20VC How To Strategically Build The Right Investor Base, Why Startup Timing is Like Surfing & How To Determine Whether Someone is Scaling with the Organisation or Not with Daniel Lewis, Founder & CEO @ Convoy

In this episode of the 20 Minutes VC, host Harry Stebbings interviews Daniel Lewis, founder and CEO of Convoy, a technology-driven trucking service. Lewis shares his journey from working in his family's distribution business to leading roles at Amazon, Google, and Microsoft, and how these experiences shaped his approach to Convoy. He discusses the importance of timing, the challenge of gaining early customers in a traditional industry, and Convoy's strategy of building credibility through high-profile investors. Lewis also emphasizes the significance of creating a culture of experimentation and scaling both the company and oneself as CEO. Convoy, which has raised over $80 million, aims to revolutionize the freight industry by leveraging technology to enhance efficiency and insights, with the support of investors like Y Combinator and Jeff Bezos.

• Harry Stebbings introduces the episode of "20 Minutes VC and Founders Friday."
• Daniel Lewis, founder and CEO of Convoy, is the guest.
• Convoy is a technology-driven trucking service company.
• Convoy has raised over $80 million from notable investors including Y Combinator, Greylock, and individuals like Jeff Bezos.
• Lewis has a background with companies like Amazon, Google, and Microsoft.
• Thanks are given to Anu at YC and Hooman Radfar at Expa for the introduction.

"I'm very excited to welcome Daniel Lewis to the hot seat today. Now, Dan is the founder and CEO at Convoy, the startup that really is the future of freight with trucking services powered by technology to drive reliability, efficiency and insights."

The quote introduces Daniel Lewis and his company Convoy, emphasizing its innovative approach to freight and trucking services.

• Daniel Lewis developed an appreciation for supply chains from working in his family's office supply distribution business.
• His early work included warehouse tasks and driving.
• Lewis's later experiences included work with the Panama Canal and airline parts distribution.
• Convoy was inspired by witnessing supply chain transformations at Amazon and the increasing consumer expectations.

"I appreciated supply chain because it paid me $10 an hour during the summer...But later on, did a bunch of things in transportation...Honestly, I witnessed pretty powerful supply chain transformation happening via Amazon."

The quote reflects on Lewis's early exposure to supply chains and how his experiences led to the formation of Convoy.

• Lewis shares operational takeaways from his time at Amazon, Google, and Microsoft.
• At Amazon, he learned the importance of deep metrics, company structure, and core values.
• Microsoft emphasized product launch strategies.
• Google focused on customer experience and innovation.
• These experiences influenced how Lewis runs Convoy.

"The one that certainly influenced me the most... was Amazon... having a set of core values that you don't just use to talk about the business to recruits, but that you use every single day in meetings and in reviews and in hiring."

The quote highlights the influence of Amazon's focus on metrics and core values on Lewis's leadership at Convoy.

• Daniel Lewis explains the difference between linear and nonlinear businesses.
• Nonlinear businesses have binary outcomes and strong network effects but may take years to succeed.
• Linear businesses can be successful at various scales and are often B2B, scaling through hard work.
• Convoy aims to combine the best of both, starting as a linear business and evolving into a nonlinear one with network effects.
• The trucking industry, traditionally linear, is being transformed into a nonlinear model by Convoy.

"A nonlinear business tends to have a nonlinear or a binary outcome... And a linear business... can be successful at different scale, different levels of scale... I think convoy is that business, or one of those businesses initially getting us off the ground."

The quote outlines Lewis's perspective on linear and nonlinear business models and Convoy's strategy to evolve from one to the other.

• Timing is a critical factor for the success of a company.
• The right timing can influence company growth, fundraising, and market acceptance.
• In the case of Convoy, the timing was aligned with technological advancements and market demands.

"Mike Dorbra at Amplify said on the show that timing kills more companies than Runway."

This quote emphasizes the opinion of Mike Dorbra, who believes that timing is a more significant factor in a company's failure than financial resources (runway).

"The timing of when you pull the roof pack is going to make a big difference."

Daniel Lewis uses an analogy to illustrate how timing affects the success of actions taken by a company, comparing it to using a convertible car in appropriate weather.

"The door really opened on both sides of the marketplace that we're building about three or four years ago, right when we were considering building this."

Daniel Lewis explains that the timing for Convoy was optimal because technological and market conditions aligned when they were starting the company.

• The choice of investors can greatly impact a company's credibility and growth.
• Convoy's strategy included selecting investors who could provide credibility to non-tech customers.
• The company leveraged investor reputation to build trust with customers and attract talent.

"First and foremost was just getting investors, building a story that was compelling to somebody that would give us money."

Daniel Lewis discusses the initial challenge of attracting investors and emphasizes the importance of a compelling business narrative.

"Investors can help us earn credibility with customers."

Daniel Lewis explains how the reputation of investors played a crucial role in building trust with Convoy's customers.

• Board composition should include diverse experiences and valuable connections.
• A good relationship with the board can provide valuable insights and resources.
• Board chemistry is important for healthy company governance.

"Are you going to lean in, and is this going to be something you nurture and develop?"

Daniel Lewis talks about the approach to working with investors and the board, highlighting the importance of engaging with them to extract value for the company.

"The board composition came very much down to people that we felt would be really, really valuable for building the business."

Daniel Lewis describes the criteria for selecting board members, focusing on their potential contributions to the company's growth.

• Founders must ultimately make decisions and own the outcomes.
• It's important to critically evaluate board advice and consider full-time visibility versus part-time input.
• Confidence in the company's direction is crucial when facing divergent opinions.

"Your board is giving you advice...but they're not seeing everything that you're seeing."

Daniel Lewis emphasizes the founder's unique perspective and responsibility when considering board advice.

"You have to believe in what you're doing, and you can't just go on the whims of people that are advising you."

Daniel Lewis advises founders to have confidence in their own judgment and not to be swayed solely by advisors.

• The decision on the pace of growth and expansion is a strategic one.
• Large funding rounds can impact the company's approach to scaling and market penetration.
• Discussions around the pace of growth involve considerations of geographic and service expansion.

"You raised a large 62 million series B. Why is such an increase on the previous round?"

Harry Stebbings questions the rationale behind Convoy's significant increase in funding from one round to the next, hinting at the implications for the company's pace and capital efficiency.

"It's kind of been fast or super fast, right?"

Daniel Lewis acknowledges the varying opinions on the pace of growth, suggesting that Convoy has been growing rapidly and that strategic considerations are continuously discussed.

• Launching a two-sided marketplace for trucking requires a significant minimum viable footprint.
• Multiple cities, lanes, and truck types are essential to cater to the needs of both businesses and truck drivers.
• The marketplace needs a substantial amount of capital to build and support its structure, including engineering, sales, relationship management, operations, and support.

"The minimum viable footprint for launching this brokerage, this marketplace is across multiple cities, multiple lanes, and with a couple of different truck types, we found."

This quote emphasizes the complexity and scale required to launch a successful two-sided marketplace in the trucking industry, highlighting the need for a broad operational base to meet diverse customer requirements.

• Daniel Lewis's personal and business approach is frugal and focused on capital efficiency.
• Core values emphasize earning through results, not entitlement due to available capital.
• The injection of funds allows for more significant risks in testing and experimenting while maintaining a commitment to efficiency.

"I don't think that it did. I think that generally my dna is very frugal and I try to be very efficient with spending money personally and in this business."

Daniel Lewis clarifies that the influx of capital did not alter his or the company's approach to spending and efficiency, reaffirming a frugal mindset that is ingrained in the company’s culture.

• YC Continuity fund was chosen for its blend of growth experience and startup support.
• YC's deep connections and insights from growth-stage companies are valuable for scaling.
• The culture of YC aligns with the company's need for proactive support and resources.

"So we felt like we got the best of both worlds, growth experience and network, as well as that culture of support and resources for startups."

Daniel Lewis explains the rationale behind selecting YC as the lead investor, citing the dual benefits of growth expertise and a supportive culture that align with the company's needs during the scaling phase.

• Trucking is a traditional industry with established purchasing habits.
• Convincing the first few customers requires building credibility and trust.
• Early customer engagement and successes help facilitate further customer acquisition through referrals and proven results.

"The first customer we ever had, they shipped one pallet [...] They were excited to kind of be the first company to use it."

This quote highlights the initial challenge of acquiring customers in a traditional industry and the significance of the first customer's positive experience, which is instrumental in building momentum and credibility.

• Culture is shaped by the values and the people hired.
• Hiring individuals from data-centric and experimental backgrounds fosters a culture of experimentation.
• Emphasizing the value of experimentation and hiring like-minded individuals helps mitigate the fear of risk.

"One of the ways you create a culture of experimentation is you hire a lot of people who have been part of organizations and companies that do a lot of experiments."

Daniel Lewis discusses the importance of hiring the right people to cultivate a culture of experimentation, emphasizing the need for employees who are comfortable with and value the process of experimentation.

• Experiments are viewed as learning opportunities rather than successes or failures.
• All outcomes provide valuable data for smarter decisions or better experiments.
• The company gamifies experiment predictions to engage employees and reinforce the culture of experimentation.

"An experiment never goes wrong. An experiment has an outcome, and we learn from it."

Daniel Lewis reframes the concept of failed experiments, suggesting that every outcome is a learning opportunity, which is a key aspect of maintaining a positive approach to experimentation within the company.

• Rapid company growth necessitates the CEO's role to evolve quickly.
• Self-reflection and adaptation are crucial for a CEO to scale with the company.
• Daniel Lewis is conscious of the need to develop as a leader to match the company's pace of growth.

"We've gone fast. So our company is not even three years old yet. We've been able to scale to over 200 people."

Daniel Lewis acknowledges the swift growth of the company and the importance of his own development as CEO to lead effectively through significant changes and expansion.

• Initially, the founder's role is multifaceted: chief recruiter, fundraiser, and visionary.
• As the product develops, the role shifts to chief product officer to focus on product development.
• The founder then becomes the chief salesman, engaging with customers and understanding their needs.
• Over time, the role evolves as more competent people are hired, especially senior leaders.
• The founder's focus returns to recruiting, fundraising, and vision as the company grows.

"I am the chief recruiter and the chief fundraiser and the chief visionary, because without getting people on board, there is no product, there is nothing to go build."

The quote highlights the initial responsibilities of a startup founder, emphasizing the importance of building a team, securing funding, and setting a clear vision for the company's future.

• Overcoming the fear of being capable as a CEO and ensuring it's the right fit.
• The founder's diverse job history becomes an asset in the varied role of a CEO.
• Identifying which team members can scale with the company and take on more responsibility.
• Recognizing the need to hire someone to take over one's current role is a key indicator of readiness to scale.
• The ability to attract high-caliber replacements shows readiness for advancement.

"The second part that's been challenging as we've scaled the company is really knowing who else is scaling and who else needs to develop more and isn't ready yet."

This quote discusses the difficulty in assessing which employees are capable of growing with the company and taking on greater responsibilities as the company scales.

• "The Stranger" by Albert Camus left a lasting impression, introducing complex life realities.
• "The Goldfinch" and George R.R. Martin's "Game of Thrones" series are among favorites, with the latter sparking an interest in fantasy novels.

"The book that burned, honestly, my favorite book, whenever I think about this question, that burned impression on me was the Stranger by Albert Camus."

This quote explains the significant impact "The Stranger" had on the speaker, marking it as a memorable favorite for its portrayal of a complex character and life's intricacies.

• "You only get one chance to make a first impression" is a guiding principle.
• Making a strong first impression opens up many future opportunities.

"Probably an oldie, but kind of a goodie is you only get one chance to make a first impression."

The quote underscores the importance of first impressions in creating opportunities and the speaker's belief in its value.

• Influential figures in life emphasized the importance of creating future options.
• A dean's advice to choose a job that keeps future opportunities open was pivotal.

"My dean said specifically, between these two jobs you're looking at, pick the one that lets you do the other one in the future, too."

This quote reflects a significant piece of advice that shaped the speaker's decision-making, focusing on maintaining flexibility and options for the future.

• Anticipates significant innovation in logistics and trucking, akin to retail and music a decade ago.
• Envisions benefits for small trucking companies and drivers, as well as improved visibility and data for shippers.

"I think that over the next five years, you're going to see incredible innovation in trucking."

The quote projects a transformative period for the trucking industry, with the speaker's company, Convoy, playing a central role in driving innovation and change.

• Appreciation is expressed for the guest's participation in the podcast.
• Listeners are encouraged to follow the guest on social media for further insights.
• The host promotes Lisa mattresses and Zoom conferencing services, emphasizing quality and user satisfaction.

"What a guest to have on the show, and as you can tell, I so enjoyed that one."

This closing quote conveys the host's enthusiasm for the interview and gratitude towards the guest for sharing his experiences and insights.