- The founders of Apartment Deco, Raham and Colum, built a profitable business by staying scrappy and iterating month after month.
- They started by emailing people on Craigslist to list their items on Apartment Deco, and when they didn't get a response, they listed the items themselves without the sellers' permission.
- They then had to figure out how to fulfill the orders and ended up using cash to buy the items and pick them up later.
- This hack helped them get significant listings and gain insights into their customers' needs.
- The key takeaway is to find scrappy and free ways to see if customers are responding to the product and to humble oneself in the process.

- The founders initially felt uncomfortable with the methods they used to promote their business
- They started as a platform but realized they needed to deliver the furniture themselves for a better customer experience
- Owning their own trucks and doing their own deliveries increased customer satisfaction and word of mouth referrals
- Despite challenges like a truck exploding, this decision was one of the best they made
- Key takeaways include not being married to one idea, letting customers dictate the direction of the business, embracing change, and being financially sustainable without relying on VC funding.

- The company had to cut marketing costs and analyze their unit economics to ensure profitability.
- They raised prices in areas where offering low prices was not feasible.
- The key takeaways are to focus on the bottom line, manage expenses meticulously, and understand the unit economics of the business.
- They learned to ignore the noise of competitors and investor chatter and focus on their own business.
- They emphasize the importance of listening to customers and building something people want.
- Once a business is profitable, the founders feel in control of everything.
- The founders share these lessons learned in hopes that others can apply them to their own businesses.
- They appreciate the audience's time and wish them success in their endeavors.

- Apartment Deco founders, Raham and Colum, built a successful business by being resourceful and adapting to customer needs.
- They initially used unconventional methods to promote their business, such as listing items without sellers' permission and fulfilling orders using cash.
- Eventually, they realized the importance of delivering furniture themselves for better customer satisfaction.
- They prioritized profitability, cutting marketing costs and analyzing unit economics.
- They focused on their own business and ignored competitor and investor chatter.
- The founders emphasize the importance of listening to customers and building something people want.
- They hope to inspire others with their lessons learned and wish them success.

And 1 of the questions I get asked a lot is, how can we fund both 10 minute meal kits and quantum computers at the same time?

And the secret, our secret, is that we have a simple focus, which is that we fund great founders.

And that's why I'm excited to bring out the founders of AppDico, Raham and Colum.

And they went through Y Combinator, the winter 2014 batch, about 2 and a half years ago.

And they never, you know, got a lot of hype or, you know, investors dumping mountains of money on them.

But what they did do is month after month, they keep iterating, they stayed scrappy, and they're building a great business.

And in a difficult market where a lot of other companies who did raise a lot of money burned through that money and went out of business.

But meanwhile, they built an actual profitable business, like the kind where every month they have more money in the bank account than they did the month before.

So I am excited to bring out the founders of AppDico.

And as PB mentioned, we are the founders of Apartment Deco.

Apartment Deco is a marketplace for buying and selling furniture, and you may not have heard of us before because we are currently operating in New York City and Washington, D.C.

We're going to be expanding to Philadelphia, Baltimore, Boston in the next few months.

And as PB mentioned, 1 thing that we're really proud of is that we are profitable.

And that is something that we want to talk with you guys about today.

We have kind of summed things up in a concept.

There's this concept of building a real business, an idea, which means that it's a business that's profitable, it makes money, and that can surprisingly get lost in this Silicon Valley VC world.

And we launched this company in winter of 2014, and we've had a lot of ups and downs, a lot of roller coasters in order to get to this point.

And what we want to do is share some real actual stories of the trials and tribulations of what it's taken in order for us to be able to get here.

And we're really excited to do that with you guys today.

So First things first, let's get from 0 to 1.

Many of you, I'm assuming, are probably looking to start a company and the idea of getting from no customers to getting that first customer, it's not so easy.

And before starting Apartment Deco, I worked for L'Oreal.

I had a group of a larger number of employees, and I was very familiar or comfortable with taking a large business and keeping that growing and keeping that sustainable.

I worked at Goldman Sachs for 6 years before leaving and going to business school.

I was an engineer, ran a team of engineers before leaving Goldman.

So we both have this in common where we know how to get something not from 0 to 1, but from maybe, you know, a thousand to 2000, not from 0 to 1.

So, this was a completely different beast and a completely different animal.

And I honestly thought that I can apply these practices.

So when I got to YC, we had to take a lot of notes.

A little ashamed to admit that now, but when we started AppDeco as a concept, and I didn't even know what YC was, and We are really grateful we're having the opportunity to work with them because it is what catapulted us and helped us to get from that 0 to 1.

So the way that this works is we would sit down with our partner that we worked with who was Kevin Hale.

1 of the first meetings that we had, he's sitting down and he's looking at our website, he's looking at our catalogue, and he's kind of looking through the listings that's on our website.

And he asked, how are you guys getting listings today?

And we say, well, we email people on Craigslist, and we say, hey, you should list on Apartment Deco, because we take care of delivery.

By we, it was like me mostly trolling Craigslist, like emailing people.

So out of 100 people that you email, how many actually list?

And so he's like, well, what about the other 90?

And so he's like, you need to list it for them.

And I remember looking at Raham and I'm like, unbeknownst to them, like without their permission?

He's like, listen, you're doing them a favor and you list it for them and if it sells, I mean, they're getting what they want.

We start listing our items, listing Craigslist items on our site, unbeknownst to the sellers, and boom, we start getting a transaction.

And so, you know, we're high-fiving, and then we're like, oh shit, like, we now have a buyer.

How are we actually going to get this item from this person that doesn't even know that it's on our website?

So it's, yes, you have to physically move it.

That's not us, but that was what we were doing.

So we're there, we're like, how the hell are we going to get this item?

Let's email them and say, hey, I'm the founder of AppDeco.

We listed your item, and we sold it for you on our site.

It was 9 out of 10 of the emails people get are spam and people trying to get money wired to Nigeria.

So we send these nicely drafted letterhead type emails and we got no responses back.

And so we're like, now we have not 1 sale, we have transactions that have come in.

And we're like, how the hell are we gonna fulfill these orders?

And so we're sitting there, my face is in my hands, and I'm like, you know what, let's just get cash and just pick it up and buy it ourselves.

So we have this bag of cash and we're going around New York City.

And we walk in, we meet the seller, and we're like, here's your $500 for your couch, someone will be here on Tuesday to pick it up.

And the response was just shock and delight from these sellers, and they just couldn't believe that we were just gonna leave this $500 and come back later and pick it up.

And we said, oh, by the way, you know what?

If you're selling other items, you should actually listen on this site, ApartmentDeco.

This hack is what got our business off the ground and to guide us from 0 to 1.

This, by the way, this is a shotgun approach.

But this was the first thing that really got the business catapulted and allowed us for us to get significant listings and to get the business to where it needed to be.

Another thing was that we were able to get insights into our customers that we never would have had before.

So remember, we're going to every seller's home, paying them in cash, going all over New York City all day long.

So we're getting to know these customers on a very intimate level, where they live, their economic status.

Many times they were making room for a baby, and it would be all these things that we never would have known unless we figure it out and had a scrappy way in order to understand these customers.

So what would you say are the key lessons or takeaways?

This was something that we did that was a little bit out of the ordinary for us and that made us uncomfortable, but I think that that's the exact key takeaway, is that when you're starting a business, first of all, let's just scrap the advertising on Facebook and advertising on Twitter or wherever.

And you really need to find out those scrappy free ways in order to see if your product is something that customers are responding to.

Because this is also an opportunity for you to meet your customers and, you know, really learn what this product needs to look like.

So, it's also, the other thing too is really just having the ability to humble yourself.

For us, this was, again, just coming from our backgrounds, was really, quite frankly, very uncomfortable.

We're in the streets passing out flyers and running around town with a bag of cash.

He did not pass out flowers on the streets.

But, You know, these are the things that we did that really helped us to get from that 0 to 1.

The second thing we wanted to talk to you guys about was the idea of don't get married to a certain path.

So, some of you or maybe most of you are thinking of starting a business, working on a business, have an idea that you're thinking of working on, and you might have this vision of what it needs to look like, and just don't focus on what this grand vision is, because you never know what it's actually gonna end up looking like.

So when we first started the company, our idea was, hey, we are just going to be a platform.

We are not going to touch this furniture.

Touching furniture was not part of our equation.

So we built our platform with the idea that we'll plug into third party moving companies around New York City.

So we worked with a lot of different companies and we would plug into their excess capacity.

So whenever they had enough space, they would plug in and we would use them to fulfill our orders.

It worked for probably like 1.5 seconds and quickly after that, we realized that they wanted their prices to continue to go up and we need to maintain our prices low.

The other thing is, we were not a priority for them at all.

Our quality of service continued to go down.

And so we had to make some quick changes.

Actually, there was like 1 Saturday where the moving company was like, listen, we're too busy.

We're just going to cancel them last minute.

And so we scrambled, posted an ad on Craigslist again for a different section this time, and looked for 2 guys to hire, got a Zip Van, and we went and did the deliveries ourselves.

So we actually had maybe 3 or 4 different customers call us that day for the first time ever, just because they felt like this was the most amazing moving experience they've ever had.

And it was what's supposed to have been a light bulb moment, because it's the first time that customers just wanted to give us feedback and comment on the incredible experience that they were getting.

So we've been doing deliveries 8, 9 months.

We had never, we had never had 1 call from customers saying, oh, I love the delivery.

Let's just get a van and let's just do it ourselves.

We don't wanna touch anything ourselves, no physical products.

So we, as co-founders will know, we had different opinions.

So then the next idea was, why don't we get man-in-a-van type of folks?

So people who own their own trucks, but they don't work for a moving company.

It sounded like great, like, hey, we're cracking this.

So that did not work at all Because that's what we ended up It's and I wish I was kidding but I'm not This is a real truck that delivered our furniture in New York City.

This is actually a photo that a customer sent us.

She loved our product and she loved what we're doing.

She was like, you guys, this is just not a true representation of your brand.

Like we saw the siding, we just thought it'd be a little more polished and you know, our neighbours are getting scared.

Brand recognition and focusing on that was not there.

So you know we were fighting this idea of like hey we need to do this platform, we need to be you know we don't want to touch furniture and we were really really fighting this and married to this idea for so long.

But, you know, months before that, we already knew that customers wanted us to deliver ourselves because we saw it happen and it worked really, really well.

So finally, we landed on having our own trucks, having our own delivery folks, and that's when everything changed.

I was very, very, very excited that we got it around.

So this was instrumental for our business.

We were able to reduce costs, increase, actually control pricing for our customers, make it a revenue stream, and also it absolutely changed our dynamic of our business.

So before we had our own delivery trucks, word of mouth probably accounted for around 10% of our business.

After we changed to the model that we knew already worked months before, it accounted to around 60 to 70% of our business.

Delivery was this delightful experience that everyone before hated.

Nobody wants moving, nobody, everybody hates moving, nobody wants to deal with it, and then we were just offering such a delightful experience that people loved it and told everyone about it.

That was sort of like our, you know, what do you call it, the X factor for our business.

So we were really, really fighting that for so long.

And this is really 1 of the key things that we wanted to talk to you about.

Now, so this was a good idea, it worked, but that doesn't mean that it doesn't come without its own hiccups.

We recently, our truck completely exploded.

So we actually have this thing where we're like, listen, delivery guys, if there's an issue, you email us.

Only if something crazy happens is when you call.

And they still, they're like, listen, hey, I left a tool in a customer's apartment.

So usually it's like the boy who cried wolf type of thing.

So they're calling like, what do you want?

We didn't believe it because what does that even mean?

So this is video and we actually saw it exploding.

It doesn't come with its, obviously, challenges.

Despite having a vehicle that exploded, literally, this still was 1 of the best decisions that we could have made.

So, Besides that and showing that insurance is important, what are the key takeaways?

Let your customers dictate what your business should be versus what you think it needs to be.

I know a startup is all ever-evolving so you really should be embracing that idea and learning from your customers.

There is an amazing essay by Paul Graham asking if you are default alive or default dead.

And I would really encourage all of you guys to read it if you haven't.

But basically, the long and the short of it is, what is default alive is essentially, do you have enough money in the bank based on your current expenses to where you will not run out of money if you ever have to raise another dollar again?

So it means, are you going fast enough in order to get past your threshold of static or expenses?

Hopefully they're static or if they're going up.

So back in 2014, 2015, we were growing really fast, but our expenses were growing fast, too.

And we were burning a lot of money and not growing fast enough in order to be default alive.

Well, more like we just wanted, it was sort of the environment where you just don't worry about your bottom line, only focus on growth, growth, growth, top line growth.

So we were saying to ourselves, if we can grow fast, like listen, lots of companies are raising.

We'll just grow fast, we'll grow the top line numbers, we'll raise money, we'll continue to grow fast.

The bottom line, that's really a secondary component.

And we hit all our goals that we set for that year.

And we had around 3 to 4 months of money left in order to, before we were going to default die, basically.

And so this was a really, you know, we talk about starters being a roller coaster, and this was, you know, the part where we had a really difficult decision to make.

And that decision was, can AppDeco stand on its own 2 feet without having the crutch of VC funding.

So that means that we have to take a look in the mirror.

We weren't spending a dollar on marketing.

Actually, just generally looked at our unit economics.

So, we looked at our revenue, looked at our expenses, made sure that we're profitable from delivery, we made sure that our customer acquisition costs were, I mean at that point there were 0, but they were profitable as well.

So this was a really tough decision, and we had to raise prices on customers as well, in areas where we were offering something at a price that was just not feasible and not realistic.

And so that is, if you have to make these decisions and say, is this something that people are willing to pay for?

We made those decisions and for us at that time it was a very difficult moment and a very nerve-wracking moment.

But it was the best thing that we could have ever done, because it allowed for us to be able to grow a business in a healthy way, continue to grow, and also become truly profitable, more money in than more money going out.

And this is the reason why we're profitable today, and it puts us in a position to have much more negotiating power if we ever decide to raise again.

So what would you say the key takeaways are?

That is 1 thing that we pore over constantly, looking at literally every expense.

And this is really, it's really easy to get away from as you are building a business and it's actually sad to kind of say that but you'd be surprised at not managing that with tooth and nail very meticulously.

I actually look at our expenses every month like I pull our data from our bank account and look at every single line item because we would never want to go back to that situation again.

And we look at that for future months as well.

And the last thing is just unit economics.

What you're charging as a commission for your business or however you monetize, does it support the things that you need in order to be able to grow it?

And particularly for an online offline business, this is something that's needed.

Right, because you're actually physically moving products, so there's a lot of expenditure that goes with that.

So the last thing that we wanted to talk to you guys about is ignoring the noise.

So you know we had the slide right before with all the headlines about you know is this a bubble or you know it's easy to fundraise it's not easy to fundraise there's all these chatter out there but we had to really learn especially what we just told you about being default alive and what we had to do for our business, we had to learn to really completely ignore the noise because we had we need to focus on our business.

So we put on our headphones and completely ignored everything that literally that's what we had to do.

And you know there's like the investor noise, there's competitors, there's just all kinds of noise.

It's not just what people are saying in the press.

So we had this 1 competitor that had raised 20 times amount of money than us.

They had, you know, they were growing so fast and they were all over the news.

Everywhere we went, it was, What about them?

So it was just, you know, and we consumed so much of our energy thinking about what's their next move?

It distracted us for some time from focusing on the things that really matter, which are what we've already discussed is what your customers want, building a real business, making sure that you're continuing to build that word of mouth.

So all that time and energy that we expensed worrying about what they were doing and how this would impact us didn't really matter.

And ultimately for us, this was a big learning and something that we really want to emphasize because there's just so much noise out there when you're building a business You really need to focus on the things that you can control yourself You are essentially the death you are in control of your own destiny, not the VC funding, climate, or your competitors, or anything of that nature.

If you're building anything worthwhile, you're going to have competitors.

It's going to happen, whether they're there now or whether they're going to be there tomorrow.

See all Y Combinator transcripts on Youtube

Reham Fagiri and Kalam Dennis at Startup School SV 2016