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BiggerPockets Business Podcast 67: Thinking BIG and Raising $70 Million with Jay Reno

BiggerPockets Business Podcast 67: Thinking BIG and Raising $70 Million with Jay Reno

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The BiggerPockets Business Podcast

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Have you ever thought about starting a BIG business?  Ever wondered what the first steps were to raising tens of millions of dollars?  Do you unintentionally impose limitations on what you think you can accomplish? Have you ever thought, “If I just had more money, I could take my idea to the next level!”?

If so, this episode is for you!

Jay Reno, founder of Feather, has thought BIG from the start. His entrepreneurial journey began with an idea a bit ahead of its time. When that venture didn’t work out so well, he took the lessons he learned to bootstrap a whole new concept.

Living in New York City and identifying with the trend of a new generation of people defining success through life experiences rather than being tied down to meaningless material possessions, Jay recognized an opportunity to put his degree in Climate & Environmental Sciences to work. With just a few thousand dollars and a ton of hard work and diligence, Jay quickly achieved proof of concept for Feather, a furniture rental company providing a flexible and sustainable alternative to ownership.

In this episode, Jay tells us about his amazing experience at Y Combinator, an incubator program where other leading companies like DoorDash, AirBNB, and Dropbox also got their start. He offers insight on the pros and cons of raising money vs. bootstrapping your way to success. (Yes, there actually IS heartache involved, even when investors have pumped 70 MILLION DOLLARS into your company.) And he provides awesome examples of taking risks, making bets, and positioning yourself to be lucky when the time is right.

Make sure you pay attention to Jay’s reminders about the common excuses potential entrepreneurs make that hold them back, to make sure you overcome and avoid standing in your own way of greatness.

Check him out, and subscribe to the BiggerPockets Business Podcast so you won’t miss our next show!

Click here to listen on Apple Podcast.

Listen to the Podcast Here

Read the Transcript Here

J:
Welcome to the BiggerPockets Business Podcast, show number 67.

Jay:
Does everyone want to build a 10 plus billion dollar company? I think more people think they do than they actually do. I think it sounds sexy and fun, but I’ve had to sacrifice a whole lot in my life just to get to this point.

J:
Welcome to a real world MBA from the school of hard knocks, where entrepreneurs reveal what it really takes to make it. Whether you’re already in business or you’re on your way there, this show is for you. This is BiggerPockets Business.
How is it going everybody? I am J Scott, I’m your co-host for the BiggerPockets Business Podcast. Here again this week with my amazing wife, co-host and business partner, Mrs. Carol Scott. How is it going today Carol?

Carol:
Doing so well. So crazy, super excited that, congratulations to you, we finally have our first apartment complex under contract. It’s 150 units in Houston, and now we are at the stage where we are raising money. So what a great spot to be in. Just exciting, fantastic times ahead.

J:
Yeah, I can’t take much credit. We have some amazing partners in this deal. We’ll talk about this more on future episodes, but yeah, we’re really excited about that. But let’s talk about this episode. This episode is amazing. We have an entrepreneur, his name is Jay Reno and his company is Feather. So if you go to livefeather.com, it’s an amazing story, it’s an amazing company. Basically Jay started this company back in 2018 and the whole idea behind the company is he does furniture rental for millennials. So if you’re starting out and you buy a new place, or you move into a rental, or you move into a home and you don’t want to buy furniture basically they manufacture and they lease furniture. It sounds like okay, an interesting small little business, but no, they’re doing this on a national scale. To date the company has raised over $70 million. They got their start by going through an incubator program called Y Combinator. This is the same program that helped jumpstart companies like Airbnb, Dropbox, Instacart, Stripe, Reddit, DoorDash, all these amazing companies.
In this episode Jay talks about going through the Y Combinator incubation program. What you should be looking for if you’re thinking about going through an incubation program with your business. Then we jump into a discussion of raising money. Jay talks all about raising $70 million for his business, but in the process talks about all the pros and cons of raising money. So raising money seems like a really cool thing and a really good thing for a business, and in some cases it is, but Jay also talks about the downsides of raising money and why you may not want to raise money for your business.
Then throughout the entire episode Jay just provides some amazing motivation for all of us that don’t think we have what it takes to start a huge company. Jay talks about the first company he worked on. Basically it was a billion dollar idea that came a couple years too soon, but he jumped in essentially with no money, no training, no experience, and it didn’t stop him, and he talks all about how you can do the same thing and how lack of experience, lack of money shouldn’t be stopping you either. So just an amazing episode. A little bit different than a lot of our episodes where we talk with small business owners who are bootstrapping. In this case Jay is raising money, working with venture capitalists, and scaling quickly. So if you want to find out more about Jay, if you want to find out more about Feather, don’t hesitate to check out our show notes at BiggerPockets.com/bizshow67. Again, that’s BiggerPockets.com/bizshow67. Now, without any further ado, let’s welcome Jay Reno and Feather.

Carol:
Jay, welcome to the BiggerPockets Business Podcast. We are so looking forward to chatting with you today. You have such a great story. Your journey is amazing. Where you are now is just awesome, and I think our listeners are going to really be able to resonate with kind of how and why you started this company. So welcome to the show.

Jay:
Thank you, Carol. I’m blushing. If you are watching you can see, if you’re listening you cannot see. So hopefully you’re listening.

J:
Jay, no, this is really awesome. So a lot of the shows that we’ve done over the last year have been focused on smaller businesses where the founders, the business owners have kind of bootstrapped. Either they’ve raised a little bit of money or they’ve started with their own money, or maybe they’ve started with no money. Your story is a little bit different. You certainly started at the beginning, but you’ve grown your company exponentially. You’ve raised a lot of money, the incubator thing, which we’ll talk about. So I’m really excited to kind of dig in and just hear about what a bigger business at scale looks like and what you’ve done. But let’s start back at the beginning. So what led you to kind of become a business owner and start Feather?

Jay:
Yeah. All good questions. Let’s see. So I started building companies when I was in college. I didn’t know what I was doing at all, nor should you in the early days, I don’t think. I think the most important thing that you can do when you want to build a company is to just do it and to start, and to fail and learn along the way. Spending too much time studying it is usually, I wouldn’t say counterproductive, but isn’t as productive as just going out there and doing things yourself. So in college I came up with an idea for an online grocery store. This was in 2007 or eight. It was a horrible idea, but it was on the right track. Online grocery stores are now a thing. You’ve got Instacart, many others that are multibillion dollar businesses. Back then I thought people would want to shop virtual aisles. So I thought people wanted to be on their desktop and literally shop through the store but on their computer, and move through the aisles and have a kind of interactive experience. So I think I was wrong there, but I was onto something, which was online grocery.
So I cut my teeth with that in college. Ended up graduating from Elon in North Carolina, it’s a small liberal arts school, and went right to grad school. Studied climate and environmental science at Columbia University. While there I took that previous grocery idea and decided to evolve it and make it a little bit more relevant. I had tried and failed at this first company and had been thinking about it and realizing that online grocery is still going to be a thing. So I spent the better part of three years post graduating from grad school, building one of the first online grocery companies of this new era of online grocery companies.
What did I not know at that time? Still a whole hell of a lot. It was before Instacart, it was before Postmates, before DoorDash. I was just a little bit young and green and didn’t really know how … I knew I had a good idea, but I didn’t know exactly how to execute it. So again, it’s really good to try and learn, and take those learnings and failures and apply them to future endeavors. So while this may not have worked for me I then ended up starting another company a few years later that was a minor success. It was bought by somebody else. So I had then seen a company fail, I had seen a company that had very minor success get acquired, and that leads me to where I am today with my company Feather. So all those learnings were super valuable and has really teed me up to get to where we are today.

J:
Yeah, it’s crazy that you basically started with an idea like online grocery, which a lot of people probably think it’s a pretty simple idea. Carol and I are actually good friends with a guy who used to run product at Instacart, so I kind of have some insight into that, how that company operates, and it’s a tremendously complex business. When you think about these companies, the gig economy, and you think yeah, it’s pretty simple. You have somebody that goes out, they pick some food for you, they bring it to your house, it’s like Uber. You have somebody, you have an app that has people. But behind the scenes there is a tremendous amount of operations that need to take place. To do it at one grocery store might be easy, but then to scale it is really hard. So it sounds like at the very beginning you were thinking about these ideas that at scale are tremendously complicated, and I just love your take that you just got to go out and do it. I mean, basically you didn’t go and work for one of these huge multi billion dollar companies before you started. You said, “Eh, I can do this.” And you just did it, so just I love that.
So talk to us a little bit about how you came up with the idea for Feather and how you started to incubate that idea.

Jay:
Yeah. I think over time, and I’ll probably, this might be a theme of this conversation is testing, iterating, failing and learning, and at some point all of that will accommodate in something that does work. I think that can be the case for anybody. I don’t think this is something unique to me. I don’t think typically people get things right on the first try or succeed wildly on the first try. I think it almost always takes many, many times and a lot of effort and grit.
So Feather is my third company. Feather is a furniture rental company. We are redefining furniture rental for city dwellers. So instead of buying and owning a bunch of stuff when you’re younger, between going to college and buying your first or second home, you’re moving on average every 18 months. You’ll move 12 times in that period of your life. I’m sure you’ve gone through this, you guys, I’m sure every one of these listeners has either gone through it or is currently going through this process in their life, and owning and managing a bunch of stuff just doesn’t really make sense. Stuff doesn’t fit in your new place physically when you’re moving from one place to another. It may not fit stylistically, it certainly if you’re buying disposable stuff like IKEA and Wayfair it usually won’t transfer well. So what we’ve done with Feather is we’ve designed and manufactured all of our own furniture and partnered with a few brands. The product is durable, it’s extremely comfortable, it’s made with component parts. So if anything ever happens to it we can move it around and change parts out. So yeah, Feather is really redefining what it means to have a relationship with stuff. We’re doing that in furniture and that’s where we started.

Carol:
I love that. I think something that specifically that you just said I think will probably resonate with a lot of our listeners, do you see that there is this whole generation now, right? I think our parents’ generation and stuff, they were all about accumulating the stuff. Working really hard and having the big gigantic house full of the big gigantic furniture and that was what said you made it as a person, right? But now I think we’re seeing this trend, most of our guests on this show we all talk about how as entrepreneurs and as a generation people are just looking for that freedom and not to be bogged down by the stuff, and are really looking for those experiences to define them as this is what is defining me. To say that I’ve made it now is that I don’t have all these stuff anymore. How did you really identify that trend and apply that into your early thinking about how Feather would be a success? How did that all culminate?

Jay:
Well, Carol, were you in our first pitch meetings? Because that is exactly what I said to early investors, to early teammates, to friends, family, et cetera. Yeah, what I realized was that the American dream has changed. I realized that instead of buying and owning houses, and cars, and having a white picket fence, and jetskies, et cetera, this American dream has changed for younger demographics. In our parents’ generation it was post two World Wars. We were just coming out of the Second World War and it made sense for people to be like, “Okay, all right, we’ve got stability. Let’s just have a house and a job that we keep forever and settle in a place, and let’s be comfortable.” Well, fast-forward 70 years to today, younger generations actually care to have much more than that. We actually want the complete opposite. Like you were just saying, we want freedom and flexibility. We want to be able to experience things and to live in the world, and to go in the direction of our dreams to build a company, or to live in Florida, or New York, or San Francisco, or Europe, wherever. We just have completely different aspirations and needs in our life.
So when I noticed that I said, “Okay, well, ownership of stuff is one of the primary things that stifles that.” So that could be the ownership of a house where it’s a bad investment to buy a house and sell it next year, unless of course you’re like renovating it and flipping it, but in general buying and selling a house within the same year and moving to a new place just doesn’t really make financial sense, nor does buying and owning expensive cars when you might move to a city and then have to sell your car for pennies on the dollar. Then when you look down the stack of all of the other stuff you have in your life in order it’s home, by value of assets it’s home, car, furniture, then below that is clothing, music, movies, et cetera. Clothing there’s Rent the Runway that is starting to or has really democratized access to clothing instead of buying and owning stuff. There’s Spotify where you don’t own music anymore. There’s Netflix where you don’t own DVDs certainly, or maybe you do, but you can stream digital content, et cetera, et cetera. Somehow we skipped over furniture, which is in fact one of the big painful things that you have to own and move around and just really does not retain any value.
So yeah, I recognized that opportunity and then also I think going back to grad school, I ended up studying climate and environmental science, and really deeply care about building a world in which things are not wasted, we’re more efficient. When I looked into the furniture industry, 20 billion pounds of furniture ends up in landfills every single year. That is 7% of all landfill waste. That’s the biggest share of any type of household waste, more than the trash, food you throw on the trash. It’s just an insane amount. So I said, “Okay, well this rental model actually solves all of these problems at once.” It gives people more freedom and flexibility, it’s way more convenient so you don’t have to lug shit around all of the time, pardon my French, place to place and then have to sell it for nothing at the end, and this is a much more environmentally friendly model where we have designed furniture to last. It’s supposed to be kept in people’s homes and not at landfills, and because Feather is tasked with doing this, this is our business, we have an incentive to keep furniture around, and clean, and maintained.
So that was a long way of saying this was like oh yeah, this is a no-brainer for me to stop what I’m doing, to leave this cushy job that I really like that I never thought I would land, and I had to take another swing at building a thing.

J:
Okay, so now you have the idea. You’ve kind of said, “I’m going to dedicate myself to this idea.” You quit your job, but again, this is not a simple business at scale. You’re not just talking about operations and getting furniture from one place to another, you’re talking about you’re also manufacturing products.

Jay:
Yeah.

J:
You’re making furniture. So in a way you have two different businesses. You have a manufacturing business and then you have a service rental type business. So you got two problems to solve, and again, it’s not a local business, it’s a national business. So you have two problems to solve at massive scale. So what was the next step? Let’s say I wanted to do a business like this. I don’t know where to start. What was the next step?

Jay:
Well, we’ll reverse engineer from what you just mentioned, which is this business should exist at scale. It could work in a lot of places. It’s very complex at scale, but I am one person with my credit card and what little money I have in the bank, and I wanted to set out to try to solve this. So there are a few options in front of you. The first is to do everything you can on the cheap to build a minimum viable product, an MVP, a thing that you can put out into the world to test to see whether your idea is good or not. It might be good, it might be okay, it might be great, but you don’t know until you put something together with your own blood, sweat and tears, without a bunch of people’s help. Just do whatever you can by yourself or with maybe one other person to get a thing out in the world.
Well, for me what that was was I needed a website so people could see furniture and choose pieces of furniture and I needed them to be able to transact to pay for the furniture, and I needed furniture. So in the early days I hacked all of this by building a Shopify site. It was pretty straightforward. It’s 80 bucks a month for their enterprise version, or whatever it was then, and I could afford that, and put a bunch of furniture up on the site from places that could deliver me furniture within a week so that once a customer placed the order I could have it delivered to my house, I could receive the boxes at my house, and then do the assembly and delivery myself with one other person that I would contract to have a truck and deliver the furniture with me. I did that for a few months, and it was at that point where I had some customers that were not people that I knew. They were friends of friends, and I was like, “I have no idea who these people are.” I never thought that anyone would want to use this that I didn’t know. I think I should start reaching out to legitimate furniture companies and seeing if they would want to partner with me.

Carol:
Jay, can we pause for one second? I just want to clarify something, right? So if I’m understanding correctly it sounds like back in the early days you had this idea. You realized to start bringing this idea to fruition you needed to do whatever you could quickly and cheaply to get something out there. So you built a Shopify site and you figured out the website piece of it, the transaction piece of it. You put some furniture up there, it sounds like they’re basically pictures of furniture, but once a customer placed the order you would go ahead, order the furniture, by yourself have it, assemble it yourself at your place, and then you and a friend would deliver it to the customer on your own. Am I understanding that correctly?

Jay:
That’s completely correct, yes.

J:
But here’s the cool thing. This is such a tried and true method, and exactly what Jay said earlier which is build your MVP, build your minimum viable product, that first thing as cheaply and quickly as possible so that you can see if there’s customers out there that want your service. I think back to Amazon and that’s kind of the way Amazon started. Jeff Bezos basically created a website, put up a bunch of books. He didn’t own the books, he wasn’t buying the books wholesale. He just put a bunch of books up on a website. If somebody ordered it, he went out and bought the book, packaged it up and reshipped it. So basically he wasn’t making any money. I’m sure you were making some money, but-

Jay:
Well, not really, but yes, thank you.

J:
Well, the goal may not be at this stage to be making money. The goal at this stage is to validate your idea, right? To prove that there are customers there with as little money, and time, and effort as possible so you know if you should then be spending a lot of time, and effort, and money. Am I right?

Jay:
That’s completely correct, yeah.

Carol:
Outstanding. What a great way to just remind all of our listeners that truly there are no excuses. I mean, if Jay is sitting here, people, ordering furniture, assembling it in his apartment and delivering it across town in a couple days, we can do this. So that’s a great, great story of how you were very first starting out.

Jay:
Completely. I think the biggest excuse that I always hear is, I’m not technical, I can’t build a website, I don’t know how to code, I can’t design a website. Well, fortunately now in 2020 it is so easy to build a website with a variety of different companies that have made this extremely simple, and you can do that. You can build an e-commerce store, you can do pretty much anything with software that’s plug and play. So at this point you don’t really need much, if anything. If you do, you can always outsource the development of anything that might need to be tuned and tweaked, which I did, and it cost me about $1,500 and I used I believe it was Upwork, a service where I could find a software developer who charged by the hour, and I said, “These are the things I need to do to this site. Can you do these things?” And she said, “Yes.” And would do things, and then I had a few more things to change, and it ended up being about $1,500 all in. Okay, I was fortunate enough to have the $1,500 on hand to invest in this, plus the $80 for Shopify, plus the probably 100 or 200 other dollars in incorporating and that kind of thing. But you can bootstrap this with, what’s that? Like 2,000, $2,500 to then see if this is a thing that you want to spend more time on.

J:
So that’s awesome. Okay, so now you have a couple customers, and as you said, people you don’t even know. Those are the best customers. They’re not buying from you because they’re your mom and dad or friends that feel bad for you. So you’ve now validated that there’s at least a few people out there that need this service. So take us from there. What are the next steps for you?

Jay:
Well, so what I did was I said, “Okay, I want to get some real good furniture on the site.” I cold emailed the CEO of West Elm. West Elm is a decently well-known direct to consumer and retail furniture store and business. They probably do a couple billion a year in sales. I really liked their aesthetic, I really liked their brand, and I just cold emailed the CEO and said, “Hey, I have this company that I’m running. It’s awesome, this is what it is.” And he replied. He said, “This is really cool. I love this idea. Why don’t you come in and we can meet?” I was like, “Okay, wow.” Lesson there is if you don’t try it’s not going to happen. So if you do want to email someone, you do want to meet someone, just email them. Just get in touch with them, find their contact information. Get somebody you know to introduce you is the best way to do it, but if you don’t know someone who knows someone, then try reaching them directly.
That landed me a meeting with the CEO of West Elm, and after a meeting he was like, “This is great. We should partner with you. How many millions in revenue are you doing?” Well, the site was horribly put together and it didn’t look real, and it was like my attempt at it. I was like, “Oh yeah, no, it’s good. We’re doing well.” And we probably had 10 orders at that point. So it was after that meeting that I realized okay, I have some people who are using my service who I don’t know. The CEO of one of the largest US based furniture companies likes my idea. Maybe there’s really something here now. I think I should apply to an accelerator program.
An accelerator program is basically a program for startups that give you a little bit of funding upfront. They take a small percentage of your company and truly help you accelerate the go to market part of your business, figuring out your business model, figuring out how to grow it quickly, even just putting it together if they think it’s a good idea and you’re a good founder. So I applied to an accelerator program that I had always heard about and always thought was completely unobtainable, and that was Y Combinator. Y Combinator is probably the best accelerator program in the world, have had companies like Airbnb, Dropbox, Stripe, Instacart, DoorDash, Flexport, all go through it when they were just the founders. So I said, “Well, I’m one person. I’ll just apply.” So I left that meeting and I applied that day. As it turned out, the application was actually due that day too. So I applied within 30 minutes, 40 minutes. As luck had it, I ended up getting in after a few interviews.

J:
That’s really awesome. So for everybody out there, so Y Combinator is probably one of the best known, so I assume you had to move your company out to Silicon Valley for a while, because they’re in Northern California. But for anybody that’s thinking about going this route, I mean, are there incubators that are local? Can people find incubators in other towns or cities besides Silicon Valley or is it kind of like there’s one or two in the whole world? What do we do if we want to do something like this?

Jay:
Yeah. There are incubators in a lot of places. There are accelerators in fewer places. I’m not totally sure if I understand what the difference between an accelerator and an incubator even is. I know an incubator incubates your idea and help you along. An accelerator usually gives you some funding and then helps accelerate the growth of it. So maybe that’s the big difference. But yes, they exist in lots of places. You can get help from local mentors, local entrepreneurs who may not have started Airbnb but have started successful local businesses or just other successful businesses. I think my time during Y Combinator, which I’m sure maybe we can get into in a little bit, was the most valuable experience for Feather, to date probably, was going through this program. It did a whole lot for us.
At this point though in an early, early company’s life you have to decide whether you want to bootstrap your company or you want to try to raise funding and try to make it really big with outside investors. There are pros and cons to both. Raising money it seems very sexy. We’ve raised some $70 million of funding, and that sounds, I mean, it sounds really cool and it’s absolutely helped us accelerate the growth of the company, but our company, I had to decide what to do with it. Whether I wanted to bootstrap it or raise funding. For some companies like mine you really can’t bootstrap this very well because we buy and own all of our assets and our furniture. With the first 10 orders, if you can imagine, if each furniture order costs just call it $1,000, I’m out $10,000 on a credit card for those first 10 orders. We’ll, I’m not made of endless money, and I knew that this money would get paid back by the customer over time, but I can’t grow more than 10, 15 customers before my credit card is literally maxed out. So my company needed to raise some funding to build up our inventory and to help accelerate the growth of the company once we had figured everything out.
Now, again, that is not for everyone. Not every business needs this. Most software businesses do not need funding, unless you’re really trying to scale it. So I would say have a good think about which makes sense for you.

Carol:
Excellent. Jay, one thing I want to point out and then ask a question. I love how about seven or eight minutes ago we were talking about in the very beginning of this venture with Feather, you were talking about the $80 a month with Shopify and that you were fortunate enough to have the $1,500 to launch the website, and then over the next couple years you went on to raise $70 million. So I just love that contrast and it shows the power of the idea and your hard work. That said, I think just from hearing those numbers it’s pretty clear what some of the pros are of getting funding, but you mentioned there are some cons. Can you talk about what those types of things are that people might want to consider?

Jay:
Yeah. The first con is that almost nobody is able to raise venture capital. So it could be very frustrating for a lot of people. My first two companies were unable to raise venture capital and I thought I could. I had to bootstrap and raise money from a few angel investors in my previous companies. I think it’s very demoralizing because the odds of getting funding for just a small slice of your business when it’s unproven is pretty hard. You have to have people who have a lot of money, whether they’re angel investors or venture capitalists who have funds of money, they could be tens of millions, hundreds of millions or billions of dollars that they have to invest, and they have to invest that wisely because they need to make returns on their bets that they’re taking on entrepreneurs and on ideas at various stages. So that’s one, is it’s not easy, and it can be very demoralizing. I’d say the other is when you take money from somebody else you are then fully responsible to that person, from a fiduciary responsibility perspective and also personally to do everything you can to return their money and make them a lot of money. You effectively take on a boss the second you take on investors.
We have 40 investors and I have lots of bosses now that I have gotten to know well and are fantastic people, but I feel a strong desire to return their money and make them a lot of money as well. So it changes the trajectory that you can take your business too. Then once you take venture capital, the third piece is you really have to scale it and grow it, and it makes the venture that much more risky, even though you’d think getting money makes it less risky. It actually makes it much more risky. So we have to grow at ungodly rates to return our investors the money that we have said that we can return them over time, and that then sets us up for having to have an exit in the hundreds of millions of dollars for them to even be remotely happy based on the economics they need to operate their fund.
So whereas I guess if you are bootstrapping your company and you don’t have investors, maybe outside of friends and family who would be okay if you lost their $5,000 and it’s kind of water under the bridge, or your own money, which is also very important. So I wouldn’t say to diminish the importance of friends and family money and your own money, certainly it more real that someone else’s money, but it’s much less and you’re still your own boss. So you can take it in whatever direction you want to take it, at whatever speed you want to take it at, and that’s super valuable.

J:
Yeah, it’s crazy to think that a lot of us, we sit here and think, “Wow, if we can sell our company for $50 million we’re in a pretty good place.” If you sell your company right now for $50 million you’re going to have some upset investors and you’re going to walk away and have to start over. So it really it does put you in a different spot, both in terms of risk and how you think about the scale of your company. You have to really grow just to make that first penny.
The other thing I know, Carol and I have both seen this because we have a bunch of friends that have raised VC money, and what we’ve seen with them is as a CEO you basically have two choices. You can focus on your company or you can focus on raising money, and a lot of people think raising money is kind of like you go out, you spend a couple weeks, you do a couple pitches, but I’ve seen friends, and I know Carol has as well, and I’m sure you’ve experienced this, where literally you spend a year of your life full-time just trying to raise money, and you’re not focused on your company at that point. So that’s where I guess having a partner or having great employees really comes into play because it’s hard to do both, and you’re working essentially with no money because you haven’t raised money. So it’s kind of a catch-22.

Jay:
Completely. If you’re Facebook in 2005 it might take you a few weeks to raise capital. If you’re almost any other company, it takes more than that. It takes lots of meetings, it takes … The demoralizing point that I was bringing up earlier is we got … Well, coming out of Y Combinator it was a very different story for us. We went through the three month program, we had offers for about $10 million worth of funding after this first program, and that was our first money that we really would’ve taken, and we ended up taking three and a half million dollars from the first investors in Amazon, Google, and Facebook in fact. So then well, what does that do? That feels really good. It feels like people who know what they’re doing and are investing in you and in your company might think the same thing could happen with you. Oh wait, that also sets up crazy expectations for you. Oh, I have to be the next Amazon, okay, great. That is hopefully what we’re trying to do, but then it makes it much more real, right? It makes it much more real.

J:
Let me ask you a question. So you close that three and a half million dollar raise. How long was it before you started working on your next round of funding that you had to raise?

Jay:
It took about … We started fundraising again about a year later.

J:
Okay, so you did have about a year where you could enjoy that money.

Jay:
Yes.

J:
Because a lot of times I hear people like you raise around and then the next day they go out and they start focusing on the next one because it can take a year or two.

Jay:
That is the case with most companies. Again, I think we were one of the exceptions because we were in this prestigious accelerator program, Y Combinator. We had really great investors who had lined up to offer us money right out of the gate. But then after that you’re then out in the world and it’s like graduating college. You’re out in the world, you have to go make your own way. You have this investment and backing from these really incredible investors, and then you have to go execute on everything you said you were going to execute on. That is what you have to do when you have three and a half million dollars. You have to turn that revenue from X, which is not that much, into Y, which will be a lot more than you think that you could even achieve during that period of time and with that amount of money, but that’s what you have to do. So the stakes get higher and it becomes even more important to grow quickly.

Carol:
Excellent. You mentioned Jay that the Y Combinator first program was about three months. Can you talk more about that program. What did you experience? What did you learn? What was that like?

Jay:
Yeah, it was probably one of the best experiences professionally I’ve ever had. You have a group of, I think for us it was about 80 companies that they accept out of I think 30,000 applications or so. They bring these incredible people together to, with their companies at various stages, but more or less in the early stages, as just founders usually trying to figure out product-market fit, trying to figure out how to build their products in some cases, how to sell their product, how to market it. They bring all these people together and you learn a whole lot from people that are going through the exact same thing you are and are going through the pain of the early building process. Note that it doesn’t really change. Things just get more painful. It just gets bigger later. Nothing gets easier with more money or more scale, it just becomes more complicated. So I implore people to build the business to the size that they want to be at themselves. Maybe that’s a three person company, you and two other people who start it together, you and two employees or whatever. But figure out where you want to take your company and what size of a company makes sense for you as an individual, but yeah.
So going through Y Combinator, I digress now, it’s this incredible group of people that are just able to learn from each other and then learn from the partners of the incubator who have seen everything happen. They have seen their companies go through each step, were doing well and then just fail or didn’t raise money. They’ve seen companies that come through the program and have tried a lot of different things that just don’t work and the company fails at the end of the program, or companies that wildly succeed and they’ve figured out how to make it work and how to make companies work and provide an incredible amount of guidance, and I think all of that is so invaluable. So if you want to go the venture capital route or if your company needs that, then accelerator programs are quite helpful in the early days.

J:
That’s awesome. Okay, so we get through Y Combinator, you’ve kind of bootstrapped your business there. You get to the point where you can raise three and a half million dollars. I assume at that point it’s now time to start to scale. You have to hire employees, you have to start thinking a little bit bigger, investors don’t want to hear about how you’re going to make $5 million next year. They want to hear about how you’re going to make $5 billion in the next five years. So I imagine your thinking starts changing at this point and your business takes on a different shape. So can you walk us through a little bit about after you raised that three and a half million dollars, what are the changes for you and what are the next steps?

Jay:
I think it’s one of the great feelings in life to have achieved something that you think is unachievable, that might exceed the expectations that you would’ve even had for yourself or set for yourself, and that certainly happened for me just in getting into Y Combinator. Then it happened again in raising funding from these incredible investors and being able to take my foot off the gas for like a week or two and be like, “Ah, the company is not going to die in two weeks. We have runway now for call it a year and a half.” Well, it feels great. Then the reality sets in where it’s like oh boy, okay. Now we need to go take that money and spend it and apply it appropriately. Wait, that’s actually really hard. How can you do that when you do not have product-market fit, you’ve not figured out how to market to your customers or really anything at that point. You’ve figured out that this is a good concept and there’s opportunity here, and you are maybe a backable company. So then the work actually starts, like really. You think that you and your two other friends who started the company are grinding really hard, then you actually have to hire a team.
So we hired a team, a small team. I think we got to about 12 people. We had software engineers, designer, marketer, operations people and delivery staff, and we were in New York and San Francisco at that point. It was a time of building, and learning, and trying to grow at all costs because when you raise venture capital or funding you aren’t usually trying to get to profitability. So you’re not actually trying to get to a sustainable point in your business. You are taking their money to light on fire in the best ways possible to get you to your next fundraise. So you’re on what people sometimes refer to as the VC treadmill or the venture capital treadmill where you have to continuously raise money in larger and larger quantities to keep the business alive, to keep it growing. Companies like Amazon, Facebook, I mean all of these companies have done that and did not try to become profitable in their early days. They took the money to then use it to grow but it’s very risky. So we had to constantly be thinking about what milestones we needed to hit in order to raise more capital.

J:
That’s interesting because I talk to a lot of business owners who say, “Yeah, I’d love to go out and raise some money. If I can get one, or two, or $3 million kind of I’m set for life.” But what I’m hearing you say, Jay, is that that’s not necessarily the way it works. You raise that one, or two, or $3 million and now you’re beholden to those investors to grow really fast, and the only way to grow really fast is to raise more money and yeah. I think the VC treadmill, I love that term because it really talks about what you’ve now committed yourself to. So I guess that’s another thing that we can put in the potential cons category for anybody that’s looking to raise money. Is that it’s never not, I don’t want to say never, but often it isn’t going to be a one time thing and then life is just good. It’s now the start of an obligation for the rest of your business’s life.

Jay:
Completely. To be clear, you don’t get that money for yourself. That is not your money. This is money that you are investing in the company to grow it and scale it. This is not your money. Just to make it clear, my business is on a trajectory to grow and scale quickly, and venture capital is the right move for our company based on where we’ve been, growth rates, and where we really want to take this company. We want to be the next generation home company. We want to change the relationship that people have with material goods. That’s our mission, to create a healthier and happier planet, and we have extremely large aspirations for the company. So would that be the case for every person who is starting a business? Does everyone want to build a 10 plus billion dollar company? I think more people think they do than they actually do. I think it sounds sexy and fun, but I’ve had to sacrifice a whole lot in my life just to get to this point. So while I might be slamming venture capital on this podcast for most use cases, maybe 95% of use cases venture capital is not right. I will say that for my company it certainly is the right path for us, but I just want to make it clear that bootstrapping a business is no less sexy or interesting than raising money for your own company.

J:
Yeah, it’s a tool. Venture capital is a tool, and if the job that you need to get done, if that tool fits that job, great, if it doesn’t, it doesn’t. Like you said, 95% of the time it probably doesn’t, but that 5% of the time it would probably be impossible for the business owner to build the business without it.

Jay:
Yep.

J:
So what did the ramp look like from there? So after the first year I guess you’re now about … What are you, two, three years in at this point?

Jay:
We are a little over three years. Three years ago I was going through Y Combinator with my friend and CTO Jake. He and I were living in a house in Silicon Valley together just coding the first version of the website and delivering stuff ourselves and with one other person. Yeah, three years from then is now, as it turns out. So yeah, so the ramp after that first year we grew … Let’s see, we grew about 500% in that year. We were able to then get to a point where we either had to become profitable or raise more funding. Usually you give yourself at least six months of time to raise money, because it can take a long time. It can take a lot longer than six months.
So with six months of runway we went out and started fundraising what’s called our series A. The first round is the seed round. That was the three and a half million dollars, and then we were raising our first bigger round of funding, and ended up finding an incredible investor, Spark Capital, who were the first investors, early investors in Wayfair. So they had seen and had lots of success in furniture previously. They have invested in many other incredible companies, and they led our series A. They wrote a big check. It was the first big check from any particular investor. I think their check was about $8 million, and we raised a $12 million total series A round.

J:
I think you just touched on something real quick, another potential benefit of raising money is now you have this investor who had also invested in Wayfair and potentially other ideas in the space. So they had experience in this industry. They probably have connections in this industry. So they can help you in ways other than just money. As soon as they give you money, now they have a vested interest in helping you in any way they possibly can. So to some degree they’re now indebted to you to help you grow the company with their connections, contacts, and experience.

Jay:
Yeah. Investors are money primarily, plus partnership. They bring the skillsets of their partners, and their associates, and principles, and they bring their network, and they bring know-how. Again, just like Y Combinator, they’ve seen everything. They look at I think it’s three or 400 companies before investing in one on average. So what are the odds? Well you either have to beat the odds significantly or you have to pound the pavement and meet with 400 VCs, and there are maybe 400. So it’s tough, but if you do find the right partner who gets the vision and really sees the opportunity, and are willing to take some level of risk on investing, you can bring on a great additional partner.

J:
That’s awesome. Okay, so let’s kind of fast forward to today. So you’ve raised about $70 million. Where are you in terms of number of employees? I don’t know how much detail you can go into on revenue and stuff like that, but anything you’re willing to share there on revenue or margins would be great. Just give us an idea of where Feather is today as a company.

Jay:
Yeah, again, it was three years ago that it was just me and one other person in a house in Silicon Valley. The show Silicon Valley it’s incredibly accurate, I don’t know if you’ve ever seen that show, but satirical, it’s funny. It’s also too close to home. It is very, very real, very fun to watch if you want to get into that. But yeah, fast-forward three years now we’re 80 employees, 80 full-time employees. We are in four cities, expanding to more soon. We have consumer and enterprise revenue from all sorts of different types of people in their homes, and businesses using us. I mean, there’s many thousands of people using us. Yeah, revenue has continued to grow significantly, and it has to, right? So it’s been quite the three years.

J:
What four cities are you in and what are the logistics to kind of launch a new city? What’s your ramp look like over the next year or two? Are you planning to go from four to six or four to 60?

Jay:
Yeah, we are having that discussion internally right now actually. So stay tuned for more on city expansion.

J:
Okay, what are the four you’re in now?

Jay:
Yeah, the four we’re in now are pretty large cities. So there’s New York, San Francisco, Los Angeles, and the Orange County is sort of a sub part of Los Angeles, that comprise a lot of people. So we have been doubling down on the cities that we’re in, we’ll be expanding to more soon.

J:
So we would normally at this point ask where do you see things going from here, but I think you just kind of answered that question. Is there anything else big on the horizon that you’re looking to announce or is it from here just scale, scale, scale?

Jay:
From here it’s scale, scale, scale. So after the $12 million round we raised another $30 million in February. So good timing. Another note, it’s very important to be good. It’s extremely important to be lucky. I think one key takeaway for anybody here should be that if you don’t plant seeds you’re not going to see any fruit to harvest from those seeds. I think it’s really important to take bets, take risks, and take a lot of them, like emailing the CEO of West Elm, or applying to Y Combinator, even though you probably won’t get in. You might just hear back from the person, you might just get in, you might raise the funding that you want. I mean, you have to get lucky at every level, but in order to have luck strike you need to put yourself in a position where it can. So I think that’s something that I have learned in the previous two companies that brings me to this one, which is invest in as many things as you can in the early days to seed what might end up happening.
Where do I go from here with the company? I mean, we are just getting started, seriously. We’re in, again, four cities, and have a lot of capital behind us, and there are a lot of people that want what we’re doing, and our core challenge as a business now is to actually change people’s behavior. Today everyone buys furniture, right? If you need furniture, you go buy it. That’s just the reality that exists. Feather is not available everywhere yet, and even the places where we are, people don’t completely know who we are or why it’s useful because we haven’t reached everybody. So right now it is getting the word out and making sure that people understand the value propositions of convenience, flexibility, and sustainability and doing that not just in the cities we’re in but in new cities.

J:
I love that whole your goal, you’re not just a product company, you’re not just a service company, you’re not just a logistics company, you’re a company that’s looking to change people’s behaviors. You’re looking to change the world, and that is … I love the mission. The mission is both one social, so basically people’s attitudes towards stuff is changing, and one of your other goals is environmental, just getting all these extra furniture out of … Keeping it from producing lots of furniture that’s going to go into landfills. So it really is, it sounds like you have an amazing business that kind of is firing in all cylinders, and it’s both a business that’s good for you and you investors, but it’s also good for the world as a whole. So absolutely love that.

Jay:
Thank you, yeah.

J:
Okay. So I think we are getting about to the point in the show where I think we’re ready to jump into the final segment that we call four more, and that’s where Carol and I ask you the same four questions that we ask all of our guests. Then the more part of the four more is where we give you an opportunity to tell our listeners where they can find out more about you, where they can find out more about Feather and anything else you want to tell us. Sound good?

Jay:
Let’s do it.

J:
Okay. I’m going to take question number one. So what was your very first or your very worst job and what did you take from it that you’re still using today?

Jay:
Well, my very first job I worked at an apple orchard and I was cutting weeds. My worst job might be that one, but I think my worst job was working inside of a cold yogurt factory where I had to shake the yogurt, pick up yogurt and shake it, and test it to see if it had solidified, and if it hadn’t it would get all over me, and break through the seal. I’m pretty happy to not be doing that.

J:
There’s some motivation to move on.

Jay:
[crosstalk 00:52:35] Yes, Uh-huh (affirmative).

Carol:
That is great. Okay, here’s my question for you, Jay. What is the best piece of advice that you have for our small business owners or new business owners that you haven’t yet mentioned today?

Jay:
Well, cop-out. I mean, I think that I haven’t yet mentioned, I think that anyone can create anything and you are no exception to that. You can build and create anything you want. If you work tirelessly to make something happen, you will, and if you don’t quit, something will work. Whether it is this thing that you’re working on or the next thing.

J:
I love that. That is simple but powerful advice.

Carol:
So real. Love it.

J:
Okay, question number three, a softball here. Give us your favorite business book, maybe one that you think isn’t too popular that everybody’s read. What’s your favorite business book?

Jay:
Business book, I think there’s a book called the High Growth Startup, which is useful for a company that is growing quickly or raising venture capital. That’s a really good one. I also think The Lean Startup by Eric Ries is a good one. It’s all about building something on the cheap, testing things, iterating on things and not getting out ahead of your skis effectively, and proving that whatever you’re doing on a small level is working before trying to make it big.

J:
Love it.

Carol:
Awesome. Okay, and here is the fourth and my favorite question. So although we talked about how many of us entrepreneurs and this generation in general is not really into stuff and is not necessarily into material goods, we’re wondering if there is something, whether it’s a thing, whether it’s an experience, whether it’s a whatever that you’ve splurged on along the way that was totally worth it?

Jay:
Yeah, I think, so every quarter I fly to Amsterdam, and I’ll tell you why. Could be anywhere really, but I go to Amsterdam, I spend three to four nights or days there, and this is every quarter. I use it as a time to reflect on what just happened in that past quarter and then to think about where I am to better myself, to invest in myself, to just have absolutely no agenda. I think it’s so valuable to be able to just … And it doesn’t have to be Amsterdam, but this is a splurge to me. I mean, I just fly across the world to go to a place that I absolutely love and would want to live one day, but you can do this anywhere. You could do it by driving two hours away from where you live, or flying somewhere in the US, and just going to a place to recharge and to just think about yourself, to learn about yourself better, and to figure out where you want to go from there.

J:
Awesome. I love that answer. Okay, well that was the four part of the four more. Now for the more part of the four more, can you tell our listeners where they can find out more about you, about Feather, where they can potentially connect with you or the company, and anything else you want to tell us?

Jay:
Yeah, you bet. Well, no one needs to learn more about me, so let’s talk about Feather real quick. Google the word Feather and you’ll find us. If you like to type in URLs and you’re good at memorizing URLs it’s livefeather.com, L-I-V-E Feather.com. We’re on Instagram. We’re pretty active there, have a nice set of content. But ultimately if you’re in New York, San Francisco, Los Angeles or Orange County, give us a look if you’re moving soon and you don’t want to own a bunch of stuff.

J:
Awesome. Well, for anybody that’s in one of those cities, absolutely go check out, even if you’re not in one of those cities, go check out livefeather.com.

Carol:
It’s a beautiful website.

J:
Yeah, the website is amazing.

Carol:
Love it, it’s gorgeous.

J:
It really is, it really is, but I’m-

Jay:
Blushing again, thanks. Start the show and end the show with me blushing.

J:
And we would absolutely love to have you back in a year or two to hear about your progress. My guess is that we’ll probably be hearing about it even without you. We’ll probably be hearing about it organically, but I would love to have you back in the next year or two just to get an update and see all the cool things you guys are doing.

Jay:
Yeah, awesome. Be happy to do that.

J:
Awesome. Jay, this was amazing. I mean, just absolutely filled with some amazing tips. Great story, and again, so different than a lot of our guests. So we really appreciate you coming on and just educating us and sharing with us. So thank you so much.

Jay:
Thank you J, thank you Carol. This was [crosstalk 00:57:10] fun.

Carol:
Thank you, J.

J:
Talk soon..

Carol:
So good chatting with you. Thank you.

J:
Bye-bye.

Carol:
Jay and J, how did I not get tripped up on that earlier? But got to tell you, I just absolutely loved his messages about how his company isn’t really just about furniture, right? It’s about sustainability, it’s about impacting the world, it’s very mission based, and it’s really just also all about changing people’s behaviors and attitudes about accumulating material goods, right? So it’s just so many other things are wrapped up into this huge business, which incidentally, like we’ve talked about this whole time, it started out very, very small. He was on the ground doing stuff by himself and now he’s grown exponentially in three short years. So we just love everything about his story.

J:
Yeah, absolutely. It was great. I love the fact that from the very beginning he was thinking big. It wasn’t he started a small company, then started another small company, a little bigger, a little bigger. No, his very first company that he was thinking about was basically a competitor to Instacart, and for those who don’t know Instacart, it is a multibillion dollar food delivery service. So he was thinking about companies on that scale from the very beginning. So just a amazing amount of motivation for any of us that are thinking about not just starting a million dollar company or a $10 million company, but are thinking about starting a billion dollar company and are thinking about doing it by raising money, by going through an incubation program. So just a lot of great motivation, a lot of great tips, and just a great story overall. So yeah. Okay, well, I think that’s all I have for this week. How about you, Carol?

Carol:
Yes, let’s wrap it up.

J:
Okay, let’s do it. Everybody thank you for listening, thank you for tuning in. Hope you’re having a great week. Stay happy, stay healthy, and we will talk to you next week. She’s Carol, I’m J.

Carol:
Now go work hard, take risks, and position yourself to be lucky today.

J:
Wow, that was a mouthful.

Carol:
I know it was a mouthful, that’s why I had to do it twice.

J:
They only heard it once.

Carol:
Oh, oops. All right.

J:
Okay.

Carol:
That’s the magic behind the scenes, folks. The fabulous editor and production crew is going to take care of that slip. Everybody thank you for tuning in and we’ll see you next time. Have a great week.

J:
Have a great week. Thanks everyone.

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