Jan 25, 2021

The Evolution of Food Delivery and Takeout – with Shawn Tsao

Show Notes

It wasn't too long ago that we would have to dial to order delivery food without seeing menus, customizing orders, and seeing updates on delivery statuses.

In this episode we speak with Shawn Tsao, co-founder of Caviar, one of the early apps that created the wave of food delivery.

Shawn didn't stop there and went on to create Beluga Capital, a venture capital fund investing in early stage technology companies.

Shawn liked food so much, he even started a Halal Guys franchise! That is right, this food-entrepreneur has good taste! Shawn is one of the entrepreneurs that defined what food delivery looks like today!

Tune in to hear how Shawn started Caviar, the early days of building a business with accounts as big as Ike's, and how Shawn looks at investing in Founders rather than just ideas.


Shawn Tsao [00:00:03] So we had signed Ike's Sandwich, which meant it took me months to get back out, like literally stocked Ike for a month on Twitter, waiting to tweet that he was in Santa Rosa by the off chance. I was looking at his tweets and I was like, I got a zip code. I got Jason and another co-founder to come with me to Santa Rosa, and we kissed him on the spot while he was leaving his boy in Santa Rosa. We got right. I, I had a picture this day, and so we sat him down, talked to him, and he's like, I'm fucking kibitzers do this. 

Jed Tabernero [00:00:38] That was Shawn Tsao talking about how you hustled to get the Ike's account when he started one of the early food delivery service start ups called Caviar. 

Shawn Tsao [00:00:49] This one customer, he signed on to caveat because it takes place every single day. He would have an egg sandwich and a Coke delivered to his place in outer Richmond every single day like I would. I'm looking at orders, like all the time. I'm like, it's Zachery again. Every time, like, I would pretty much have, like, a warrior ready to go 11:00 at night because I know that orders coming in, like, I just want him to get his sandwich as quickly as possible because he was like that our most loyal customer. And I was like, OK, we got to keep this thing alive so that we could feed this man like it was. So it's it's motivating when you see customers or loyal customers is using your product every single day like that drives you. 

Jed Tabernero [00:01:24] Caviar is the company that Jack Dorsey, CEO of Square and that other company bought in 2014. In twenty nineteen, Doordarshan acquired caviar for about four hundred ten million dollars in 2015, he started focusing his efforts on investing on entrepreneurs of the future. He found Blue Capital, a venture capital fund investing in early stage tech companies. Shawn liked food so much he even started a Halaal Guys franchise. That's right. This food entrepreneur has good taste. 

Shawn Tsao [00:02:03] I've loved in New York for training and they literally taught me how to make Halaal guys. I was out on one of their stores, like making oh guys like making chicken and rice platters. 

Jed Tabernero [00:02:15] Sean is one of the entrepreneurs that defined what food delivery service looks like today. Tune in to learn how Sean had built caviare. Welcome to U.S., where we unpack the ever changing technology economy 

Adrian Grobelny [00:02:40] hangout with Jed, Shikher and Adrian as we tackle the industries of tomorrow. 

Shikher Bhandary [00:02:46] This is things have changed. 

Shawn Tsao [00:02:55] Well, first of all, I'd like to put on record that I don't like the name MunchonMe, I actually don't really like the name Caviar either, but like it was out of necessity. And I will I'll tell you why later. So the story, I guess, starts back in UC Berkeley. Jason and the rest of my co-founders, we were part of a fraternity called Pi Alpha Phi. And I'm in my senior year. Jason's working at Google, Richard, our other co-founder. He was working at Yale and another co-founder. And he was he's a couple of years younger than I am. He was studying to be a Major Jason when he was working at Google. He was already starting to think about doing his own company. So, again, like he was really into deals coupon's like he was sending me like deals, coupons all the time. And he loved the idea of Groupon, but he wanted something specifically for food because, you know, Jason's a foodie and for one, he can't cook for it. And so he always eats out, but he wants to get a discount at them. And so he decided to build lunch on me daily deals for food back in early 2011. And when he was building that out, I was I wasn't really doing anything at Berkeley other than like an architecture internship. My major was architecture, and he needed someone to help him with a little bit of the business side stuff, sales and operations. Plus, because of my design background, he needed someone to help illustrate some of the marketing materials and stuff. So I was like, OK, I have time. I can I can help you out at a time. Like, I wasn't really committed to the startup stuff. I was like, you know, like I have an architecture offer lined up, like, economy's not so great back in 2011, you know, maybe I take the safe rail and just take this offer right now and I have some time. I'll help out my friend Jason. And so I started helping them out with a few things, doing some sales. And then Jason and the other co-founders, they going to Y Combinator. Yeah. And that's when they're like, hey, so we're like a real company now. So would you like to come on at full time and we'll make you like a partner as I can. I can delay this offer a year, you know, and I have I had enough money saved up to kind of scrounge through at least a year and go through this startup journey. And so, like, I went to Y Combinator with with them and building out the company, much of me in San Francisco, in New York, San Diego, we were all over the place. And that was actually one of the problem is, was that we overexpanded too quickly without building the product. Well, and maybe like we went through Y Combinator and we got one check that sucked. You think like, oh, I see a company, you're going to have investors left and right now we had one check and we were just going through a side of life with like a fifteen thousand dollar check and then Groupon IPO that year and they tanked. It was atrocious. And so when that happened, we realized that like we were fucked, the whole thing was screwed, like no one's going to invest in us. And at the same time, like, we weren't really using our own deals and coupons. So it's like, why would you do a startup that you don't even use yourself? And and so we got so we decided that like we needed to pivot or we go back to our normal nine to five jobs. And one of the co-founders, Tony, he he was a Canadian citizen and he couldn't he needed a work visa. So because we didn't have any money, like we had no direction, like he had to leave the company, which really sucked because he was one of the people that really convinced me to do the startup stuff. And so we had like a month to kind of figure out, like, what the heck are we going to do? And so we had an office in San Francisco on Kerney and Bush. And I would just use I used to go to like the same place all the time, Moriches, which is like a Japanese curry place, but I got tired of it. I'm very fortunate in that my mom is an amazing cook. So when I grew up, like she would make like different things all the time and like they were just delicious. And so I'm used to like, you know, good food and different food all the time. Like, I was sort of spoiled in that way and I really wanted a sandwich. And the only way to get it was to go there and wait two hours or do a TaskRabbit which cost 20 bucks and they took like three hours. And I'm like, this is stupid. Like, why can't like GrubHub or whatever, just like go get this sandwich for me. And at the same time, we had a restaurant that we had been talking to, a coffee shop saying that, you know, like maybe they wanted to get into delivery, but they didn't want to manage the delivery logistics themselves. And so, like the two things, kind of the problem and the idea kind of like mashed up at the same time and we realized, like, we can build this and we knew that we we could tap into the independent contractor workforce because Uber and Lyft was already very popular at the time. And because of that, we were we thought that we could build an Uber for food. We have talented engineers, Richard and Andy, that can build this out in maybe a couple of months. Originally, we tried to partner with another company to do the logistics while we do the business operations of signing restaurants and whatnot. Fine enough that other company was postpaid. Yeah. So we essentially brought the idea to them because it's like so the CEO and the CTO, we had a meeting with them saying like, hey, like if you guys can deliver our food, we can sign to restaurants because they already had they already had a bunch of bikers and whatnot on the road doing postal deliveries. That's what they call Postnet. But then they kind of go sit us for a while and then built their own thing. 

Jed Tabernero [00:09:11] Why? Oh, oh, Postmates! you heard it here first! Ghosters!

Shawn Tsao [00:09:18] I don't really have to much be for them like they they executed very well and like I would say, like they have a really good marketing team and they got bailed out by Obetz recently. So good, good on them. But so we built out Caviar and go back to why we call the Caviar. That's because when we were talking when I was trying to talk to other restaurants to do delivery, they were like, we don't want to do delivery. Like it's a bad it's a bad name. They're like only shitty Chinese or Thai food. Is that do delivery or pizza? You know, we don't want to be in that category of low tier food. And so when we were thinking about it, we're like, OK, we need to be a delivery where you immediately understand that we have good quality food. And so when we were trying to sign a name, that's the direction that we were going towards and we were thinking about high quality food. Jason was like, what about caviar? Was the first person to say that, yeah, the oil was available, take carry it. So we're like, OK, screw it, we'll just buy it and then we'll see if I have another name, then we'll change it. But nobody can think of anything better. So we just kept with it because like the next day I need to go out and start doing sales. When we started caviar, we had one restaurant, a coffee shop and one burrito. Like that's it. They didn't give us anything else. Like we sold one burrito that's we a burrito delivery service at the time and then, like, it picked up. So we went for one burrito. We expanded the whole menu and then we were able to find other restaurants and and people like, oh, shoot. Like I can get my favorite sandwich or my favorite burrito now. And you can track it just like Uber and Lyft. And so we just slowly grew from there. 

Jed Tabernero [00:10:57] Yeah, it's quite a crazy, crazy type of growth because when I was I remember when reading news first about caviare in the beginning, they're like, yeah, most of our relationships were built within the first six months. What did you do to convince the people and say, hey, listen, if you sign up for a food delivery platform, it's going to be classy. How did you sell them on that? 

Shawn Tsao [00:11:19] I can really sell them on the classy part, but the word is classy. But like, I didn't know, I didn't want to tackle that. What I did instead was tackled. We're going to make money for you. It's as simple as that, you don't need to change your number of employees, but your revenue will go up because we're giving you more demand. And in the beginning, it is extremely difficult to talk to these owners because they didn't want to. The people we were talking to are like popular restaurants, like is a popular restaurant with like lines that have like it's like our two hour long lines. Sometimes we were I was talking the next Krispy Taco's, who's like extremely Piper's little star, extremely popular. But then the thing with like these the some of these early restaurants were that they had owners who were entrepreneurs as well. And so when we were able to get an in-person meeting, which was extremely difficult at the time, we told them, like, hey, like we can build more revenue for your restaurant, which will allow you to expand, which will allow you to do more. And at the same time, we're taking care of all the operations, all the customer service where we're like will handhold you the entire way through. And so they were they were like, OK, we'll try it out. We'll do like maybe a couple of weeks, maybe a month. If it doesn't work out, we'll just, you know, we'll just leave it. We we didn't do any contracts with any of the restaurants. We just said, like, we'll just take like 10 percent or something and no commitments. And after two or three weeks and one month, like every single restaurant, they're like, oh, this is great, but we're going to we're going to keep going. And so once we had like a bigger names, like sandwiches, for example, like I would just namedrop every single day, like I would need to buy every every time I want a restaurant or sales pitch or call or whatever, like, oh, well, we have X places already on their platform. We're making he's making 20, 30 percent more revenue than he did before. Like, I would love for you to be on here as well. And that's essentially the pitch ahead every single time. And restaurant owners were like, OK, is it easy to set up? Like, can we just try it out for a week? And I guess we can just be super quick. You can try it out. And once once they started, they're like, OK, this is really simple. We're making money, and that's that's all it took. 

Adrian Grobelny [00:13:42] You were really close on the sales side. You were working directly with these restaurants, trying to get them on board, have them do like a trial period, no obligations. So what kind of feedback were you getting from the restaurants initially? And what were the really vital changes or adjustments you made to the platform to really get at that crazy growth that you guys had in your first six 

Shawn Tsao [00:14:02] months for them? They wanted their operations to not change at all. And so they wanted us to integrate to the process. But we couldn't you know, we didn't have the manpower to do that yet. So we provided them with the iPad. Eventually, we built out a like a merchant side software so that they can easily manage their orders for caviare. And one of the things that they did also mention that they don't want to talk to any of our customers. They they're just focused on making the food. And so we make sure the customers didn't like reach out to restaurants. Instead, they reached out to us and we they asked the restaurant also do that like we represented them in a way. And so we made sure that we had, like, the best customer service possible so that the restaurants and the customers would trust us to take care of every single order like these, like these restaurant owners. They love and care for their product. So we needed to treat it the same as well. You know, when I was trying to sign some of these restaurants, I would bring the thermal bags with me to just say, OK, I'm going to put your food right now into my bag for 20 minutes. I'm going to try it and see how it comes out. And like, they would eat. I'm like, OK, it's still like pretty good quality. So it'll it'll still work. Well, in transport. I'm like, yeah. So you actually 

Jed Tabernero [00:15:17] you actually sat there for 20 minutes just like, listen, I'm going to put this shit in a bag and we're going to check this out. 

Shawn Tsao [00:15:23] Minutes just going to hang out. 

Jed Tabernero [00:15:25] OK, OK, so 

Adrian Grobelny [00:15:26] your sales pitch was twenty minutes 

Shikher Bhandary [00:15:28] long and you're probably going to good restaurant. So it's a way you 

Jed Tabernero [00:15:32] let me put this shit in the bag and. 

Shawn Tsao [00:15:36] Yeah, like it's actually like how I found myself. It's like if I had a restaurant like they'll feed me. So I guess that's staff. 

Shikher Bhandary [00:15:47] That's a good life though. 

Jed Tabernero [00:15:49] Yeah, exactly. So did any restaurant charge you for the meal during a sales call? 

Shawn Tsao [00:15:55] No, no, it's oh it was always free. And and one of the things that we really wanted was that we want to take a photo of every single item. We believe that you're more likely to order more or be or more likely to order something if we had a photo of it. And so after after we signed each restaurant, we would take a photo of every single dish that they had, the restaurant owners, they would provide all that food for free. And, you know, once we're done with the photo shoot, I would take all the help. And that was my meal for the week. 

Jed Tabernero [00:16:27] Yeah. No, know that is a good idea. Remember that time, that period where we had, like, ordering apps where they didn't have pictures and shit. So as I was like, I'm not going to do this yet, let me just drive to McDonald's. I can't see what this flirty looks like, you know what I mean? 

Shawn Tsao [00:16:42] Yeah. I mean, like most apps today still don't have photos because, like, logistically, it's like a little bit difficult for us. We we felt that in order to have like a complete product, we needed to have all the photos. 

Shikher Bhandary [00:16:55] This whole thing must have been like, you know, setting up, I guess you mentioned, OK, I'm going to give them iPads. I'm going to you guys, we're building the software behind it. So there was a lot of probably money that was going into this right to create a good experience for Top End kind of niche food delivery service. So how was that whole process? Was it just you guys putting your the money you had saved and stuff? 

Shawn Tsao [00:17:21] Let me tell you about like our early fundraising process. So when we were closing down my shop, may I put our last ten dollars onto a whiteboard and we're like, this is what we have. And so, Jason, being the CEO of my you know, you go get money, man. And Richard, like, put some of that. I put in more money into our bank account to keep us going. But, you know, it was really our earlier angel investors that, like, kept us afloat, like our first investor. His name is Paul Buchheit. He created Gmail and he was an advisor to Y Combinator at the time. And I just remember, like going into a meeting, we had already got rejected many times. And but we were pitching him the idea. We had like one frickin burrito on there. And he said, I love it. Wow, this is great. Goes this guy gets a check. Fifty thousand dollars and they think, God, 

Shikher Bhandary [00:18:15] wow, that's great. 

Shawn Tsao [00:18:16] Before this, like Jason had talked to the the guy who created Yahoo! Mail, Jeff Ralston, who is currently the president of Y Combinator, and he told us it was a really stupid idea and like Waita dotcom is going to destroy us, et cetera, et cetera, et cetera. It was like totally like. It's like. Hearing that from like someone like him and then we also had a meeting with Justin Kohn and he's like like is a really funny meeting too, because, like, he had a company started then called Zech where it's like it's kind of like TaskRabbit, but you can pay you pay fifteen or eighteen dollars an hour to get someone to do anything for you. Right. Which is like kind of similar to persuasiveness like he could use his own people to get food delivered. And I remember at that meeting too, he was like, yeah, like I don't think is a good idea. You know, I can use something else. Like, I don't we had so many rejections, like we have so many people saying, oh, this is a niche product of doing like better food delivery. You know, it's like now I understand, like, most products start as a niche and then you go out from there. And so it was great that we had some incredibly forward thinking angel investors early on, even though we didn't have the best numbers, they still invested in us. And so, yeah, that that kept us going for for a while. 

Shikher Bhandary [00:19:45] Well, do you sometimes think back and think, oh, OK, I used to email every day, so. Yeah, take that Yahoo that. 

Shawn Tsao [00:19:56] I mean, I mean Gmail is superior but you know, whatever. Yeah. Yeah. 

Shikher Bhandary [00:20:00] We can hear it. We can hear it. 

Shawn Tsao [00:20:04] But it's I think in a startup's life, like your earlier angel investors are like your biggest promoters and they really when they give that check to you, like you, they give you faith in yourself and energy to like, you know, when we go back to the office after I'm assigned, like I'm to 20 more restaurants I'm so mad about, I'm going to make him proud, you know, and like I remember, like last year public, I tweeted that, like, his like two favorite investments were food delivery investments, which was us and that and and he was super happy when my daughter acquired caviar, said, let's go 

Jed Tabernero [00:20:39] for the ten million. Happy here, too. I mean, you know, talking about food delivery here for a sec. And I just want like a little bit of a picture of what the food delivery industry was when caviar was kind of starting. Right. So you had to use cases already. I think GrubHub was was found in like two thousand eight or something. I think post financial crisis. There were others on the come up as well for food delivery. How was it during that time for you guys to think, OK, there's a lot of opportunity still here and for us to be a niche in this type of industry, they didn't seem crowded, I guess. 

Shawn Tsao [00:21:20] It was definitely not crowded because the lack of use in within our circle, if I was in New York, everybody seemed less like it was like like, know you're busy or something. Like you use food delivery, seemless. It's just natural. And I didn't understand why that wasn't the case in San Francisco. And so I was like, OK, well, like a seamless and GrubHub, who has been there for a while, doesn't have like any presence in San Francisco. They must be doing something wrong because there are people that use them every single day constantly. So why isn't that happening here in San Francisco? And I just think that there's like there was just this idea where the restaurant owners, they're like, oh, like there's food delivery is bad. I don't want to deal with my own logistics. It's it's a waste of my time or even people who order it was like, well, there's no good options. You know, why would I want to do food delivery when it's usually just bad options? And so we just, you know, in New York, like using said because like, a lot of really good restaurants are actually on it, but it's seamless. Could have dominated or to have could have dominated this market. But they didn't realize that they can get all these restaurants in the United States onto the platform by just providing the logistics. So we just provided logistics for these amazing restaurants. And and that's why now, like Doritos is the number one food delivery service in the US, like how does that happen? You know, like GrubHub should have dominated, but they didn't at the time. When we're building it, we just thought it was obvious that I thought there was already services out there when I was trying to get an egg sandwich. Like, it's like there's got to be a service that that does it say like it's just it's just so obvious to me. But there wasn't. So it's like, well, why not build the obvious then? 

Shikher Bhandary [00:23:15] It's so interesting. Like when I was growing up in India, we used to get food delivered, like most of the not all the time. But I'd say once a week, you know, that I'm talking about the 90s. 

Shawn Tsao [00:23:28] Yeah. You go to Asia and like I remember going in, I was in Korea and I was we were trying to order Korean fried chicken middle of the night. It took five minutes to get there. And they give you, like, real utensils and stuff to eat it. And then after you done, you just leave the utensils outside the door and they pick it up like an hour later. It's like I was like, wow, that's fucking amazing. But like, like all the logistics of like, food delivery was very, you know, like a parent and all these other countries except for the United States. So we did a lot of research going into this and we had no idea why it was not revealing where we lived. 

Shikher Bhandary [00:24:10] Was there anything that was when you guys started unfolding things you realized, OK, maybe this is why actually building something like this takes a lot of sophistication. Was that something that you realized that, OK, that's why someone's not gotten into this? 

Shawn Tsao [00:24:24] I don't know. For me, it wasn't, like, sophisticated. I just thought, like, it just took a lot of time to build an operation like that. It took time for engineers to build, you know, like a live tracking, to send orders from a customer to us to the courier to the restaurant. So what we built was a three sided market requires customers. And so it did take time to build that out. And you have to build out the demand, plus the buyer side, plus the logistics side. Thinking about big picture, it does look difficult. But then for us, we're like, well, if we just take it one step at a time, it'll just get built. I always thought it was just possible if you just put the time into it. And so that's what we did. And voila. 

Shikher Bhandary [00:25:09] And you mentioned, OK, you got the fifty thousand dollars, which is, you know, big amounts still. You guys start building this, you guys see traction. One burrito becomes too burrito's becomes the whole menu becomes all the Mexican restaurants in San Francisco. Was there a specific moment that you look back thinking, damn, that was probably it, that gave us the boost that that was needed back then? 

Shawn Tsao [00:25:31] I got to tell you about this one customer that really inspired me to continue doing caviar, because there are times like after we got the fifty thousand, like we didn't get more checks after that. It was like a drought for a while. So we had signed place sandwich, which meant it took me months to get back out, like literally stocked like for a month on Twitter with for friend to tweet that he was in Santa Rosa. Like by the off chance. I was looking at his tweets and I was like, I got a zip code. I got Jason other code on the table up with me to Santa Rosa. And we pushed him on the spot while he was leaving his store in Santa Rosa. We we we got we got like this thing. And so we sat him down, talked to him, and he's like, I'm fucking convinced, let's do this. And this one customer, he signed on to caviare because of X place every single day. He would have an egg sandwich and a Coke delivered to his place in outer Richmond every single day like I would. I'm looking at orders, like all the time. I'm like, it's Zachery anchor again every time. Like, I pretty much have, like a career ready to go eleven o'clock at Ike's because I know that orders coming in, like I just want him to get his hands as quickly as possible because he was like the most loyal customer every single day. And I was like, OK, we got to keep this thing alive so that we can feed this man now like it was. So it's it's motivating when you see customers or like just loyal customers is using our product every single day like that drives you. You know, it's like that is my purpose to feed this thing. We didn't want to be short careers. And so, like, if I knew that, I'm like, oh, should we have a sudden surge in demand? I'm just going to go out and go go through some deliveries to make sure that our customers are getting their food on time. And it's funny because, like sometimes like James and I were doing deliveries, we're also doing customer service at the same time. And like, I'm double checking operations to make sure careers are going into the right place. And the restaurants are calling me at the same time. Yeah, I'm pretty sure, Jason, I like going to almost accidents like five, seven times. Like where? I'm pretty sure I almost like it. 

Shikher Bhandary [00:27:36] What was it like for you guys when these new companies are coming up and the valuations just go crazy? I don't know if you were still within KBR during that phase where all the Softbank money was coming in. Was it something that you guys looked around and were like, oh, my God, what is this going to be a significant threat to our business? No. 

Shawn Tsao [00:27:58] Yeah, absolutely. I mean, like when we started the whole thing, we were like, if Uber gets into a delivery, like, we might be screwed, like a real screwed. And so we need to go fast enough where like we just build a loyal customer base. Even if they get into the game, which they did, we will not lose our customers. And then when we were raising a series A, like all of our competitors raised like fat rounds really quickly, like one of our competitors raised a fifty million dollar series in one week and as a whole. And I thought is like twenty million. And like we, I mean like look like we raised thirty million at the same time, like in that one or two month that we raised a series, a competitor's finish this series. OK, is this is an arms race right now. Like holy cow, like every VC wanted to get into food delivery. It was crazy. And so but then like a month later I came back and we want to buy. 

Jed Tabernero [00:28:56] OK, so two years after starting it, you know, it's making. Headlines, there's talks of the acquisition coming up from Square and all this stuff, it's so weird for me to think like knowing what Square was as a business that they wanted to get into this space. So I wanted to ask you, like, kind of what was the attitude towards that? Was that an acquisition play where they wanted to grab the restaurants that are already signed up for the service caviare, where they could easily provide them away into their POS system? 

Shawn Tsao [00:29:26] So, yeah, I mean, yes, we were able to cross-sell with our restaurants, Foursquare, but when Square was looking to acquire us is because they had another protocol, square order at the time. Every square system can now provide a mobile app ordering system know. Great idea, but execution was not really there. And so they were looking at other options to acquire something that can take over a square order. So that was stored at other people. And so initially, like, they came up to us and said, hey, we would love to partner with you guys. We're building square order, which is just takeout, but we would love to have delivery. Would you be able to be the delivery arm for us? And so, like, yeah, let's let's talk, you know, and after like. A couple of weeks of talking about partnership, how we could integrate, et cetera, et cetera, they came and they're like, OK, well, we have an offer for you. And so, you know, we we talked to Gokul, who is head of product at the time, and Saphire, who was the CFO at the time. Now the CEO is next door. And there were saying, hey, look, you know, we have like 20, 30 engineers, like a top engineers ready to go to make this grow. And that was actually one of the problems that we had, was that because all of our competitors had raised that series like us, we were in arms race to hire engineers. But at the time, like engineers, salaries were like half a million dollars, you know, and as you might know, like the recruiting cycle for an engineer, it's like really long. And we felt like we were losing to our competition because of the lack of engineering power that we needed. I mean, like we did have some incredible engineers. We had like six guys like versus like Postmus already had like 40 people. You know, our six guys were like doing the same work as 40 people. It's like we have some incredible engineers. But the thing is, we were still too slow. Right. We needed we didn't have an Android app. It was crazy outside, we think we needed to build out all these other features and we need to fix all these bugs and we need to do this and that. And so, like when we were talking like a man, like, yeah, we we can take the money now and they'll like, give us the engineer power, like the next day. So, you know, after talking to Jack Dorsey and Sarah and all that, and they convinced us, like how they can take us, take us to the next level, we're like, OK, like let's let's do this like, well, hand the keys to the company to Jack and so that we can make this product the way that we imagined it. And I mean, they held on their promise like next next day, like 20 years walk into a door. I'm like, oh, shit. Like we don't have it. Yeah. Interesting, interesting process. 

Shikher Bhandary [00:32:23] So some of the times with big companies, at least though, acquisitions don't really work out. But was that something that when you guys walked into the room and we were like, OK, this could happen, I can see square across all small businesses around the country and then KBR seems like a seamless fit with Square. Was that something that you guys were thinking as well as obviously the engineering problems that comes with them? 

Shawn Tsao [00:32:48] Yeah, no, we were definitely thinking about that. OK, I mean, I would say that Gokul from scratch did a good job of kind of painted a picture for us of how we would integrate be part of the square ecosystem. And for us, like, OK, yeah. Like it's sounds about right. You know, we can we can do this and like anyday they knew that, like we what we built was really good and but we they needed the business side of everything, our customer service, our operations or logistics. Like that's not something that you can build overnight. It takes some time. And at the same time, like when when we said M&A to our series, any investor Tiger Global, they're like, oh, OK, OK. All right. They already had. They already had. They already had a board seat on Square. And so for them they loved it because they already love Square. So they're like, OK, great. But within our partner there is like I'm I go shopping around. And so he talked to every dog together, like we had a car with, like, end up like not working. I think he tried contact Amazon as well. And in a day like we still stuck with Square, which which I thought was interesting, like something I had never experience in my life, obviously. Like I didn't know what the hell like an acquisition was like entire time. We were just thinking, like, go, go big or go home, like we're going to IPO and all this stuff. Like we never even thought about acquisition. So when it happened, it was just like completely new and out of left field for us. When we talked to another investor who I must say it was like a really essential part of our growth because they had an office in New York. They helped us set up and everything, but told them we had an offer from Square for thirty minutes like they they cost us about saying this is a piece of shit company, don't sell yourself to them, blah, blah, blah, and all that. It was instinct like literally cussed out for like thirty minutes. Yeah. 

Jed Tabernero [00:34:47] Did it make you love it more or did it make you hate it. 

Shawn Tsao [00:34:50] It was bad enough where like we may not have been able to have the acquisition if that investor blocked it to it. Was it, I mean like we could have forced their hand but then we don't want to like burn any bridges. So like I believe like the square team, including Jack, like had to talk to the investor and be like, you'll be fine. Yeah. Yeah. Interesting like that. I mean, that happens to other startups like where they are looking for a merger and acquisition, but then an investor who has some control of your company can block it. And so that's something like a lot of founders to understand, is that like you need to manage your capital correctly so that you have ultimate say at the end of it? We were very lucky in our series A that we were able to negotiate no board seat. So we had our founder founding group had 100 percent control of everything, including acquisition. 

Adrian Grobelny [00:35:51] And on acquisitions, I wanted to transition into Woombye and how you started that whole venture. What was the reason for transitioning into that? Did you feel like it was the appropriate next step to really go to the next level, to go on to the next project with all your success at Caviare for I. 

Shawn Tsao [00:36:11] I didn't really think too hard about it. I just kind of stumbled into it. What happened was that near the end of our time at Square, Jason was telling me about how the guys are looking to franchise. And when I was out in New York expanding Mirjami or KBR, I hello guys. Like every day. And so he knew I loved it. And so when you got that, got to get that sauce. Yeah. So good. And so and you know, out at square, I was essentially like a middle manager, so I wasn't doing much and looking to do like another project. And when Jason say, hey, you want to like once we leave square, do you want to own a franchise store and make sure we're not? I loved the guys. And so, you know, we wanted to build an LLC, so that's separate from all of our other assets and I called it my hospitality as Japanese, meaning delicious. So we only built that so that we can have a Halaal guys up in Seattle. The reason why we did Seattle was because the guy who told Jason about the four guys owned the San Francisco writes to Hello guys. And so but we but Jason has always wanted to be in Seattle and also like we just happened to have a general manager who lived in Seattle that was looking to do this with us. And so we flew out to New York, did a whole interview with Mike, the guys founders and everything. And they're like, OK, great, we're going to give you the rights to Seattle. And so after after I had left square, my golden handcuffs were off and everything I left and did this whole like cooking chicken and rice thing, like I flew out to New York for training and they literally taught me how to make halal guys. I was out on their one of their stores, like making a lot of guys like making chicken and rice bladders and whatnot. It was funny, really funny and fun experience. Yeah. 

Adrian Grobelny [00:38:14] The Google guys was like Gemini's go to late night. Like after going out to the bars, we needed some like we need some fuel to keep going. 

Shawn Tsao [00:38:24] Yeah. With the help guys like they were really good at making sure things came like fresh and like they really taught us how to keep everything clean and making sure that the processes were like after you go through the whole process, you appreciate it more because of like all the little things that went into building, just like little platter. I've heard of horror stories of other fast casual restaurants where it's like the employees wouldn't like to eat at the restaurant because they knew like it was like a piece of shit. It wasn't fresh or it's not really good for you or something, but hello guys. Different. It was like everything's fresh, everything was clean, everything was look that on a very fine level. And so that's why I still love the guys and and in and so we built out the store, learned all about restaurants, which is funny because when I signed all these restaurants I caviar, the owners used to tell me, don't start a restaurant. It's a ton of work and it really has a ton of work. Yeah. To the restaurants. 

Adrian Grobelny [00:39:28] Like one aspect of the American dream is like having a restaurant or having a bar and people get into the restaurant business not always because it's the most lucrative, but because it's just it's like an emotional thing. They're attached to food. They're passionate about it. It's it's like a dream to just have your own restaurant, have fine dining, have people, have your fans, your customers that are loyal and go and have food critics, try your food and say good things about it. It's it's not an easy business to get into and and be profitable, grow and consistent. We see food, food, restaurants closing all the time like you went to Berkeley. So you know how often there's restaurants churning in there. There's every year there's a new restaurant and a in a handful of restaurants going out of business or closing. 

Shawn Tsao [00:40:14] Oh, yes. 

Adrian Grobelny [00:40:15] It's so competitive and difficult to stay above the water. 

Shawn Tsao [00:40:20] Yeah, no, it's like I didn't realize, like, how many little things go into a restaurant. And it's helped me understand that there's a lot of things that can be disrupted in the restaurant industry with tech. And so on the investing side, which is so, Jason, that we started chasing me and the other co-founders, we sort of blew the capital to invest in early stage companies. And so when I see tech companies trying to tackle certain areas of a restaurant, like I have a higher understanding of what they're trying to do. And when I see it, I'm like, OK, I'm going to put money in this. Like, it makes a lot of sense. And it's actually there's a lot of there's a lot of companies that can get into the food industry by way of restaurants because there are a lot of problems, a lot of old age problems that happen at a restaurant. And and a lot of things can be a hell of a lot more efficient if someone would build software for every little thing. So that is something I do look for when I am out looking for startups in Boston. But yeah, anyways, back to my so we built all our guys and then somebody came to us saying, like, do you want to buy a bunch on which is a Korean fried chicken place. Yeah. I also go there a lot when I was in New York. And so a San Jose location was available for purchase and we decided to purchase that location. And a bunch of chicken is fucking fantastic. Once people started learning that I was in the restaurant side of things, we just got more and more deals to to invest in restaurants. And so we started to understand how investing in restaurants work when numbers look good, what it's like, what's a good price for real estate, et cetera, et cetera. And so we brought in a couple of people to help with that side. So a guy named Ben Park and David Chang, like they they help with a lot of the financial side, the business financial side of our restaurant endeavors. And yeah, and it's still going and it's it was really difficult during this time, like doing covid just because, like, you know, we had no idea, like, how long this virus is going to keep going, how long it to shut our doors. But luckily, like, we had really good operators, we had really smart people working at our restaurants figuring out how to get around this. And luckily, like all of our restaurants are alive and well even through all this because of the people that we have. And but yeah, like I can sympathize with a lot of restaurant owners now, like small business owners even just going through this pandemic. And it's tough. It's it's really tough. And so there's like I just like that every day, like a lot of these restaurant owners were talking to each other. It's like when is this stimulus still happening for my government? Like, we need it to stay alive. And the whole process of getting like a government loan, like the PGP was like a complete mess. Like banks had no idea what to do. We had no idea to do like there were people pretending to be small businesses so they can get free loans from the government like it's insane. 

Adrian Grobelny [00:43:44] Yeah, I was working at a brewery for a little bit and my part time was in between jobs and they were like a small business, basically self-funded. And there weren't they weren't a big brewery. They're pretty small and they were delayed with their PPY because it just got filled up so fast. And then they put a priority to the larger businesses because higher transaction fees, less volumes of transactions that would be done better for the banks. 

Shawn Tsao [00:44:14] So, yeah, we have a big mess. San Francisco restaurants like they found out, like Jared Kushner, is getting like millions of dollars for his real estate company, like from the people feel like, man, they were pissed. So pissed, like, I believe the restaurants here in San Francisco because of the lack of communication from the city. And when they sued the city for like billions of dollars. And so not until then, they only did that to get their attention. But then not until then did San Francisco have like a better plan of reopening or how to keep businesses alive during a pandemic? 

Adrian Grobelny [00:44:47] No, definitely a lot going on. I wanted to go back into beluga capital. I hope I'm pronouncing that right. Yep. And with all of the knowledge that you've gained from starting your own franchise, what are you looking for? Is it exclusively just food startups that are related or innovating the food landscape in some way? Are you just looking at tech that you think is going to really disrupt industries? What's kind of your approach? 

Shawn Tsao [00:45:14] So initially that was my approach to look at stuff that I have experience in to see, like, OK, what products are out there? Like, what do I think will disrupt the industry? But recently I shifted away from that, that I didn't. I actually think that it's a bad strategy to go and look for features or products that you think would be awesome to have. But it's better to invest in people. So what I've done recently is like, I kind of don't care what you're building, like, if it's like, you know, really smart, really cool, that's great. But I'm really focused on nowadays is is the founders themselves. So it's kind of like if I were to just invest in a food daily deals company, like right now, I'd, I like that's dumb. But like if I was looking at the people that was running, I'm like, OK, like I was new and I would have worked out. And that's actually how I see like a lot of the investments we make at Beluga is it's not really about the product, but about the founders driving that product. And so and that is actually like a key component with a lot of VCs as and that's why they'll they'll look into like what kind of education did you have? What kind of background did you have? Is your background relevant to the problem that you're solving? Like how do you tackle, like, difficult problem? Can you deal with, like, mass mass amount of stress? Because end of the day, like these companies, these ideas can be built by anybody. But like, if you want to be a billion dollar company, it's not about the product, it's about the person driving that product. So, like, right now, like I know like some of my former employees, I can hear if they like I know who are top notch, smart as hell, people like if they start a company and I would give them a check instantly. I don't care what you really I'll give you a check. 

Shikher Bhandary [00:47:12] And this whole journey, you know, the personalities behind the ideas are as important as the idea itself or even more so. Now, looking back, you you guys have had a winning formula for such a long time. You and your co-founders have been together for so many ventures. It's kind of crazy. High stress, high intensive work. What has been the magic drink or food that you guys eat so that you guys can live together being friends as well as working on these crazy products? Because from munch on me to caviar to an old beluga and also ohmy, to a certain degree, you guys are still intact. Right. So what's the key over there 

Shawn Tsao [00:47:53] with my co-founders? I we were very mission driven and we're very persistent about getting to that goal, that mission, because we have plenty of fights, we have plenty of disagreements. And like some like pretty serious like a times where it's like, oh, sure. Like, can we are we going to keep this company going? Because like Matt, we were just like at each other like next year. But at the end of the day, it's like our mission is to deliver the best food possible that you could get. As I sometimes like a lot of companies, like the people in it, have different goals, different missions. It means that your company is going in different directions. But at an early stage, it needs to be one direction. Right. Like the band went one direction, but we had a very simple mission. We're going to build an amazing food delivery service that makes a lot of revenue. It's it's it's very simple right now. It's like, yeah, you've got to come together for something and that something has to be the mission of the company. 

Shikher Bhandary [00:49:05] Hey, thanks so much for listening to our show this week. You could subscribe to us and if you're feeling generous, well, you could even leave us a review. Trust me, it goes a long, long way. You could also follow @THC_POD on Twitter and LinkedIn. This is things have changed.