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In this episode of The Inner Chief podcast, we speak to Ben Lipschitz, Co-Founder and CEO of FoodByUs, on being data-driven, starting and exiting a business, and successfully securing funding.
Born in South Africa, Ben graduated with a law degree before realising he wanted to pursue an entrepreneurial journey. At age 24, he started his first business, Flipsters, which was a brand of foldable women’s shoes designed to fit in a standard clutch bag. After scaling and launching into 16 countries and selling to more than 300 Australian retailers, he sold Flipsters in 2014.
In 2016 Ben teamed up with Gary Munitz and Tim Chandler, both formerly of Menulog, combining their expertise in hospitality and technology to launch FoodByUs, the only online hospitality marketplace in Australia which allows venues to not only choose from a curated list of thousands of top suppliers, but offers an entire procurement solution.
In the past twelve months the company has more than doubled its headcount to 75 people, closed a $10M Series A funding round backed by global marketplace investor F J Labs and Macquarie Capital, and continues to smash existing revenue figures by as much as 40% MoM. As a result, Ben was recently awarded the 2022 Entrepreneur of the Year at the CEO Magazine's Executive of the Year Awards.
Ben is a volunteer Director on the Board of Redfern Legal Centre, and he is also a keen runner and triathlon participant.
In this episode we talk about:
- Lessons on starting, scaling and selling a business (and starting again!)
- Being humble and curious by using your customer data to keep nailing ‘product-market fit’
- Finding the right partners in business and his three pillars for business success
- Successfully securing VC and private equity investors.
Connecting with Ben Lipschitz
You can connect with Ben via LinkedIn.
Books and resources
“Let's approach these problems humbly and not try to tell the customer what we think, but rather how can we offer a service that is definitely wanted now and that can grow into a software solution over time.”
On founding his first business at age 24
- I think this is just one of those situations where you're so naive, you don't realise how insane the task is and how kind of silly it is to take something on. I was in my final year of university and I'd already decided I don't want to go back to the law firm and I was looking for business ideas.
- When you're open to looking for business ideas, you're ready to become an entrepreneur. But the flip side is that you may be less inclined to truly assess the merits of the idea.
On selling his first business
- It closed the loop in the sense that we clearly established something that was of value, which is different to how an external person sees it. So for us, where we felt the most pain was where we thought the most value was, and that's just not true.
- As a process you're learning how others see your business, it's harshly objective, they're really looking at the numbers and things like that. And you can say to them, “That took us years to work that out.” They don't care.
On pivoting a business
- I think there were some really important questions we asked when we decided to shift strategy, namely, “What does our tech do? Are we going to have to change our tech a lot?”
- And the answer was that our tech actually doesn't have to change at all. Our customers could be a restaurant instead of a consumer, so we already had a marketplace, and all of the technology required.
- And then we asked ourselves, “What's the data showing us in terms of what happens when a restaurant does enter into the network?”
- The data was really clear that these restaurants were sticky, they loved it, and in fact were asking for more categories to order from. Yes, it was difficult to implement in the long run, but the data made it a very clear decision.
On being data-driven and listening to your customers
- To go into a venue and say, “We've done the hard work and here's the perfect list of suppliers” might seem helpful, but you'll never service all of their needs and they'll never use your platform for everything. And so what we did is we opened up the software to allow the venues to add their own suppliers and facilitated the order between venues and their suppliers.
- Importantly, we don't make any money from that, it's not a revenue generating feature. But what it does is it gets the restaurant very sticky in using the platform as a one stop shop.
- I think it's just a good example of doing something that services the needs of your customer without even actually making money from it.
- It's become self-proving over time. The more we follow the data and the more that we do listen to the customer, those have been some of our best features or our best business decisions.
On building the right team
- It is definitely one of the most important things, particularly in the early stages of a startup, is who you bring on and who you let go because they're not able to take on the journey or perform the role.
- And it's hard. We go through a quite weird and rigorous recruitment process where we're really looking at not just what are the skills of this candidate, but their attitude to work generally and something that we internally refer to as grit, because we don't think it's easy working in a startup.
- And weirdly we're also trying to scare them off. We're trying to reveal to them the realities of working in a startup, that it’s an ambiguous environment and one which is often changing and one where there's not always a lot of infrastructure around what you're trying to do and you're going to have to work fairly autonomously.
- There's a lot of people working really hard, and the more you build that culture, the more you get that really nice pace and people are on the journey with you and everyone is working really well together. If you throw a wrench into all of that with a potential bad hire, then you've got to be on it quite quickly because there's just very little resources in a startup. So by having that discussion with them early on, it always is better for the business.
- There should be a constant sense in the staff of, “We are the team to do this, we appreciate being here, we're all sort of unified in that.” And part of firing people up is just being really open, “These are the challenges we're facing, this is how much cash burn we've got.” The staff are aware of everything, the vision, where, why, how we're trying to do it, what investors are saying about us if we're in the middle of a capital raise. It's actually a common theme we hear at FoodByUs from the team is that they've not often seen this level of transparency.
On selling to difficult customers
- I think chefs must be one of the hardest user groups to sell to, it is a constant challenge. They're in the back of house and they've got to deal with a very fast pace, in addition to keeping all the food supply going, in addition to looking at the cost of goods and keeping a nice margin, so there's a lot of responsibility there. And it's late night work, a highly intense environment all the time, and they're often not in love with technology.
- Going in as a sales rep when they're busy, they're under the pump and you're saying, “Hey, I would love to change how you do all of your food ordering from a wholesale nature.” I've had reps go in at the wrong time of day and had a potato thrown at their head by the chef!
- I think the most important thing is that you're empathetic to why they're like that, and really take them on that journey. A lot of our staff will visit a venue multiple times, train them up how to use the marketplace and ultimately when the cost of goods starts coming down, and then the time efficiencies start creeping in, all of this great stuff starts happening.
On raising capital
- I think the first question is, do you need it? I think that's critical because for a marketplace you have to get hundreds of suppliers before you can get one buyer. You've got to build a whole ecosystem already. We definitely established that we needed capital, there was just no way that a marketplace was going to work without it.
- And then I think it's very much about understanding the journey that you believe this business can go on.
- And how much you will need to take it to a certain level, and finding the right investors who share that vision and understand the problem that you're trying to solve and the timeframe that you want to do it. A lot of venture capital companies have certain time obligations and an investment horizon. It doesn't mean that you don't have a great idea and that you're not investible, but I think finding that match is really important.
- I think the thing we're most excited about is getting to that level of market penetration where it's an essential software for running a restaurant, and we can really see that light at the end of the tunnel now.
On working on the business
- If you are working in the business for too long, you're not going to have a business; you’ve got to work on the business. So just stop it, you've got to eject yourself at some point, however you do it, for a day, a week or month or however long you need.
- In my view, the founder's job is to work on the business; it is the one non-delegatable thing. And by “on the business” I mean the long term strategy, identifying the things that could be going wrong, finding the revenue opportunities that no one's seeing. And you're not going to do that sitting in meetings and answering emails.
On his favourite interview question
- I just love an open-ended question like, “Tell me about a problem you've solved that you're really sort of proud of.”
- You can tell a lot from that; firstly, what they consider to be a really big problem.
- And then as they take you through the details, you get to understand what their actual involvement was in that. And sometimes the solution might have been an agency that they got onto the issue to solve it that way. And sometimes you see a real grit in how that person not just thought about it but approached it and pushed through to a solution.
- And I can talk for 20 minutes on this one question, and then it's almost like I’m working with them already and in that problem-solving space.
On leading people
- Sometimes as a CEO and a Manager, part of your role is to guide or advise your staff as much as it is to get them to understand themselves.
- Dig deep on where they're at and what that alignment to their values might look like, and then you can talk about the company or the role and how they all fit together. It's going to be different for different people, but I think you can feel when things are not right.
Final message of wisdom and hope for future leaders
- Anyone who's looking into starting a business should absolutely embed in their business the ideas of sustainability.
- Business people are often the ones looking at new ways of doing things and breaking new ground and end up forming a new standard. And that standard should have baked into it that we've only got one environment and we just need to look after it.
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