor's Survival and Strategy

  • Bolt's success attributed to their earlier focus on building necessary integrations for medium-sized businesses.
  • Bolt copied the messaging strategy from Speaker B's company after its launch.
  • Speaker B acknowledges the importance of building infrastructure to support enterprise clients.
  • Bolt's fundraising success and hiring practices are commended, though their product-market fit is yet to be proven.

"Bolt had just been building all of those integrations for a lot longer. They had five year head start on building all these pieces."

This quote explains Bolt's advantage over Speaker B's company, which was their longer period of establishing necessary integrations and infrastructure, contributing to their survival in the market.

Reflections on Past Business Endeavors and Future Approaches

  • Speaker B reflects on the high demand for their team and product post-company closure, indicating successful hiring and product development.
  • Focus on consumer needs is a strategy that Speaker B would replicate in future ventures.
  • A significant change for future companies would be maintaining a much lower burn rate.

"We got team right, we hired the right people. We hired the best people."

This quote emphasizes the success in team building, suggesting that hiring the right talent was a key strength of the company.

The Role of Capital and Spending in Business Failure

  • Speaker B admits to overspending rather than raising too much capital as the reason for the business failure.
  • E-commerce and checkout systems are complex, requiring significant time and capital for integration with large enterprises.
  • Speaker B suggests choosing a product that does not require integration with complex systems in the future.

"We just spent too much money. We had a burn too high."

This quote acknowledges the mismanagement of funds as the critical factor in the company's downfall, rather than the amount of capital raised.

Decision-Making in Crisis

  • Speaker B agrees that reducing burn rate and extending the company's runway was the right strategy.
  • Despite the company's proximity to a tipping point with significant customers, the inability to reduce spending in time led to its demise.

"I'm with you. I think that was a plan. And to be honest, it's exactly what I wanted to do."

This quote shows Speaker B's agreement with the idea of cutting costs to prolong the company's survival, indicating that there was a plan to do so, but it was not executed in time.

Tipping Point and Decision to Raise Money

  • Fast reached a significant milestone with $8 billion in signed deals with enterprise merchants.
  • The company was beyond the tipping point, and the natural course of action seemed to be raising additional funds to continue operations.
  • Speaker B's personal vote was in favor of raising money to keep the company going.

We had $8 billion of enterprise merchants in signed deals that we were onboarding. We were so past that tipping point. And my vote was to do that. It was to raise money whatever, and keep going.

This quote illustrates the company's strong position with substantial deals and the speaker's inclination to secure more funding to capitalize on that momentum.

The Board's Decision and Investor Involvement

  • The board did not follow through with raising more funds due to the expectation that existing investors would prefer external investors to lead the process.
  • Restructuring and right-sizing the company were necessary steps to reduce burn rate before seeking new investment.
  • The insiders wanted to see commitment from external investors before they would participate.

I think our insiders just really wanted to see external investors come in and lead that process and them to participate with other people lead, which I get.

The quote explains the board's stance on funding, highlighting a preference for external leadership in the investment process.

Strategy for Company Survival

  • Speaker C suggests a strategy focused on extending the company's runway to the end of the year by proving out specific objectives (X, Y, and Z).
  • The emphasis was on saving the company, potentially through cost-cutting measures, to avoid the need for external investors.
  • The board did not adopt this approach, which could have made the company more attractive to investors later on.

We need to lost till the end of the year and we need to prove out X, Y and Z. I don't care about, I'm sorry, cutting heads. We're saving the company.

This quote represents an alternative strategy that prioritizes the company's longevity and self-sufficiency over immediate external investment.

Personal Resilience and Public Perception

  • Speaker B reflects on cultural influences, such as the traditional Aussie male attitude, that shaped his response to challenges.
  • There is a contrast between private suffering and the more accepted public sharing of struggles and mental health issues.
  • Speaker B acknowledges the difficulty of the situation but prefers to cope privately, focusing on being a steadfast support for his family.

I've always been the rock in my family. That's the job, right. It's really easy for people to want to hate or want to talk about or want to have a go at people who don't suffer publicly.

The quote highlights the speaker's personal coping mechanism and the societal shift towards openness about personal struggles, which he does not conform to.

Support Systems and Future Outlook

  • Speaker B finds solace in his family during tough times, which is his way of dealing with stress rather than public expression.
  • Despite the hardships, he remains focused on learning from experiences and seeing opportunities for future endeavors.
  • Speaker B expresses his intention to continue building and solving problems, drawing inspiration from the support of his team, investors, and customers.

I'm just going to keep doing what I do well.

This quote conveys Speaker B's determination to persevere in his professional pursuits, despite the challenges faced.

Appreciation for Support and Next Steps

  • Speaker B has received positive feedback and support from his team, investors, and customers, which motivates him to move forward.
  • The next chapter involves ideation and figuring out the shape of future projects.
  • The support and positive impact of their product on customers drive Speaker B's ambition to create something significant again.

The reality behind what happened that keeps me driving forward, right? The media and whatever scumbags on Twitter can say whatever they want about me, but reality is going to go and build something magical again.

This quote reflects Speaker B's resilience and the encouragement he receives from his support network, which fuels his desire to overcome setbacks and continue innovating.

Gratitude and Reflection on Failure

  • Speaker C thanks Speaker B for the honesty and participation in the discussion.
  • The conversation acknowledges the difficulty of the situation and the importance of learning from failure.
  • The show aims to provide insights and celebrate the journey, including the challenges faced by startup founders.

I do think that we need to celebrate failure, as Dom said there, I hope you enjoyed the show today.

The quote emphasizes the value of embracing and learning from failures as part of the entrepreneurial experience.

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