2014-03-13

Co.Labs

MakeSpace: When Venture Capitalists Go Startup

MakeSpace wants to bring personal storage into the 21st century. How the founders' VC experience has saved them from common startup pitfalls.



MakeSpace is like Dropbox for your physical stuff. The online self-storage service landed funding easily thanks to its cofounders’ experience working for venture capital firms. Their backgrounds also gave them a front-row seat to many startup failures, which they needed to grow its staff fourfold. The service lets you manage your closet from the cloud—but it wouldn't have survived this long without startup lessons from the VC world.

For the uninitiated, MakeSpace is a service that will drop a container off at your door for you to fill and then pick it up to store for a monthly fee. Want something from your container? MakeSpace digitally catalogs your stuff for you to peruse online, which they can pluck out at your behest and deliver to your door. With the newly released MakeSpace Air service, the company can receive your packages and ship your stored stuff anywhere in the world.

Sam Rosen thought up MakeSpace when he flew back to New York from Colombia to help a former girlfriend. Hurricane Sandy had devastated her apartment, so they were packing her life into a storage container. The rain-bedraggled pair were about to lock up the unit when they heard that a bad Nor’Easter storm was coming. Somewhere in that pile of things were a pair of her snowboots.

"We looked into this thing that we packed in the last few hours and were like...oh no," says Rosen.

Here's how it works: Sign up for their service and you’ll get a crate delivered to your door for free. Pack the crate with personal items and one of their Uploaders will pick it up to store for a monthly fee. Everything in the crate you packed is cataloged online. For a nominal fee, customers can get a specific item plucked from the crate and delivered to their door.

The MakeSpace concept resonated with investors, but getting an idea funded is only the first step. The collision of abstract concept with logistical reality often wrecks startups beyond recovery.

Lessons From The Inside Track

Rosen was in Colombia to get his mind off of the failure of his previous startup, Speakergram. The last thing he wanted to do was launch another startup. But the idea for MakeSpace wouldn’t leave his brain. When Rosen ran into his mentor Mark Suster in November 2012, the esteemed entrepreneur immediately told Rosen he’d back it. Rosen started as an entrepreneur in residence at Upfront Ventures in early 2013, where he finally got to see things from the VC’s perspective—as an outsider looking in.

While Rosen had gotten mentoring from Dave McClure and the accelerator 500 Startups for Speakergram, being inside Upfront exposed him to the day-to-day partner meetings and the criteria used to vote on startups. The biggest thing that kills startups is lack of momentum, Rosen found. He likens it to an infamous YouTube video of a guy who singlehandedly starts a dance party at a music festival: Dance alone and you're crazy, but get just two other people on board and the rest will flock. A friend had recommended Adam LeVasseur to become the second MakeSpace member, but Rahul Gandhi was the crucial third man who got the MakeSpace party going.

Gandhi had over three years of experience at High Peaks Venture Partners before he left to join Rosen at MakeSpace last July. During those years, Gandhi had quietly observed startups, waiting to see them get their finances and products in order before stepping out of the shadows to tell his firm which were worth funding. Gandhi had seen thousands of deals, but nothing sparked his fancy despite an increasing desire to jump in the startup game. He’d had known Rosen for a few years, but as MakeSpace began to take shape in Spring 2013, Gandhi fell in love with the idea.

The three cofounders of MakeSpace: Sam Rosen, Rahul Gandhi, and Adam LeVasseur

More to the point, Gandhi was convinced that he, Rosen, and LeVasseur would get along very well. Thanks to their experience inside and observing startups, Gandhi and Rosen believed religiously in the importance of team compatability over perfect qualifications.

"What really matters is the personality fit, not the exact skillset," says Rosen. "It’s a big risk. Don’t underestimate how important the personal dynamic is, especially at the beginning."

Rosen’s startup Speakergram was plagued by cofounder disputes, which partly led to its downfall. Now Rosen is incredibly cautious about new hires. In order to preserve an A+ team, he’ll forgo hiring if the right candidate hasn’t shown up.

This meant that the cofounders Rosen, Gandhi, and LeVasseur were doing every job, even driving to customers and loading their crates from the alpha launch in June 2013 until they hired a full-time Uploader team four weeks ago. Unlike other startups, bootstrapping MakeSpace’s services meant Rosen, Gandhi, and LeVasseur’s boots were on the ground...and all over New York City.

The Logistics Game

Personal storage hasn’t changed in half a century. To shift toward computer cloud-style loading and delivery of personal things, MakeSpace needed to pave the way themselves. The trio launched MakeSpace alpha without even closing their fundraising round. With a storage container from Home Depot, plain green Uniqlo T-shirts, and any yellow taxi they could hail, the trio built MakeSpace one customer at a time.

"It was really scraping it till you make it. Looking back, it’s kind of embarrassing," says Rosen.

But that overwork didn’t ease Rosen’s rigid insistence that if MakeSpace hired someone, that person needed to be perfectly qualified in order to preserve the team’s quality. As the trio ditched taxis and Zipcars to invest in their own dedicated MakeSpace-branded vans, they seriously considered hiring a supremely qualified logistics expert. Gandhi pushed hard, but Rosen balked. The expert was too expensive, and did they really need another team member? No, it turns out—because without much personnel logistics training, Gandhi stepped up to master the startup’s operations.

"People told me ‘There is nothing above you when you launch a startup’ before I did this and I didn’t really understand until I sat in the seat and started driving the van," says Gandhi. "I have three degrees, I spent time in venture capital. And then I sat in that seat and said, Wow, this is what it takes to get a company off the ground."

Gandhi didn’t know how to run a fleet of vehicles. He looked at the logistics of companies he admired like FreshDirect, Amazon, DHL, and UPS. Like he learned in his venture capital days, he found advisors from other companies to chat up. But he pointedly ignored CEOs in favor of the men on the ground—anyone who drove around and dealt with the delays and frustrations of getting things through city streets.

"I’m a big believer in flipping my own burgers before anyone else," says Gandhi. Far from the lush confines of the VC office, getting their hands dirty unwittingly gave the cofounding trio serious respect from the Uploaders they hired. Gandhi discovered that a lot of managers and CEOs never drove and didn’t understand the reality on the ground.

"Right when we started the Uploader interviews, I said, ‘Look—I was in your position, I know all the routes in NYC, all the parking situations, and how to deal with certain customer situations," says Gandhi, "'and we’ll give you the opportunity to really grow within the company.'"

The Personal Touch

Unlike other startups that sift through emailed customer complaints, the Uploaders are the point men, the eyes and ears who represent the service and give feedback on efficiency clogs in the MakeSpace system. But they get super excited about where the company is going, Gandhi says, because he listens to their feedback, diagnoses problems, and solves them in hours. The respect goes both ways.

That’s important when you’re dealing with people’s stuff—which almost always needs to be stored for one of the four D’s: death, disaster, downsizing, or divorce.

"We had a customer, a midlife woman, and the first thing she did was tell us that her spouse died," says Rosen. "Our customer service team is trained to deal with these situations. And honestly? They’re trained to give a shit. Maybe leave a handwritten note saying ‘Sorry for your loss,’ maybe bring coffee and chocolate. You think another storage company cares? You’re just a number to them."

The Future Of Storage

"We’re building a scalable company in a business that traditionally is not scalable," says Rosen. "We can scale because of the tech we built."

Part of that tech is the logistics MakeSpace developed to optimize routes, pickup schedules, and the online categorizing system. The other technology, so to speak, is the Uploader Playbook they developed, which Gandhi used to train the first four-person Uploader team in three weeks. Add a fleet manager and perhaps a marketing person and boom, that’s a basic team for expansion into another city. MakeSpace could be online in Boston in a matter of weeks.

MakeSpace hasn’t released solid expansion plans. With the hiring of full-time Uploaders, the team is up to 12 people, and Rosen's extreme hesitance to hire still keeps the team working at full capacity.

But they are rolling out new services. The newest, MakeSpace Air, will give users the ability to both ship an upload to MakeSpace or have MakeSpace ship previously stored items at below shipping rates. Upcoming ski trip? Instead of the hassle of having them delivered to your home and schlepping them to the slopes, MakeSpace will simply ship them to wherever you’re staying.

But the most surprising benefactors will be military men and women. Often, servicemen and -women hack traditional storage by buying or shipping things to friends who deposit them in storage units. MakeSpace can store and ship out the military person’s items at the click of a button.

"Everyone wants a GroupMe story, an Instagram story, to be bought for a billion dollars by Facebook. That’s not the reality for our startup," says Rosen. "It doesn’t faze us like that. If we are going to disrupt public storage, we’ll get there one customer at a time."

[Image: Flickr user D. Sharon Pruitt]


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