This guest post was written as part of our FounderTalk series by Noah Glass, Founder & CEO of OLO. OLO is the leading digital commerce engine for restaurants, providing online and mobile ordering capabilities to top restaurant brands like Five Guys Burgers & Fries, La Boulange (recently acquired by Starbucks), and many more. You can follow or respond to him @nhglass.
Between my freshman and sophomore years at Yale in the Summer of 2000, I had the good fortune to work as a Product Manager Intern at Shutterfly (SFLY) in its very early days, with about a hundred employees. Beyond the sheer exuberance of that time – the peak of the first dotcom boom, I loved Shutterfly because I had the opportunity to work on a B2C service. It was a joy to spend my time working on a product/service that my friends and family could use and enjoy. One that would make consumers’ lives better. When it came time to start my own company five years later, I was thrilled to dive into the same challenge to make consumers’ lives better. Like many a young founder, B2C was kind of all I knew and I was enamored with it. I’d launch a service and touch millions of consumers –that was the plan.
When I first moved to New York City after graduation, I lived on Wall Street – which was like living in a ghost town after 6pm on a weekday and a tourist attraction on the weekends. A combination of New York City development grants and general public disinterest in living in the Financial District made Wall St. ridiculously affordable. Every morning, I would stop for coffee at the 45 Wall St. Starbucks and get stuck in a 10-20 person long line of stockbrokers and i-bankers trying to get their caffeine fix. My personal frustration turned into a fascination with creating an easy way to order and pay ahead, so that I could skip the line. With a scrappy founding team, some seed money, and a working beta at the ready, I headed back to the Yale campus in New Haven to launch GoMobo.com – the first mobile ordering service, allowing consumers to order and pay by text message and skip the line for their morning coffee.
My grandmother and mother came to New Haven on November 30, 2005 to place the ceremonial first two orders. Yes, really. Yale students loved it and so did the coffee shop. We adopted “Skip the Line®” as our trademarked tagline and returned to New York City to launch in Silicon Alley, at Rockefeller Center, and on Wall St. in 2006. The press ate the story up, culminating in a lead-off piece on “Good Morning America” and BusinessWeek naming me a “New M-Commerce Barron.” It felt like I was living the dream. In March 2008, we quietly raised a $7M round to scale up independent restaurant sales and consumer acquisition.
Bear Stearns and B2B
For a couple of months, we ramped up our consumer acquisition efforts and were spending $150k to generate 10,000 new consumers per month. GoMobo’s customer lifetime value story was less than clear. Restaurants paid us 10% per transaction. Were we really expecting the average customer to spend over $150 on GoMobo before churning? That seemed like an awful lot of coffees and sandwiches.
Then came the Bear Stearns collapse and the financial calamity that followed. Our new Board of Directors encouraged me to explore new business models. What if the restaurants paid a flat monthly fee and promoted the service to their existing customers as VIP access: an extra benefit for their loyalty? That line of thinking ultimately led to experiments with a SaaS subscription fee model and a white-labeled offering. But that meant that the B2C model that I had cherished was getting tossed aside. Despite the sky falling all around us, I was in the “Kellogg’s overtook Post by doubling down on marketing during the Great Depression” mentality, trying to convince myself that now was the very time to ramp up consumer acquisition even further.
It’s So Hard to Say Goodbye to Consumers
What followed was a soul-searching period in my life as a young entrepreneur. I knew that the numbers were not on my side, but did I really want to spend my time working on a non-consumer startup? That wasn’t why I’d gotten into entrepreneurship in the first place. I wanted to create consumer-facing products to make consumers’ lives better. I didn’t want to have to compromise with other companies’ brand guidelines and other exogenous limitations. I shuddered to imagine my company being categorized as just another supplier/vendor/service provider. What would it feel like to be one of many companies to receive an RFP (request for proposal) – a dreaded indication that you are not special and one-of-a-kind but one of many who could fulfill a customer’s need? What would it feel like to forego our consumer brand and offer a private-label version of our service?
I didn’t have many startup entrepreneurs to turn to and ask for advice and perspective. Essentially every startup I knew was in the B2C space and found B2B “boring” and/or “not worth the effort.” So instead I went to restaurant industry tradeshows over the next couple of months and spent my time trying to get into the heads of the suppliers – the companies like PepsiCo Foodservice and Sysco that provide their products to the restaurants to then sell to consumers, oftentimes without a trace of the supplier’s brand. Talking to the executives of these foodservice companies showed me that a company could take pride in scaling to a large and commanding market share, even if it’s brand was not front and center to the consumer. It also showed me that one could take the same kind of approach to product design and development with enterprise/B2B users as one could with consumers. In fact, many of the suppliers that I spent time with at the restaurant industry tradeshows described formal enterprise/B2B user groups that they developed and maintained to help steer their product direction and ensure that they were building products to serve large future market needs.
B2B2C – A Scrappy Model for Scaling
I committed to giving the B2B model a shot and told myself that we could build a “B2B2C” model: we would be the backend technology that enabled restaurant brands to provide better service to their consumers. GoMobo.com gave way to OLO.com: the restaurant industry acronym for “On-Line Ordering” and our new B2B2C brand. Nobody heard much about the company for the next couple years. The consumer press seemed less enamored with the new model. The irony was that we actually were finally starting to crush it – and by doing so, we were actually reaching many more consumers and having a much larger impact toward my goal to make consumers’ lives better.
I remember the Board meeting when I got to explain that we had been paying $150,000 to bring in 10,000 new consumers per month and now we were getting paid $150,000 to bring in 100,0000 new consumers per month. By shifting to a flat subscription fee model, we were able to align incentives with our B2B restaurant partners so that they marketed the lights out of the Skip the Line service on their websites, through their email marketing lists, and in-store and got their money’s worth. This was much more targeted and efficient marketing than we could ever have pulled off as an independent consumer brand. The predictable cost and overwhelmingly positive ROI of the flat fee model led to OLO signing marquis restaurant brands like Five Guys Burgers & Fries, the fastest growing chain in the history of the restaurant industry. In B2C mode, we only ever reached 100,000 consumers.
Today, in B2B2C mode, we will soon blow past 3M consumers. We power restaurant branded mobile apps and do not compete with our own, instead providing our aggregated roster of restaurant menus as a feed to an exclusive network of discovery websites and apps like GrubHub.com – our former rivals – for incremental transaction fee revenue. And while I am consistently haunted by the inevitable question “so, where do I download the OLO app?”, the plan is to stick to our knitting and keep up the scrappy B2B2C growth that has served us well over the last several years and keep iterating and improving our offerings with both the consumer and the enterprise B2B user in mind.
My original fear of loss of control with a B2B model turned out to be overblown. I’ve been able to challenge major brands to rethink their consumer experience and use OLO’s platform to make consumers’ lives better – my original reason for becoming an entrepreneur – at a much grander scale. It is a great honor to touch as many consumers as we do today and with many different varieties/applications of the original digital ordering and payment service. Many of the best ideas that have gone into making OLO the elegant platform that it has become originated from a close and collaborative partnership with our restaurant clients in true B2B client-vendor style. Today, as an older, wiser B2B entrepreneur, I am grateful to OLO’s clients for pushing our thinking and giving us a grand platform to make millions of consumers’ lives better. That’s the very challenge I set out to meet eight years ago. It just came to fruition in a different manner than I had planned. But doesn’t it always?