Max Mullen | Hustle Con 2018
Instacart: From Zero to $4 Billion - August 10, 2018 (over 6 years ago) • 31:10
Transcript:
| Start Time | Speaker | Text |
|---|---|---|
Max Mullen | Wondering if I'm still strong | |
Sam Parr | What's happening, everyone? We're going to do something similar to last time. You can tweet at me as we go, and I'll try to get those questions asked.
So, earlier today, we had Jake from Movement, which is about a 5-year-old company that was entirely bootstrapped. Now, we decided it would be exciting to get the exact opposite of that: a 5-year-old company that is not bootstrapped, has raised a lot of money, and is trying to take on a big market.
So today, we have Max Mullen from Instacart. He's the co-founder of Instacart, and he's going to tell us a little bit about the story. So, Max, I know Lindsay said you guys are worth "4 avocados." | |
Max Mullen | those are some big avocados | |
Sam Parr | Yes, so you're worth $4,000,000,000. Tell us a little bit about Instacart, so everyone knows what it is and kind of where you guys are now.
| |
Max Mullen | Yeah, absolutely. So, if you don't know about Instacart, we're an on-demand grocery delivery service. You pick your favorite local grocery store, choose the items that you want delivered, and we'll deliver them in as little as an hour.
We started off doing this in San Francisco, here in the Bay Area, and now we operate in over 200 cities in the U.S. and Canada. We partner with over 240 retailers in those areas, and we have a team consisting of about 500 people in our 10 corporate offices, along with tens of thousands of shoppers who actually do the shopping and delivery of the groceries in the field.
| |
Sam Parr | And I think I heard someone say that you guys have been in 65 million households, something like that.
| |
Max Mullen | Yeah, so we have expanded geographically, which is a whole kind of task in and of itself. The zip codes that we are live in now represent about 65 million American households, which is most people in America. | |
Sam Parr | Wow, alright. Well, when we first started the conference earlier this morning, I was talking and I actually referenced you. I said how HustleCon, the idea here, is that you can make your dreams become reality.
I thought that when you and I talked a couple of weeks ago, one thing that was interesting is that before Instacart—well, Instacart has kind of been a smashed success. You guys have only been around for about 6 or so years, 5 years, and you've done amazing things.
But before that, you were not really doing so hot. Can you tell everyone about what you were doing before Instacart and where you were then?
| |
Max Mullen | Yeah, so Instacart's the second company that I founded. The first company was called Volley. I started it in Los Angeles in 2010. We built a mobile app, a few different versions of that, which connected people socially. It had a location component and messaging features.
We started that company because we thought it was a really good idea. We pitched that idea to our friends and presented it at a hackathon, where we won. So, all this validation was kind of flowing at us that we should do this.
We built the first version of the product, not really knowing very much about what we were doing, frankly. We launched it, and sort of nothing happened. This included people who were friends of mine who said they wanted us to build it. We gave it to them, and they didn't use it.
So, the first lesson I took away from that is there's a difference between asking someone if they'll use something and putting something in front of them to see what they do or whether they'll pay for it. | |
Sam Parr | something and what happened with that company | |
Max Mullen | We iterated several more times and kind of realized we really weren't that passionate about the particular problem we were solving. This was another huge lesson from my first company. We were aqua-hired by a company here in the Bay Area. | |
Sam Parr | And then a year or two later, that brings us to Instacart. We have a photo. It looks like, is this your first office?
| |
Max Mullen | yeah that's a picture of our first office in south park in san francisco | |
Sam Parr | it just looks like a big closet | |
Max Mullen | It kind of was a big closet. It's one room; that's our second office. It's across the street from there and it's about 750 square feet or so. I genuinely looked at that room when we first moved in. We put four IKEA desks—I built them with my co-founders—and we set up shop.
At that time, it wasn't full, and I thought, "Man, it's so empty in here. Are we ever going to fill this place up?" I mean, now we have 60,000 square feet in San Francisco and nine other offices across the country.
| |
Sam Parr | that's crazy | |
Max Mullen | pretty crazy | |
Sam Parr | So, tell me about the first year, starting from day 0 to about 6 to 12 months in. What happened after that?
| |
Max Mullen | Yeah, so the first year of the company was really interesting. I think it's a little bit different than some startups. My co-founder had already coded a lot of the app, so we were launched from day one. We were taking orders from customers, fulfilling those orders, and getting better and better at doing that.
I would ask them what to do differently, and they would tell us all kinds of features that they wanted. We would try to build those features and work a lot on growth. In working on growth, we would try just anything—anything we could possibly do to get people to try Instacart for the first time.
One thing we did was buy a bunch of ice cream sandwiches and coolers. We hired people from Craigslist to deliver ice cream sandwiches to people if they would place an Instacart order. They would go to offices, but this failed miserably because people would take the ice cream and then do nothing.
Another thing we did was buy traditional advertising. We bought ads on buses; this was an ad on the Chicago transit system: "Instacart, a grocery store on your phone, instacart.com." We tried to see who would go to our website when these ads were running, and like nobody did. I think we got about six orders from this ad.
| |
Sam Parr | how much was that | |
Max Mullen | $1,000. It would have been a better way to spend money if we just gave people money in order to order. | |
Sam Parr | that would have been a way better idea | |
Max Mullen | But we continued trying different ideas, and that's the important part of the story. We eventually found a few that really did work.
The first one was giving away delivery for free, which we did for a very long time. Another one we created was a referral program. So, if you are a customer of Instacart and you send a link to your friend, you can give them $10 of free groceries. If they accept it, you get $10 of free groceries as well.
We found that people really wanted to share Instacart. They were proud of being a customer, and giving them a little bit of an incentive and a nudge to do it meant that they would actually do it. That customer acquisition strategy is still one of our top-performing channels.
| |
Sam Parr | and you you are not technical at all correct | |
Max Mullen | I wouldn't say I'm not technical, but I am not an engineer, and I do not do software development full-time.
| |
Sam Parr | and so what was your first the first 10 or 20 team hires | |
Max Mullen | Well, my two co-founders are both engineers. We hired almost all engineers in the beginning of the company, and we got very, very lucky. We hired some really talented individuals who stuck with the company for four or five years. Many of them are still there, so it's almost all engineering.
| |
Sam Parr | so what were you doing | |
Max Mullen | I was doing everything else. I was doing all the design work. I was doing all the product management work. I was taking out the trash. I was ordering dinner. I was hiring people. I was doing all the customer service at one point in the company.
I was sort of just filling in wherever I could, doing whatever I could possibly do at any given moment to move the company forward.
| |
Sam Parr | At this, you guys hired 20 people by the end of year 1.
| |
Max Mullen | we were about 14 people after a little bit more than a year | |
Sam Parr | And you're not profitable. You're running off... you'd raised some venture capital, yeah?
| |
Max Mullen | we'd raise a seed round | |
Sam Parr | and were you running out by the end of the year | |
Max Mullen | We were always running out of money when you raise VC, right? That's why you're always in the mode of fundraising. But we weren't running out of money; we just weren't yet in a groove where we had any assurances that we were going to be growing as fast as we are today. | |
Sam Parr | So, one thing that I think is interesting is that everyone knows I'm not technical. My co-founder actually is. You said that you were doing everything, and I do that too. I'll take out the trash, just go clean, literally anything.
But you also did one thing that was super interesting involving Trader Joe's. One interesting thing about Instacart, which I'm sure you could talk about, is that you guys work with a lot of these grocery stores to put their groceries on Instacart so you can order. But early on, that wasn't the case. You were actually in charge of getting a lot of the inventory on the website, right?
| |
Max Mullen | Yeah, so we did not spend a lot of time in the grocery industry before we started this company. We did not understand just how important it is where people's groceries come from. We thought that we would get them from the closest store.
In the early days of the company, we did not have partnerships with grocery stores. We would just go into the store and shop like a regular customer. That was cool because we could do it immediately; we didn't have to ask for permission.
However, the downside was that we didn't have good information on what the store actually carried. So when customers came to us and said they wanted us to work with other stores, other than the ones we already had, we had to get creative to obtain that catalog information.
Back in the early days of the company, at one point, we started going into Trader Joe's and trying to write down all the information on all the items in the store and take pictures of everything so that we could build a website. When they would ask, "What are you doing?" I would say, "Oh, nothing," and then they would say, "Get out of our store." I got kicked out of there a few times.
Eventually, we came back in with a better idea. We approached the store manager and said, "Hey, my name is Max. I'm here to buy one of everything in your store." They responded, "You're gonna do what with what?" I said, "I'm gonna buy one of everything in your entire store right now. Open a check stand for us for the day."
And they did! We bought one of everything in the entire store. Over the course of three days, we took pictures of all of it. It took three days to take 3,000 pictures, and after that, we had a catalog.
| |
Sam Parr | how much does it cost to buy an entire trader joe's | |
Max Mullen | it costs $22,000 | |
Sam Parr | And so, you told me that you and your girlfriend, I think, basically had this as your Christmas break project.
| |
Max Mullen | yeah in 2012 | |
Sam Parr |
So you literally just went and bought one of everything? And how many stores did you...? So basically, Instacart-like... I mean, you guys, this is... You just were kind of doing whatever the hell you wanted at the time. I mean, you're just like, "Look, we need to get inventory out there," and you really just kind of took it into your own hands.
| |
Max Mullen | Well, the way I would say that, Sam, is the customers wanted something, and we wanted to deliver it. So, we would go out of our way to make that happen, no matter what it took.
| |
Sam Parr | that's a lot that's a lot better yes | |
Max Mullen | Yeah, so we were sitting there in a room, writing down the name of every single item, the price, and the aisle into a spreadsheet with my girlfriend—now my wife—and my roommate for three days. | |
Sam Parr | That's amazing! So, we're going to talk about raising money versus bootstrapping soon. But before we get there, one of the ways to get customers for you guys is a little bit different than a lot of other products.
Everyone needs groceries, so there are going to be users out there who want their groceries delivered. I mean, it's quite obvious that the demand is there, right?
| |
Max Mullen | yep | |
Sam Parr | But the hard part for you guys is getting partners, so you don't have to go and take photos of everything at Whole Foods.
| |
Max Mullen | that's one of the hard parts yeah | |
Sam Parr | That's one of many hard parts. Can you explain how a 14-person company that isn't well known and has never worked in the grocery industry is able to get meetings with a lot of these big companies? Because that seems like the key to making this business work.
| |
Max Mullen | Yeah, first, we got incredibly lucky. Second, we hired someone named Neilam, who's our Chief Business Officer, and she's amazing at business development.
But I think even before Neilam joined the company, the strategy we took was that we obviously weren't going to get a meeting with Safeway if we just walked into their office in Pleasanton, California, as a 14-person company.
However, we could get a meeting with our local grocery store with one or two locations. So, we went to Rainbow Grocery and we went to Buy Right Market in the Mission. We sat down with the founders of those companies and we said, "Here's what we're all about. Here's what we do. Here's how we think it could work for you to expand your business."
They agreed, and so we made partnerships with some of the smaller stores. Then, slowly but surely, the larger stores took notice of what we were doing and thought it was really interesting. They would start to reach out to us.
| |
Sam Parr | and you just got you guys just kept doing that for multiple | |
Max Mullen | Yeah, until we had a really sophisticated and large business development team across the country. Now that team runs those relationships and takes those meetings. | |
Sam Parr | Got it. Okay, I want to talk about the raising versus bootstrapping thing. I'm getting a lot of tweets about it now.
Let's start from the very beginning of even getting money because someone is asking me about it. I mean, some of the largest failures during the dot-com boom were, I believe, grocery deliveries, right? Webvan? Yep, yep.
How were you able to convince investors early on that this was an idea worth funding?
| |
Max Mullen | That's a great question. We tried very hard to make it clear that what we were doing was different from the way that companies had approached grocery delivery before. In fact, we had a line in our pitch that said something like, "There have been spectacular failures in this market before, but Instacart is different." That was the opening line of our pitch because we knew it was such an elephant in the room.
Most investors, frankly, turned us down for our seed round because of that reason. But eventually, we found a partnership with Sequoia Capital, which is a great venture capital firm here. They had invested in Webvan and had seen what you just said, Sam, which is that the demand would be there if a company could come along with a smarter way of doing it that would have good unit economics.
So, the conversation with Sequoia was very different. They decided to partner with us and funded us in our Series A.
| |
Sam Parr | And your guys'... I mean, I don't think it would even have been possible to bootstrap a company like this.
| |
Max Mullen | You know, it's a marketplace. In marketplaces, it's very well known that you have to build supply and demand at the same time. You have to build a lot of density in each geography, and you also ideally want to be the biggest marketplace so that all the parts of the marketplace get the most value from each other.
Our strategy has always been to grow and to be large. I think there could be other ways to do it, but our strategy has been to raise money to support our growth. | |
Sam Parr | And then another thing about marketplaces is ideally, you want to be there very quickly. I don't remember exactly when Amazon launched their competitor to you guys, and I know that there are already other competitors in different markets. You may be the biggest in San Francisco, but for many people who flew in here, they might have their own version.
Did you feel, do you think that you had to raise money in order to get big very quickly? I mean, how much pressure was it on you to do everything with speed?
| |
Max Mullen | We have a culture of having a high sense of urgency in general. First of all, we have five company values, and one of them is called **"Every Minute Counts,"** which is partially about speed.
I think it was important for us to expand outside of San Francisco quickly because we wanted to show people that the model would work in other places. Once we were in the top 15 or 20 cities, we wanted to expand outward in those cities to demonstrate that it would work in the suburbs as well.
To be the biggest grocery delivery marketplace by far—which we are, by the way, in America—we need to have the most coverage of anyone. Therefore, we needed to raise money in order to cover more people faster. | |
Sam Parr | And then comparing you guys to MVMT, one thing that they've been able to do, I think for a while, is kind of be a little bit below the radar. Raising money is oftentimes, in the tech community, a huge event. It's like, "Okay, well, if these folks are raising money, then this business is clear; maybe it's a signal that something big is going on here."
But I guess where I was going with this was... I don't know how I was phrasing this. Anyway, I wanted to hear about near-death moments. Just because you have raised all this money, does that mean that you've been able to avoid some of these near-death moments? And how has that impacted how you do business? I mean, I know what Jake was saying: he's like, "Every month we had to make a profit."
| |
Max Mullen | yeah | |
Sam Parr | You guys, you'd have a little bit of leeway there. But are there still these near-death moments?
| |
Max Mullen | You know, earlier in the company, when we had raised a lot less money, there was a time when we were growing very fast. Then, because of a retail relationship that went sour, we lost almost half of our business overnight. That was really difficult because all the metrics in the company are set up for hockey stick growth.
Suddenly, to go completely down in the opposite direction immediately was really, really hard. Luckily for us, we had raised enough money that it wasn't going to mean we wouldn't be able to make payroll or something like that.
I feel very fortunate and lucky that we have been able to be good at fundraising as a company, to time the markets well. Now, having raised over $1,000,000,000, we have a war chest of money that we can use to invest in our business, build new products, and handle anything that comes our way.
| |
Sam Parr | There are a lot of folks out here who have small businesses, and they're thinking to themselves, "Should I keep doing what I'm doing, or should I raise money?" When someone asks you for your opinion, typically, how do you have a framework that you tell people on how they should think about this?
| |
Max Mullen | Yeah, it's a really difficult question to answer without knowing more. You shouldn't raise money if you're starting a company for the wrong reasons, and you shouldn't raise money with the intention of using it for the wrong things, right?
What I'm talking about is scaling too fast. I think it's a great time to raise money when you have a really clear idea of what you're building and really good signs that customers want that thing. You couldn't build the business without raising the money.
| |
Sam Parr | Great! I'm getting a lot of questions from you guys. That's fantastic! I'm going to start kind of peeking through them.
One thing that people have repeatedly asked is, everyone is using the word "Amazon." They're saying, "What?" Yeah, they're asking lots of questions about how you... what are you going to do with Amazon buying Whole Foods? How is that going to impact you? Or how are you going to beat Amazon?
Earlier today, when I mentioned... I said, I mentioned to you when we were starting the company or starting the conference, I said how you guys are competing quite nicely with one of the top 5 largest companies in the whole world.
So, I'm still getting a lot of tweets about that. Can you talk a little bit about how it is to compete with someone like Amazon?
| |
Max Mullen | Yeah, so it's been a year since Amazon bought Whole Foods, and we're still around and thriving. The grocery industry has gone through a tremendous amount of change, and this is just one of the great signs of that change.
For us, as a company designed to partner with and help retailers come online, it has meant a tremendous opportunity. We've deepened and broadened our partnerships with all the grocers we work with in the last year, and we've signed a bunch of new grocery partners.
The industry dynamics are actually in our favor. Moreover, customer demand grows and grows every year. People are getting more and more used to and excited about pushing a button and getting their groceries delivered in an hour. So, that's been good for us.
| |
Sam Parr | so do you think that you guys can both win | |
Max Mullen | I think that it's a very, very large market. It's a **$700 billion** market just for grocery sales in the U.S.
We do things even beyond just delivering groceries. We work with pet stores and we work with Sur La Table, which is a store that sells kitchen supplies.
So, the market is even bigger than that. With that amount of space and a growing market, there's plenty of room.
| |
Sam Parr | So, you guys, you've told me before how you have a really great board of directors and how they've helped you. But one thing is, when you do raise $1,000,000, that means that your company is definitely not like a sole proprietorship. You know, it's not the Mac show. You can't just do whatever you want. You know, you have a... | |
Max Mullen | I might differ with you on that, but yeah, we did that deliberately, as I mentioned, because we wanted to have the flexibility to operate in the way we want to operate our business.
But the flip side of that is when you raise money, any amount of money, you have an obligation to a new group of stakeholders called investors who own some of the stock of your company. You have to listen to them, and you have to do right by them because they're investing in you to make money too.
This obligation takes away some of your options. For example, it takes away the option of just staying private forever, never selling the company, and just making a bigger and bigger business. So, it's a different kind of business.
| |
Sam Parr | And so, how do you... do you have to do certain things? Do you have a certain strategy in order to retain control? I mean, do you actually have that fear that, you know, you...? | |
Max Mullen | No, I think that that's a myth of, you know, Silicon Valley. I believe if you're working with good people that you've picked specifically for their expertise in an area, and you have trust in each other, then that's a non-issue. | |
Sam Parr | and so it just doesn't you don't even you're not worried about it at all | |
Max Mullen | nope | |
Sam Parr | okay let's see yeah man | |
Max Mullen | I got a question for you sam yeah what does it mean to you to hustle | |
Sam Parr | For me, hustling means it's a verb. It's when you set very ambitious goals, and it's the actions that you take to achieve them.
| |
Max Mullen | I like that | |
Sam Parr | that's how I define it what about you | |
Max Mullen | I think that we at instacart we hustle we don't use that word | |
Sam Parr | is that one of your it's on your mission | |
Max Mullen | There are our five company values. We don't use that word, but there is a little bit of hustle in this value we call "Every Minute Counts."
"Every Minute Counts" is about making the most of our time together and asking the question, "Is this the fastest way you can do something?" In a startup, you're trying to grow and do a bajillion things with limited resources. If you take your time on everything, you'll just move slower than the next guys, and that can hurt you as a company, especially when you're small.
So, our way of hustling is to emphasize "Every Minute Counts."
Also, I want to talk about one of our other values called "This Is Your Baby." You didn't say it, but part of hustling is doing it right—making sure it gets done. That's ownership, and we really believe in ownership at the company. We hire people against that value called "This Is Your Baby," meaning if you're going to do something, you better be willing to put your name on it, and you better be willing to fully own it and see it through.
So, we value those two things in the people that work at the company: a sense of urgency and ownership.
| |
Sam Parr |
So then, as a company that has a value of sense of urgency, yet you're dealing... You know, it's not a media company where you can go in and edit an article after you've already published it. I mean, someone's grocery [order] is very important. You have to be timely, and you can't screw up on the first time.
How do you balance having a sense of urgency in launching things very, very quickly - even before you're certain if it's ready - and trying to keep a customer happy? And not ruining like someone's birthday party for not having their cake delivered on time?
| |
Max Mullen | It's a very, very good question. I mean, it is *the* question because we have to balance speed, quality, and care for the customer.
We didn't set this up, but the very first value of the company is called "Solve for the Customer." It's the first value because it's even more important than speed and some of the other values. What it means is that we need to make decisions that benefit our customers—the people who are paying us money to have their groceries delivered.
If we forget that, if we ever slip on that, we'll be a worse company for it. Those people are the ones creating our marketplace, which creates jobs for shoppers, which creates sales for retailers, and which creates opportunities for our advertisers to partner with us to advertise.
So, it all starts with customers, and we consider them first when we think about the way we build our business.
| |
Sam Parr | I'm going to answer two more, or ask two more of these tweets. But the first one is, is it called "of course"? I'm struggling to see it. Is it "of course," but maybe yes? Explain what that is.
| |
Max Mullen | Of course, but maybe you could just stream this conference, and you wouldn't need 2,000 people to come here to Oakland in person and do it all live.
However, maybe bringing them together is actually a much better and bigger idea. If you do it, you can call it "HustleCon." It can be amazing.
So, "of course, but maybe" is a framework for thinking big and outside of the box. It ensures we don't do things just because it's the way they've always been done, but that we actually invent new things, invent the future, and solve problems that have never been solved before in our business.
Right? People think, "Oh cool, it's an app, and you deliver groceries. So I push the button, and it goes to the shopper." Very simple. Uh-uh.
There's a team—this is a real thing—of about 50 people in our office, out of the 250 people in our office, that all they do is take data that comes in from our retailers. They run a bunch of sophisticated processes on it and then apply our grocery catalog, which is the largest and best grocery catalog in the world, to that data.
So that you, as a customer, can see perfect images, nutrition facts, the right price, and the right availability of hundreds of millions of grocery items across the country in real time.
That's an incredibly hard problem solved in an incredibly novel way that no other company is even close to having solved, and that's because of the spirit of this value.
| |
Sam Parr | Got it. Okay, last question that I've been asked many times during this talk: How did you get that Twitter handle, Max?
| |
Max Mullen | Of all the things you could ask me on this slide, it's kind of a funny story.
I had another Twitter handle, and I thought, "Hey, it'd be really cool to have 'Max.'" This was about five years ago or something. So, I just tweeted at the person who had it and asked her for it because she wasn't using it.
She was a lovely woman named Max in Washington, D.C., and she gave it to me. Wonderful! If you don't ask, you don't get what you don't ask for.
| |
Sam Parr | Well, look, we have a crowd of entrepreneurial folks from all over the country. Are there any last words that you think they should know about how you've been able to make this happen? And are there things that you wish you knew when you were just getting the business started?
| |
Max Mullen | Absolutely! I would tell you to make sure you're passionate about what you're working on. Make sure you're passionate about your job, or if you're starting a company, ensure you're passionate about the problem that you're solving.
It isn't going to be easy. It isn't going to be simple, and it isn't going to be straightforward. There will be moments when you almost don't make payroll, or you face a huge problem and don't know how to solve it. The first version of your product might not work out, and that is the moment that will test whether you're actually passionate about what you're doing or not.
If you're passionate about it, you will push through and be tenacious. If you're not passionate about it, you will give up. In my first company, we effectively were not passionate enough. In my second company, I'm extremely passionate, and that is really the key to giving you the strength and motivation to keep going.
I'll say a second thing: as you're choosing that problem to solve, you've got to talk to customers. We, as humans, are wired to assume what we think is going on and then do what we think is right. That is the wrong strategy. Just stop and listen to people who use your product.
Stop and listen and talk to customers. Sometimes, just listen to customers talking to each other. Gather as much real, actual ground truth data on your customers and what they want. That will help you figure out what to build. Whatever you think it is in the first iteration, it's almost certainly the wrong version of your product. Only by listening to customers in a scalable way will you actually find what's a real problem and then the real solution on how to solve it.
| |
Sam Parr | well perfect well thank you man this is wonderful | |
Max Mullen | yeah thank you | |
Sam Parr | thank you thank you |