20VC Why Great VCs Know The Opportunity In Hardware, Physical Stores Will Not Disappear and The Importance of Consumer Brand with Josh Udashkin @ Raden

In this episode of the 20 minutes VC, host Harry Stebbings interviews Josh Udashkin, the founder of Raiden, a company revolutionizing the luggage industry with innovative features like built-in chargers, scales, and trackers. Udashkin, a former securities lawyer, shares his journey from retail exploration to redefining travel gear, emphasizing the importance of physical retail presence alongside online sales for brand trust. He discusses the challenges of hardware startups, the significance of customer experience through mobile integration, and the future vision of Raiden, which focuses on enhancing the travel experience through their products and app. The episode also touches on VC dynamics, with Josh's fundraising approach highlighting the value of building relationships over time and the strategic avoidance of crowdfunding platforms to manage customer expectations.

• Josh Udashkin transitioned from being a securities lawyer at a hedge fund to founding Raiden.
• Raiden creates innovative suitcases with features such as phone chargers, built-in scales, and trackers.
• The company has raised funding from notable investors like First Round, Lerer Hippeau, and the Pritzker Group.
• Raiden's products are a blend of practicality and style, aiming to revolutionize the travel experience.

"Now Josh is one of those super interesting people who goes from being a securities lawyer at a hedge fund to founding Raiden, who are essentially making suitcases sexy and really, really cool."

The quote highlights Josh Udashkin's unconventional career shift from law to entrepreneurship, focusing on creating a unique and appealing luggage brand.

• Falling asleep in less than 5 minutes suggests sleep deprivation; the ideal time is around 10 minutes.
• Lisa mattresses feature a design of three layers, including memory foam and latex-like foam, to ensure comfort and coolness.
• The mattresses are sold online, bypassing the showroom experience, which results in lower prices.
• Customers in the UK, US, and Canada can enjoy free shipping and a 100-night trial.
• A promotional offer is available for listeners with a discount code.

"Did you know that if it takes you less than 5 minutes to fall asleep, then you're likely sleep deprived? The ideal amount of time is about 10 minutes."

This quote provides a quick fact about sleep patterns and introduces the Lisa mattress as a potential solution for better sleep quality.

• VC Unlocked is a program for aspiring venture capitalists or those wanting to advance in the VC industry.
• The program is a collaboration between Stanford Professional Development Center and 500 Startups.
• Participants learn from industry leaders like Dave McClure, Mark Suster, and Jason Lemkin.
• The application deadline is July 1st, and the program offers opportunities for making connections in the investor industry.

"VC unlocked really is a must. It's a joint program run by Stanford Professional Development center and 500 startups for anyone looking to make their move into the world of VC or improve their standing in the VC community."

The quote emphasizes the value of the VC Unlocked program for professionals interested in venture capital, highlighting its educational and networking benefits.

• Josh Udashkin is Canadian and holds a JD/MBA from Toronto.
• He worked at a large hedge fund law firm in New York before joining Aldo Group.
• At Aldo, he observed the retail industry and travel products, leading to his realization of the untapped potential in the luggage market.
• The lack of strong brands and inconsistent merchandising and pricing in the luggage industry inspired him to create Raiden.

"I'm going to make the world's best suitcase company."

Josh's quote reveals his moment of inspiration to disrupt the luggage industry by founding Raiden, aiming to create superior travel products.

• Consumer shopping behaviors have shifted, with a few products (power SKUs) generating the majority of sales.
• This trend is evident across various categories, including industrial design products like headphones and wireless speakers.
• The rise of online shopping has cannibalized traditional brick-and-mortar retail, with aldo.com becoming the top-performing store for Aldo.
• Unsexy categories, such as mattresses, have seen innovation and growth through e-commerce and product development.

"You really saw the rise of the cannibalization of brick and mortar shopping by online shopping."

The quote discusses the significant impact of online shopping on traditional retail, emphasizing the shift in consumer purchasing habits.

• Josh Udashkin believes in the importance of both online and physical retail presence for brand building.
• Physical stores allow consumers to interact with the brand, its values, and its products.
• Raiden's New York store was designed to reflect the brand's values and product features, such as the lightness and aesthetics of the suitcases.
• The store's design, which includes floating suitcases, aims to create an engaging consumer experience and convey the concept of a round trip.

"It's very difficult to communicate your brand values and also your product features only online."

This quote explains the rationale behind Raiden's investment in a physical store, highlighting the limitations of online-only retail in brand storytelling and product demonstration.## Trust in E-commerce

• Establishing trust is crucial for new e-commerce brands.
• Consumers need confidence to make online purchases from new companies.

"We were really thinking that we needed a place as a new brand for people to trust us."

The quote emphasizes the importance of trust-building for new e-commerce businesses to succeed.

• Josh Udashkin highlights the importance of a long-term brand-building mentality.
• Focusing on product design, customer experience, and storytelling is key.
• Transforming traditionally mundane products into desirable luxury items requires a strategic approach.

"His DNA is fundamentally different about the long game. And you have a brand building mentality that's all about the product and the customer and telling the story."

The quote reflects Josh Udashkin's focus on the long-term strategy of brand building and creating a compelling narrative around the product and customer experience.

• Prioritizing industrial design can differentiate a product.
• Collaborating with talented designers like Kenny Sweet, who worked on Beats, is beneficial.
• Challenging industry norms, such as in the luggage market, can lead to innovation.

"I think know industrial design first."

The quote underlines the importance of prioritizing industrial design in product development to stand out in the market.

• Digital branding encompasses imagery, photography, graphics, and videos.
• It is necessary to communicate brand values and create an exciting and engaging customer experience.

"In order to build something, you need to communicate your values and it needs to be exciting."

This quote highlights the significance of communicating brand values and creating excitement through digital branding efforts.

• A focused monosku strategy simplifies communication of brand values and product details.
• Deep dives into product functionality and customer experience can reduce purchase friction.

"We have an opportunity to go really deep and I think that's what all the great new digital brands do."

The quote suggests that a detailed and thorough approach to presenting products online can enhance the customer's buying experience.

• Josh Udashkin expresses optimism about omnichannel retail strategies.
• Creating engaging and unique physical retail experiences can revive interest in in-store shopping.
• Collaborating with online and brick-and-mortar retailers can be more effective than relying solely on direct-to-consumer models.

"Omnichannel retail for me is the way to go and for others."

The quote indicates Josh Udashkin's belief in the effectiveness of an omnichannel approach to retail, combining both online and physical store experiences.

• Innovating the retail experience, such as hosting unique events, can make shopping exciting.
• Physical stores have the potential to offer memorable experiences that online shopping cannot replicate.

"There's just an opportunity to make going into stores exciting."

The quote captures the potential for physical retail stores to offer unique and exciting experiences that attract customers.

• Hardware startups face multiple challenges and require a diverse set of business capabilities.
• Venture capitalists may be hesitant to invest in hardware due to the complexities involved.

"You really have to have the stomach for it."

The quote conveys the notion that succeeding in the hardware business demands resilience and a capacity to manage its inherent challenges.

• Managing the supply chain and manufacturing process can be difficult for hardware startups.
• Partnering with experienced individuals or teams can alleviate some of these challenges.

"So was very hard when I was on my own."

The quote reflects the difficulties faced when managing hardware startup challenges independently, highlighting the benefits of finding experienced partners.## Manufacturing and Prototyping Challenges

• Josh Udashkin discusses the difficulties of aligning hardware and software development timelines.
• Coordinating the release of a product and hiring various teams simultaneously is challenging.
• Ensuring sufficient capital for product launch is crucial.
• Delays in manufacturing can force shifts in launch schedules, such as missing holiday sales and postponing to post-holiday.

"I also will say that our factory really is my first VC. Before I ever had vcs, I really went there to pitch." "We were going to launch our company in November and we just didn't have enough product that was made in time in order to hit holiday."

The first quote emphasizes the importance of building a strong relationship with manufacturers, as they are critical in developing prototypes. The second quote highlights the impact of manufacturing delays on launch schedules.

• Josh Udashkin sees IoT products combining physical products with mobile experiences as the future.
• High user engagement with mobile apps can extend brand interaction beyond the initial purchase.
• Providing additional services through the app can enhance customer experience and brand loyalty.
• The ability to communicate with customers through an app is seen as a superior customer service model.

"You really end up with a superior physical product, a superior bag or speaker or headphone or whatever it may be, with a very highly engaging mobile experience." "When you can communicate with your customer at the touch of a button on an application, that's the customer experience of the future."

The first quote describes the synergy between high-quality physical products and engaging mobile apps, while the second quote suggests that instant communication through apps is the future of customer service.

• Josh Udashkin acknowledges the potential for a SaaS model in the future.
• The company is currently focused on understanding customer needs and app usage.
• A SaaS model would require a significant user base and a deep understanding of customer behavior.

"I think it could. Down the road, I think like any of you need to have enough units out in the world and really learn."

This quote indicates that while a SaaS model is not currently in place, it is a possibility once the company has a better understanding of customer usage and a larger user base.

• Josh Udashkin raised a seed round over a year ago without announcing it.
• He values privacy and prefers not to publicize fundraising.
• Building relationships with VCs over time was a key strategy.
• Having a working prototype was crucial before seeking investment.
• The fundraising process was long and involved sharing the company vision and strategy.

"We actually raised a seed round about a year and change ago. It wasn't announced." "I would say Ben quite smartly waited until I had a working prototype before taking the leap."

The first quote reveals a strategic decision to keep fundraising efforts private, while the second quote emphasizes the importance of having a working prototype before investors are willing to commit.

• Relationship building is a long-term strategy that Josh Udashkin employs.
• Creating urgency around a raise is a tactic he acknowledges but does not always use.
• Passion for the product can be a double-edged sword in fundraising.

"Yeah, I think I built relationships over a considerable period of time, and I think I still do." "I'm super passionate about it. So I really do, like any founder, but I've gotten crazy about suitcases and how beautiful they can be and how useful they can be."

The first quote highlights the importance of cultivating long-term relationships with investors, while the second quote reflects Josh's deep passion for the product and its potential impact on consumers.

• Rejection is a common part of the fundraising process.
• Being emotionally invested in the product can make rejections more difficult to handle.
• Josh Udashkin acknowledges the challenge of dealing with rejections and the need to remain resilient.

"The first ones are hard because you're rolling in what you think is the most beautiful product, and you say, how do you not see this?"

This quote captures the emotional difficulty of facing rejection when one is deeply passionate about their product and its potential market impact.## Relationship Building with VCs

• Josh Udashkin discusses the importance of finding the right investor match, comparing it to dating.
• He advocates for actively reaching out, including cold emailing, to connect with potential investors or advisors.
• Josh emphasizes that seeking VC connections isn't only about funding but also about advice and shared experiences.

"And one of the great things is there are many great investors in many cities, and eventually, just like dating or anything else, you find your match."

This quote highlights the trial and error process of finding a compatible investor, similar to finding a personal relationship.

"No, it's well within my reach. I do it all the time. I cold email people all the time in kind of all walks of life."

Josh Udashkin confirms that he frequently uses cold emailing as a method to initiate contact with VCs and professionals across various industries.

"It gets easier after you've launched because then you're googleable. Takes away some of the referencing problems."

Josh notes that having an established presence or product makes it easier to approach investors, as it provides a reference point for the business's legitimacy.

• Josh Udashkin explains his preference for VC funding over crowdfunding platforms like Kickstarter or Indiegogo.
• He cites negative personal experiences with customer expectations from crowdfunding and the challenges in building a brand and fulfilling orders satisfactorily.
• Josh emphasizes the importance of being able to immediately ship products to meet modern consumers' expectations for quick delivery.

"Just terrible customer expectations as a buyer of some of those products, and very empathetically with those founders there, because I know how hard it is to actually get these products out the door."

Josh sympathizes with the difficulties founders face in meeting customer expectations when using crowdfunding platforms.

"So for us it was really about launching and then being able to ship product."

The focus for Josh's company was on being able to launch and immediately deliver products to customers, which influenced their decision to seek VC funding.

• Josh Udashkin shares that his current favorite book is "Shoe Dog," finding inspiration in the story of Nike's founder.
• He admires consumer brands with beautiful design and useful products, specifically mentioning Dyson.
• Josh regularly reads the Business of Fashion to stay informed on the intersection of fashion and technology.

"Always the one I'm currently reading, which is Shoe Dog, which is the story of the founder of Nike."

Josh finds motivation and a sense of camaraderie in reading about the experiences of other entrepreneurs.

"Really, really beautiful design, incredible retailing concept and just super useful products, but that don't really sacrifice brand."

He appreciates consumer brands that manage to balance aesthetic design with practicality without compromising their brand identity.

"I read business of fashion every day."

Josh's daily reading of the Business of Fashion indicates his keen interest in staying updated on trends at the crossroads of fashion and technology.

• Josh Udashkin reflects on his past strategies, considering spending more time in San Francisco for networking.
• He acknowledges the importance of geographical location in connecting with investors.
• Josh also indicates that his approach to building a team in New York and focusing on Asia for production may have limited his investor network.

"I think I would probably have traveled to San Francisco more often."

This quote reveals Josh's hindsight perspective on the significance of being physically present in key locations to foster investor relationships.

• Josh Udashkin credits his father as his biggest mentor, emphasizing the universal aspects of business learned from him.
• He highlights the importance of team building and customer satisfaction, regardless of the industry.

"Oh, my dad. No question about it."

Josh attributes his business acumen and entrepreneurial insights to his father's mentorship and experience.

• Josh Udashkin outlines the future vision for Raiden, focusing on creating high-quality products and enhancing mobile travel experiences.
• He discusses the integration of product use with travel information, aiming to provide a comprehensive customer experience.

"I think really for us, it's continuing to build beautiful, high-quality products, but most of our roadmap is really around the mobile experience."

Josh shares the company's commitment to quality and the strategic direction towards improving the mobile and travel experience for their customers.