How Andrés Ornelas Vargas Closed a $2.2M Round for Verve Market (Andrés Ornelas Vargas / Verve Market - Ep 54)

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Andrés Ornelas Vargas: And I remember like this, this guy literally saying, Oh yeah, like I've seen this company before and like, you know, the CEO was Mexican. So we're going to pass. what I realized again, is like, he was not engaging with the he was kind of quickly sorting through his mental model and was like activating like preconceptions to make a yes, no decision

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Jason Yeh: Have you ever walked into a room excited to tell a story only to realize the person across from you? Thinks they've heard the story already. Before you even finished your story, they already know how they want to respond. Now consider this situation where every single fundraise meeting you book happens the same way. You walk in. After [00:01:00] pouring your heart and soul into a company. And the investor across from you already knows that they don't like the deal because it reminds them of something they saw in the past.

That's the wall. So many founders might face when raising capital for a company that might sound a little bit like something from the past. And breaking through that takes more than just knowing your market and metrics.

It takes mastering your story.

Today's guest Andres ornate last. Vargas knows that firsthand. He's the founder and CEO of a startup, making it effortless for people to manage their dietary restrictions and food choices. And there, I just went through over 150 investor conversations before finally landing a lead investor in closing is $2.2 million around. What changed? He figured out how to shift the narrative from the details of the past. To a vision of the future that investors could see and believe in. But if you really want to understand Andres. We've got to start long before Verve, before the fundraising [00:02:00] rounds, before the startups and the investors, there was a kid who never stopped questioning the rules. Something that stayed with him. Ever since.

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Andrés Ornelas Vargas: I mean I think it was an interesting kid because I like always did it really well in school Like that was something that like I kind of cared about myself, but I was super rebellious So I feel like a lot of like, kind of, a lot of my teachers didn't know what to do with me because I would do well in the classes, but then I'd be very rebellious and I would like question them and stuff like that.

And I think a lot of their rebelliousness was like, um, I always kind of struggled with authority. Like, I think like when, when someone would say, Oh, I am the authority because I'm the authority. Like, even when I was like four years old, I just, I don't know, like I kind of felt I had to respect people and stuff.

So, yeah, I was like very nerdy, but rebellious at the same time, which was a funny combination. Yeah.

Jason Yeh: And, uh, where'd you grow up?

Andrés Ornelas Vargas: I grew up in Mexico City. Yeah, Mexico City, Mexico.

Jason Yeh: Mexico City. And as you were growing up [00:03:00] with this rebellious streak, um, what were the sort of inspirations in your life in terms of Direction, especially, you know, going through high school and stuff. Did you see the writing on the wall in terms of you being an entrepreneur or is this a path that you weren't expecting?

Andrés Ornelas Vargas: Yeah, no, not at all. I, uh, it's funny. I think like with me, I just, uh, like I have like a very thinking brain, but then when I actually make like big life choices, I go a lot by like feelings, so um, I think like growing up, I really always liked biology, like that was something that I think is interesting, but I was like more passionate about like thinking and systems.

So biology allowed me to think about like how multiple things like really interconnected. So I like biology and then I'm a really, really big mixed martial arts guy. So honestly, like for a lot of like high school, like I would train because I thought it was super interesting and I would. Watch fights and all that kind of stuff.

And sometimes I wouldn't sleep during classes because, you know, like, you know, [00:04:00] like, I didn't have energy. But, no, it was an interesting thing because I never actually thought I had a direction and then, uh, At some point, like my brother, like find out there was like this program where you could like take classes like in the US over kind of over the summer.

And then I applied to that because my brother was applying to it. And then, you know, I took classes. Um, and then I thought it was awesome. And I really liked the American model of education where they didn't impose what you need to study. You could choose a major. But then you have, you know, a lot of time to explore other things.

And, um, that's when I said I wanted to kind of go to the U S and then when I go to the U S I started studying and then I figured out you could be an entrepreneur and you could be an investor and kind of, it all just started like happening. And I just did what I thought was interesting and I ended up in this situation, but yeah, it was definitely not planned.

Jason Yeh: Hmm. What, what were your, what were your parents into? Uh, what were their careers? Did they create a model for you to follow at all in this?

Andrés Ornelas Vargas: Uh, yeah, well, my father is actually, [00:05:00] I mean, he basically, I mean, he inherited it a business, but like the business. Was not doing very well when he inherited it. So, so like he actually had to do a lot of things, uh, with, so it's kind of like entrepreneurship in a way, but with a started, uh, business that was already started, but it was just not doing that well.

Um, and then he's like a chemical engineer and the business is like super technical. So I did grow up like being around like someone, you know, like leading, uh, a company, um, and like, that was interesting. And my mom. She's always been an awesome homemaker. But so I do have a little experience with my father kind of managing a.

But it's very different from like a venture backed startup.

Jason Yeh: So you got some exposure to the United States via some kind of study abroad program, I guess, growing up. Uh, I saw that you actually went to Yale. What did you, what did you study at Yale? And, you know, was it like, I'm going to study a specific thing to get to an outcome? Were you already on the path to being an entrepreneur [00:06:00] at

Andrés Ornelas Vargas: Yeah, no, and that's why it's like so funny. So first of all, like crazy story, but, uh, like the only reason why I ended up starting in the U S is like, I really loved, you know, like my experience and you know, like that, uh, like summer program. Um, but I actually thought I was going to be a doctor, like a medical doctor.

So. Med school is different so you can actually go to medical school like right after high school. So I got into like a really good medical school and I actually was going to go there and then it was actually kind of funny because like they made, they made you while you were in high school to, you had to like go to classes for like six months while you were still in high school um before med school.

So I went to kind of those classes like that took place in the evening and I remember the first class like. The doctor that was teaching said, medicine is not about innovation. It's about following procedure. Like if any of you, you know, like want to innovate or not follow procedure, I guess, like, this is not for you.

And I was like, all right, peace. I'm out.

Jason Yeh: this

Andrés Ornelas Vargas: And I literally, I literally just walked out, uh, uh, and then like just stopped attending the [00:07:00] program. And everyone was like, what, like, what are you doing? Um, and then, yeah, I decided to, you know, like, uh, I had applied, thankfully. And yeah, I decided to go to. When I was at Yale, I, um, I thought I was going to study biology and I was going to be pre med, um, but then, yeah, I learned a little bit more about like entrepreneurship and investing, got captivated by both like entrepreneurship and investing.

Um, but I always cared a lot about biology and medical stuff. So. It made sense to study biomedical engineering and take a lot of computer science classes as well. So I think by the second or third year, I did start to see like, Hey, I like startups. I might learn a little bit about software and stuff like that.

But, um, but it wasn't really planned. It kind of just happened.

Jason Yeh: Got it. Okay. So it seems like you started getting nudged in this direction, um, but there are a few stops along the way between Yale and Verve. Um, maybe you could give us a sort of summary on how you thought you got pushed to Verve because Verve is your first company technically, but it feels like you've had some exposure to, [00:08:00] you know, companies in general, early stage stuff.

Andrés Ornelas Vargas: Yeah, it's, it's, it's funny. I'm, uh, like my career is kind of weird in that sense that like I had a lot of like actually co founding experience, if you will, even though like the company wasn't like fully You know, started by me. Um, but yeah, I basically after, after college, so the story is funny too, but, um, I actually taught a startup.

I had a really like small medical device startup in college and, and I wanted to do that, like, you know, for, for a summer. And then my mom's like, This is not going to work. Like you should get a job. So I applied to all the jobs on like the Yale career page that didn't require a cover letter. So I just like apply to like all of them.

And then there was this thing is like called General Atlantic and I have no idea what General Atlantic was, but like they wanted to talk to me and I talked to them and then I found out that it was like one of the best like growth equity Like funds, uh, out there and ended up like taking an internship with them.

But it's funny, I didn't know who they were, but anyways, I [00:09:00] did an internship with them and there I got really exposed to the world of like growth equity and venture capital and like, you know, startups. And like, I really, really like investing. I think it's super cool, but there was just something I was like, no, I want to be building the companies.

Um, so I decided to basically join a company called Samargen that, that Was a hot startup that ended up not doing that well, but it was like a hot startup at that time. Um, it was like, I met them through General Atlantic and I thought it was super interesting. Um, like I want to join. And then they had like a lot of people, like there were McKinsey consultants, like that startup before.

So it felt like a good place to learn about entrepreneurship, but also get like kind of the, the top tier consulting skillset. So I went to that place. And then, you know, Samargen didn't work out the way many people expected, but for a while it was, it was doing really well. But I kind of realized it was just not going to go in the direction that people were thinking.

And like, I decided to leave as like, it was valued at like four billion or something. People were like, you're crazy. Like, what are you doing? It's like, ah, like, [00:10:00] I want to be a companies that are like well set up to succeed from the very beginning. So I went to a place called a production board founded by David Freeburg, who, who basically now is in the all in podcast.

So famous but, yeah, so I went there and Bailey at that point, David started like a venture foundry model. So. The, the point was that we're not just investing capital. we're looking, we're actually looking for people, CTO's that could have a lot of value in like the food and ag value chain, new co-found companies with them, and I eventually became the head of new ventures and, and basically my job.

was to start companies kind of like as a co-founder with like the CTO's um, and then lead the companies, basically scale them and be like the main business person, general manager, if you will. Um, and then like scale them and yeah, I helped scope several, uh, several of them are doing super well and I took them from zero to more than 50 employees and a lot of revenue and stuff.

So I have a lot of that early stage experience. it just I, it was not like, [00:11:00] it was mine fully.

it was like in partnership with the fund.

Jason Yeh: cool. And well, I'm sure you have a lot of opportunities to talk about what verb is. We can touch on that very quickly, but I really want to transition to talking about the story of Getting ready to raise capital for Verve, right? So, um, you have all this experience, you have some amazing logos between Yale and GA and, uh, the production board and, and starting companies and stuff like that, um, but this is going to be your first time doing it from scratch on your own. And so I wonder if we could set the stage. So just a quick description on what Verve is, but then tell me a little bit about. Starting Verve and whatever your expectations were for Verve. Did you know that you wanted to raise money right out the gates? Were you working on it first? So, tell us what it is, and then, and then that background.

Andrés Ornelas Vargas: Yeah. Let me actually tell you a founding story. I think it would be actually really helpful [00:12:00] to like, you know, talk about like the founding story here. Um, so about like 14 years ago, um, I got, like, a really, really bad, like, stomach infection while I was, like, traveling in rural Mexico. And then after I got that stomach infection, I developed as a consequence of that infection a condition called irritable bowel syndrome.

And what that means is that I can't eat about, like, 40 ingredients. And if I eat them, I feel, like, very, very sick for, like, two or three days. So, like, all of a sudden, like, my life went from, hey, you can eat whatever you want and whatever you like. To now you can eat a very limited set of things. Well, actually it's not that limited, but you have to pay a lot of attention to what you can eat.

Uh, so you don't eat the things that you actually can't. Um, and like that became one of the biggest problems in my life. Like it's actually quite complicated to navigate a diet where you can't eat about like 40 very common foods. Very common ingredients. So, you know, for a long time, like I, I've just been thinking like, Hey, there's a big problem in my life.

Like it affects me. Like, how do I solve it? so then, you [00:13:00] know, when I was kind of ready to transition and leave like that production word ecosystem, if you will, I started thinking about like, okay, what do I want to build?

And like, I keep coming back to you. Hey, this is a really big problem in my life. Managing my diet is really large. You know, I want to solve it, but I don't know how. Um, and then, um, when I left the production board, uh, I didn't have like a plan. It was just like I knew I wanted to start something, but I didn't know exactly what it was.

So sure enough, kind of like I got the idea.

I realized that, you know, there's 110 million people in America that like most follow a very strict diet. 19 million are starting to choose products based on specific. You know, ingredients and nutrition facts, and 70 percent of Gen C actually follows a diet. And so I realized, like, look, this is not a problem.

It's not only a problem I have and many people have. It's like where everyone is heading, right? Um, and that's when the idea kind of for Verve arose. And the idea is basically to, to make it effortless for anyone, regardless of whatever diet they're followed, [00:14:00] like plan, discover, and shop in like less than, less than five minutes.

So that's Verve. And then I had this idea, right? I I had this idea of what I wanted to do. Um, but then I actually did do a lot of work. So I don't know, Silicon Valley ecosystem, like a lot of people really over index and like the YC model of like, just start building and then like, you know, do things, I think there's merits to that model, but I also believe that it's a little bit overused.

So, um, you know, when you're building a bridge, like you just can't start putting clay together and trying to build a bridge, like you actually have to like, think about it and like plan and stuff. So I actually spent like a good amount of time, like probably, Four or five months, like analyzing the opportunity, thinking about it, doing research, then I started talking to like my now co founders.

So I think like by the time I was ready to raise like these, like pre seeded round, I'm not going to say I'm an expert, but I was like, yeah, I was like on the level of an expert of like, what are the different solutions out there? Like why don't they work? Why does it fail? Like that kind of stuff. So I had like [00:15:00] a pretty good knowledge.

I had no data. I had no traction, but like I was pretty. Yeah,

Jason Yeh: Awesome. And so, when you, when you first started having your conversations, you know, what were, What were some of the things that now looking back you're like, I just kind of made certain mistakes or if I were to do it again or the next time, like there are a bunch of things that came out of my approach that I would do differently.

Anything come to mind around that?

Andrés Ornelas Vargas: there's like, I mean, there's, there's tons of them, like, honestly, but I think one is just like, it's not really like a mistake, but I feel like every founder has to go through it when you're starting something, you know, for me, like it's obvious, like for me, like, It's obvious, not only as a founder, but like as a person that like lives the problem every day, like it's obvious that this solution doesn't exist.

And it's something that a lot of people want, like, to me, it's like, again, very, very obvious, but you know, like try explaining that [00:16:00] to like a guy or girl that is like super busy. Many of them are very jaded and like, you know, like you're trying to captivate their attention in a very small amount of time and not have their mind go into places of like, Oh, I've seen this before and I've seen this before and that didn't work.

So I think the thing that I didn't do well is I spent a lot of time on the data, I spent a lot of time, you know, understanding the market, understanding the technology, but I didn't spend enough time at the beginning and figuring out how can I succinctly, succinctly, you know, Communicate in a very punchy and attention grabbing way to investors that, you know, like might be predisposed to think about things in a certain way.

So I think that's the main thing. I wasn't, I didn't refine the message enough at the beginning.

Jason Yeh: So, you know, I kind of want to loop this back to something else you said, which is like, you actually worked in investing, you know, you

worked in equity. And I've seen this happen a few times from friends where like friends had jobs where the word [00:17:00] investing or bank, you know, was part of their role. So hedge fund investor, private equity investor, growth investor, investment banker, when they get to starting their first company and trying to raise capital from venture capitalists, they have like a distorted picture of what needs to be presented.

And is that part of you? Do you think part of kind of what was in your head at first around what influenced you to go numbers heavy or data heavy?

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Jason Yeh: I love what undress is pointing out here.

The difference between knowing your market inside and out versus communicating it in a way that cuts through the noise. Most founders think their depth of knowledge will carry them. But if the pitch doesn't grab attention, fast, investors will tune out. It's not enough to be right. You have to be heard. After the break under his shares, what he learned during his time as an investor and how that influenced how he pitched for his own fundraise.

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Andrés Ornelas Vargas: Well, like I'm going to say something funny, but I think in my case, part of the problem is that, I mean, the reason why You know, like I would, I would say like I was a different type of investor is that I'm actually very analytical. So when people like, pitched me, um, in the past, I would be very analytical. I wouldn't care if the founder was sounding very confident or not.

I was actually trying to understand their business and I was trying to breaking it down very analytically and I do mean that I was actually trying to do that, whereas I feel especially in early stage venture capital. You know, you have like so much inbound that I would say the average investor is not spending as much time actually trying to understand the business.

They use a lot of heuristics, like, you know, is the founder sounding confident? Or is the message actually put in a way that I understand? So I think for me, I would say my own [00:20:00] particular approach to venture capital or my own particular approach to things, uh, made it harder because I, I use like a theory of mine that everyone else was going to be like me and that turned out to be wrong.

And, you know, I'm not saying that's bad or good. It's just everyone, people have different approaches, but, uh, but yeah, I would say the average early stage investor probably focuses a little bit more on, on heuristics and is trying to understand what you do more quickly. Whereas probably, you know, a growth stage investor is more analytical and like looking at the metrics.

So it's a different type of pitch as well.

Jason Yeh: As you're going through this, um, you remember the numbers, you remember the numbers of, of like how many investors were on your target list, how many you ended up talking to roughly?

Andrés Ornelas Vargas: Yeah. I mean, I probably, I mean, it depends on how you define a conversation because, you know, once actually I realized, hey, I got my act together and I can, like, pitch well and stuff. It was like a relatively small amount, but the process of getting to that point probably took like 150, like 150 [00:21:00] conversations.

Um, so yeah, it took some time, but again, I would say the caveat is that like, Once I actually, I managed to tell the story well, like it was probably like 10 or 20 to then like actually, you know, close around. So 150, but then it went really fast after, after I got it.

Jason Yeh: Yeah. I mean, I think a lot of people, uh, sort of in hindsight will look back in their numbers and sometimes think to themselves, Oh, at about 130, I figured something out and then it was, and

then it was

Andrés Ornelas Vargas: exactly. Yeah.

Jason Yeh: has a version of that story. And it kind of always is. There's a large number and it might've been because you needed the reps in order to iterate on the story and figure that out.

It might've been because that's just how long it took you to find someone that thought about the world the same way

as you or et cetera. Um, you know, with 150 plus conversations, you bound to have some unsavory interactions. Were there any, [00:22:00] uh, But were there any stories in your mind of like, that really freaking sucked?

And

it was like,

Andrés Ornelas Vargas: Yeah. Yeah. I think it's one that I actually think we can use as a little bit of a teaching moment, but I mean, one of my main takeaways I would say from, from the fundraise is that you definitely need to refine and work on your messaging and your communication Again, I think for my perspective, we've always had a really good business and a really kind of good story, but we weren't telling it in like the way that, how like the high, at the beginning, like the way that had like the highest chances of like resonating with an investor that is very busy.

Like that, and that's, that's, that's what happened kind of in our case. And what I also learned again is that especially in the first meeting, I think a lot of founders, myself included, like tend to put a lot of detail forward. Whereas like, that's not what you should do. what you should do is, Kind of leave all the clues or the hints that are going to make [00:23:00] investors want to take the next meeting.

And once you actually understand those things, like they're pretty clear. And this is where I'll tell you like a funny story. Like a lot of them use heuristics. And there was one particular example of like this, this, this person that I got introduced to. And there's this like other, other company that like literally 15 years ago, like did something related in the nutrition space and the founder happened to be Mexican.

And I remember like this, this guy literally saying, Oh yeah, like I've seen this company before and like, you know, the CEO was Mexican. So we're going to pass. And I was literally what I realized again, is like, he was not engaging with the Like he was kind of quickly sorting through his mental model and was like activating like preconceptions to make a yes, no decision.

And again, I don't fault him for it or whatever, but that that movement was really important for me to realize, like. You're dealing usually with a system in which like people have preconceptions [00:24:00] about what you do and your role is to make sure that the people First you find the people with the right preconceptions or the people that you know are disproportionately excited about what you're doing Uh, but then also like you can kind of tell your narrative in a way that you like don't trigger Like those, those preconceptions.

And some of these are avoidable. I can't change the fact that I'm Mexican. But, you know, like, uh, but like for other things you can. So, you know.

Jason Yeh: is a weird reason to be discriminated, discriminated against. I can understand. I can understand the reaction being like such a quick path based on that. Like what? Um,

Andrés Ornelas Vargas: that's the worst one, probably.

Jason Yeh: What about the, what about the flip side? Um, you know, you're grinding now, 130, 140 meetings, and then things start to click, right? Things start to work. Do you remember when you had the conversation or when you heard that your lead investor was going to actually [00:25:00] commit to, to your lead check? Do you, do you remember where you were?

Andrés Ornelas Vargas: Yeah, yeah, it was actually like a Friday night and, uh, I think, uh, yeah, like the investor was like on an airport, so she's like, Oh, can I call you? And I didn't know it was going to be like a, like a pass or like, I want to lead you around. And then I think the person was like going through customs and stuff.

It took them like a long time. So it was like for 30 minutes, I was just like, they're staring at the phone. And then, yeah, finally, like Friday at like 8 PM, I got the call and saying, yeah, we want to, you know, we want to come into the round and then we want to, you know, take a really important role in it and lead it and stuff.

And yeah, it was, it was awesome. It was definitely, you know, like a great, uh, A great moment.

Jason Yeh: Yeah. And then, you know, it's, I feel like based on what I know, um, the adage that I hear it's like, or that I usually share, it's like fundraising is. You are dying of thirst. Dying of thirst. And then all of a sudden, you're drowning. [00:26:00] What was that transition like once you got that lead check in?

Andrés Ornelas Vargas: Yeah. Once I got a lead check in and like, there was so many people that kind of wanted to invest and, and like come in and stuff. Um, so we ended up over subscribed by like almost more than 80 percent of the round. And at that point we were like, not even like seeking capital anymore. And so, um, so yeah, I mean like once you get a lead, Um, that definitely like increases your chance of getting more, but I think in my case, by the way, too, like I just got much better at telling the story.

Like, I think that that's, that's some part of what happened as well. It was, it was, Hey, like part of that is like, we go to lead, but you know, at the same time, like I'm getting so many reps in that I got really good at making people see what they weren't seeing. And I think before I wasn't like painting a forest, I was like painting individual trees and people were like getting hung up and like, Oh, I think this tree is too small or whatever.

But once I explained, like, no, like it's this whole forest. I think that's where, again, [00:27:00] we just, at some point I, I literally, there's, I get so much LinkedIn outreach that at some point that's like, I couldn't really handle it. So it's, it is kind of crazy how it goes. Um, but yeah, in our case, you have to do a lot with the lead bros, just the narrative got much better.

Jason Yeh: Super good. I love hearing the story of like how much The practice and the iteration and just like waiting for your pitch to get better had such an impact on on the outcome because I am a big proponent of getting people to practice and getting feedback because I think too many founders try to build their stories in their minds and then they're like iterating in their minds and you know kind of like you being like I thought everyone else thought like me it's just like

Andrés Ornelas Vargas: Yeah.

Jason Yeh: like you, right?

Andrés Ornelas Vargas: In my case, like I think like actually in my case, what was interesting is like, I, we're doing something that if you like, we're doing something that if you don't face the problem, it's like actually really simple for you as like an investor, as any person, you know, for that [00:28:00] matter, to kind of don't, I don't want to say don't do a lot of deep thinking, but like, it's very, it's very simple for people to like fall into the trap of thinking, Oh, I've seen something like this before or whatever.

But that's incomplete thought, like that's incomplete thinking, um, and, you know, like we spent a lot of time thinking about this and we have a problem and we know it's not solved, and we know the way we're solving it is the best way to solve it. So I think in my case. It was a lot of, okay, like knowing what were the triggers that could like kind of trigger that.

Oh, I've seen this before. It didn't work or something. And speaking in a way that I wouldn't trigger them. And then, and then once I did that and they got the vision, like most investors, I thought it would become like really, really big believers. That's what I was saying before that I was telling the story.

People will like focus on like this specific like tree because it would remind them of like something they saw 15 years ago and the CEO happened to be Mexican, but once I like told the story, like [00:29:00] more cohesively, um, things really, really changed for us. So I think that that's the main learning for us.

It's like, you know, as you tell your story, try to like avoid falling into the, People's of, you know, like the bad taste in an investor's mouth that came 15 years ago and over time you uncover them and you can anticipate them, but it also just takes reps. Like you can't just, you know, like you can't just think about, you know, what's in their minds.

And the more reps you have, like the better you can tailor kind of your approach to telling the story. Now you, you have, you have a good startup, like you can't

just, you know, like out of that startup. But, but in our case, it was just like refining the message so that we didn't trigger. Those like wrong preconceptions.

And once we got good at it, like the, the interest was just immense.

Jason Yeh: it's, it's a good point. I, the takeaway I don't want people to have from our conversation is that you can, you know, put lipstick on a pig and, and sell

it. And like, you know, have a shiny veneer on a total crap sandwich of a company. [00:30:00] It's like, it is more the fact that when people are trying to solve hard problems. Oftentimes, they can, as they try to describe those problems and describe the opportunities, get, um, stuck in the weeds of, of all the complexity and getting great at describing something on its simplest level to get people excited, to get people wanting to learn, wanting to learn more is, is the most important thing. Um, do you guys, were you guys able to celebrate at all, um, when you closed your round or was it right back at it?

Andrés Ornelas Vargas: Uh, yeah. I mean, like, yeah, we had a little of a moment, like we all thought it was awesome, but we didn't really like throw a party or anything, but yeah, it was like a, it was an awesome, it was like an awesome moment. Uh, you know, I think for us, we're also like very, very mission driven. Like we care a lot about what we're doing.

So a lot of the celebration is like, we get to do this thing that we believe is going to. You know, helpful, a lot of people. So, um, yeah, it was definitely an awesome moment, but unfortunately no, uh, no party.

Jason Yeh: [00:31:00] No, I, I love that. I think. The celebration that you get to work on this is exactly what investors are hoping to hear and what they're looking for. Um, well Andres, that was pretty awesome. Um, I usually like asking questions at the end that might uncover something funny. You are working in a space with funny dietary restrictions and, and things like that.

As you have, you know, done your research and work with potential customers. Are there any like crazy things that happen because of dietary restrictions or any funny stories being in this space around helping people with food and helping people avoid allergic reactions? Uh, anything come to mind?

Andrés Ornelas Vargas: Well, I mean, I don't want to say it's like really funny, but like, it's actually something that's really cool. So when we started, like we thought, Hey, you know, like we are going to focus on what we now call painkiller customers, which are people that like actually have medical needs, just like me, right?

Like I can have certain ingredients, but what was really cool. And it gets fun in some regards. It's like, once we started talking to more and more people, you know, [00:32:00] We quickly realized that there's not only for, for people like me that actually have a medical condition, uh, we should be talking to a lot of people.

So people are, Oh yeah, like, I don't like shellfish and I don't like tomatoes. And I don't like cilantro. And like, I like eating in this way and I avoid this and stuff. So, it became really awesome, like, to see people that, on paper, didn't have, like, any sort of restrictions. Like, oh, hey, if you actually truly make it effortless for me, I'll have this, like, large long list of things that, like, I wouldn't have, and some of them have been pretty funny, right?

Like, the number of people that have said they don't like tomato, like, is pretty, like, I never saw that one coming, but a lot of people are like, yeah, I would pay just to have a place where nothing I eat, like, contains tomatoes. Yeah, it's like That was weird. Like, uh, well, not weird. It was funny. Then a lot of people, you know, have read like, or see like a whole bunch of, you know, podcasts and stuff by different influencers and they're like, know so much about like the biology of vegetable oils and stuff like that.

So it's actually been really cool to see like the non medical folks [00:33:00] that if they were given, you know, like verb to make it effortless for them to eat, they would follow all of this. Like literally very personalized and unique way of eating that you would never thought people would be interested in doing that.

And that's what we want to support by the way, but that was pretty cool. And yeah, it was pretty funny. It was at the

Jason Yeh: Yeah, dude. I live in LA. No seed

Andrés Ornelas Vargas: same time. Exactly. Exactly. Tomatoes. Tomatoes is a really big one. I, I, that was, that was funny. Yeah.

Jason Yeh: Awesome. Well, Andres, this has been a really fun conversation. I'm really proud of you to see exactly what you're able to do. And, uh, I definitely think this is an important problem to be solved. So we'll be following you and keeping tags on everything that VerbMarket does over the years.

Andrés Ornelas Vargas: Awesome. Thanks Jason.

Jason Yeh: That was Andres on ALS Vargas. Founder and CEO over the most personal online supermarket. Historians or a reminder that even the most personal ideas don't always click with investors. It took 150 conversations for him to refine his pitch and close his [00:34:00] $2.2 million round. But he got there and if you're running a great company, You can get there too. When we come back. We'll hear my producer pages.

Thoughts. On our conversation.

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Paige Randall: [00:35:00] Hello, Jason. How you doing?

Jason Yeh: Hey P, I'm good. Is it still cold and snowing in Austin, Texas?

Paige Randall: No, that was weird. It was. Um, no, it's kind of just cloudy and not that great out. But, um, 70s pure sun again. And that's all I see. So, I can't complain.

Jason Yeh: Back to, back to expected Texas weather. Yeah, it's cold in Los Angeles. Cold for us is anything below 60 degrees, but it is like consistently like low 50s, which is very hard for me to take.

Paige Randall: I feel terrible for you. I hope you can recover [00:36:00] eventually, but anyways, I love it. We always talk about the weather too.

Jason Yeh: What is a, it's an important topic.

Paige Randall: It's such a great opener. Um, but besides the opener and besides the weather. I do, I am excited to talk about this episode. I think there was like a lot of things that I noticed that Andres, uh, founder of Verve shared.

Um, just even around his viewpoints and his past experiences of kind of never being a founder before Verve, right? But being surrounded constantly by founders, by people in the public eye. He worked for some big names. He ended up kind of trying to take over or become the head of new ventures. I think he, he mentioned.

Um, so it was very cool to see him kind of take those insights of like what he learned into his fundraising experience, which was still a struggle and a challenge, right? So I think this is going to make for a great conversation.

Jason Yeh: Yeah. And, um, you might've had some of this on your mind to talk about, [00:37:00] but I will say that I have seen something very similar, like honestly in myself and then other friends who have more exposure to. investing or specifically venture investing and startups than say a first time founder who hadn't been a VC before. but those people have a lot of advantages of course, right? They have a little bit more context but in some ways you don't realize challenging it's going to be you actually go out and fundraise. You don't, You don't anticipate all the things not going wrong. You don't anticipate certain things.

And so, uh, there's a lot that even Andres could learn and involve around. So yeah, I thought it was really interesting to hear about his experience.

Paige Randall: Yeah. And. Honestly, on that same topic, something that I thought was fascinating that Andres had mentioned is something that he struggled with, with fundraising was people, you know, kind of trying to understand his pitch in his company [00:38:00] right away and kind of, uh, analyze his confidence and all these different I guess external factors and how he presented himself and when he was talking about his past experiences, uh, when he was getting pitched too, he said his mind kind of went to the more of the place of analytical and it didn't really matter if the founder was confident or not or this or that.

He was really trying to dial in and understand the problem and kind of work with where the founder was at, you know, in terms of story or whatever that may be. I thought that was pretty interesting because it makes you think. If, yes, there's a large majority of VCs, right, that Are kind of looking for that, um, you know, that external appeal of confidence and story and things very summed up and organized, but it was interesting to hear him speak from this different place of, I didn't really care about that.

And that was what was so difficult for me to go out and fundraise is because I didn't know that investors cared about that as much as, as like [00:39:00] trying to understand the problem I'm speaking on. So I kind of wanted to get your thoughts around that, um, since you were also in the VC space.

Jason Yeh: Yeah. I mean, I think one quick takeaway is the reality is you can paint, you can paint a picture and use broad strokes to define most VCs, but. Different people have different approaches, have, have, have sort of different patterns that they connect uh, experiences that influence the way they evaluate deals. will say with him, you know, he was saying that, Oh, I was much more about the numbers. whether or not you say you're looking for a confident founder, I think even he probably was influenced by the way people presented their numbers with or without confidence. That's just going to be a guess. I didn't get to ask him that question directly. Um, but, The reality too is that he could have been one of those, call it investors in the minority, who just wants to look at the numbers. [00:40:00] And the truth is that whether explicitly or implicitly, a lot of investors, especially at the earliest stages are just looking for The way an opportunity is presented and, and a vibe, a look into someone's soul around how deeply committed and how deeply confident they are in, um, an opportunity in a company.

And so that is definitely something he had to learn, you know,

Paige Randall: Yeah. Yeah, and he said, like he showed up so data heavy and detail heavy first, and he actually gave a good analogy. He was Saying how he was felt like he was painting individual trees instead of painting a forest, which I thought was kind of cool because he's like, focus on this tiny thing, focus on that.

And then, you know, shiny object syndrome investors get it like, maybe not in the best way either. I don't know if that's the right term to use, but, uh, they get distracted. And hung up on certain things that maybe you wanted to share a detail because you thought it was important and beneficial, but then it ends [00:41:00] up working against you and people will double click into it and then, um, start to kind of fall apart from there.

So, yeah, 1 of the things he mentioned was that he had to continuously learn how to. You know, make his messaging very succinct and, uh, bottled up into one, um, specific story that could, you know, kind of cover everything that an investor needs to know in order to get to the next thing, you know, kind of like investor poker, which you might want to talk about.

It's kind of like the same thing as you described.

Jason Yeh: You know, before I go there, another thing comes to mind as why his experience might have been slightly different. So he was involved in something called the production board. And a lot of what they did was look for ideas and sort of bring them kind of in house and do a lot of the execution and operations alongside the founder.

And so in some ways, I'm just sort of going out on a limb here. In some ways, [00:42:00] his decision making criteria was slightly different. He's like, well, if there really is a market opportunity here, can our team execute against this? So might've been less. dialed in on like just reading the founder than he was on the opportunity.

And when it comes to venture capitalists who are literally putting their money in and stepping away with some light exceptions around much support they give, they are really being like, well, I'm betting on the jockey. This person has to be able to do it on their own. Uh, we'll help a little bit, but it's, it's this person's deal. I think that evaluation is a little bit different. And then what you were talking about, yeah, making sure you tell a story that can pique someone's interest enough to see the next card. Uh, you know, we call it investor poker when we talk about it in our program, but like, it is not giving too much detail where someone can't get overwhelmed and build momentum to want to see more. uh, not too little where they aren't actually excited or [00:43:00] intrigued. So there is a sweet spot and I think Andre is like, figured that out. Pretty quickly after a string of no's that, that he needed to tune that to a better degree.

Paige Randall: Yeah. That's actually what I was going to talk about next is like, you know, Sometimes it does take quite a few conversations to figure out. Uh, in the conversation he said, you know, he had like 150 conversations total, which is, I mean, based on what I'm familiar with, which is kind of where you want to be around.

Like, you want to aim for a lot of conversations. But to people listening to this, maybe, you know, who aren't as aware of everything that might go into a full fundraise, um, that might sound like a lot, but it was cool to hear Andres describe how, you know, those first a hundred. 120 conversations were him figuring out how to speak about his company, how to build, you know, relationships, um, you know, down the line, like maybe he would loop back around with different people and be able to tell a better story.

Um, and [00:44:00] after he said, there was a point where it clicked for him on how he needs to showcase himself and his company. And after that, 20 more conversations in his round was closed. So that's also one of those funny things too, when it does click. And that's what I also think is beneficial about setting yourself up to have so many conversations and not looking at it in a bad way, because I'm assuming it can be tough to have so many conversations where people are like, eh, not interested.

But if it brings you to a yes, well, like, which, if you don't stop trying, it definitely will, for the most part, that's a good way to look at it. Uh, of, okay, there's going to be a lot, But at some point it's, if I'm running a good company that has a lot of opportunity, it's going to click and I'm going to get there much faster once it does.

Jason Yeh: Yeah, and this might be annoying because I feel like I bring this up every single time it happens, but um, I do just feel the need to triple underline the fact that Andres like comes from a [00:45:00] pretty shiny background, like fancy background. I think he went to Yale undergrad and he You know, was at the production board. He, you know, he had all this exposure to startups and investors and had an amazing network and all of those things, right. And a personal connection to his business and all of the, with all of those things, he still had 150 conversations, right. And so I think it's really important that every time we see that we underline it and we call it out because I know that there are founders out there that are like, no way.

I'd like, do I have to do that many and whatever? It's like, it's just a part of the process, right? And whether You're taking those conversations to refine your story and your pitch and the way you're running your company because your company needs some time to evolve or the relationships need time to, to develop. these are all, there are a variety of reasons why [00:46:00] that volume is so important. And you know, just making sure people know that it's part of the game, of the process and to gear up for it, I think is one of the most important messages that we send, right?

Paige Randall: Yeah, I agree with you. And sometimes maybe it's not even that you have a bad story or you have a bad pitch and maybe it's just you haven't found the person that just gets it and it clicks with them. So either way that, um, you know, mass outreach or that, you know, Pushing as many conversations as possible is going to lead you to one of those few things, whether it's like you said, um, working on something within your company, working on the story externally, um, finding that right fit, like all of those different, uh, conversations are going to lead you to.

Again, if you're running a awesome freaking company, that is a big opportunity, a very successful outcome. Um, I did have one thing I got kind of confused on in this episode. Uh, I don't even know if I've asked this before, but on Gray's Hedge here.

Jason Yeh: asked it [00:47:00] before and you haven't learned it yet, I'm going to be upset, but go

Paige Randall: I know, but what you're not gonna do is go through all of the previous episodes and see if I'm asking for more. So, you'll never

Jason Yeh: brain, I'll probably not be able to remember, but ask

Paige Randall: you can't. Uh, but, so he had said that his round was over prescribed by 80%? I have no idea what that means. I know it means a good thing, right? Like it overscribes. I'm sure like more money coming in But what does that exactly mean?

Jason Yeh: Great, great question. Um, and you're right. I can't remember if you asked this before. So the term he was saying was actually oversubscribed, and it's a, it takes on the vocabulary and the terminology of a more formal, um, investing process. But, In this context, what he is saying that is that he had a goal, some sort of goal, [00:48:00] say he was trying to raise $2 million.

That was what he had set out to raise. when someone says they are oversubscribed, that means they had more demand, more people wanted to invest and more dollars wanted to be invested in his company. Then he had created room for, or he had initially anticipated raising capital. Um, so this is a way to tell the world like. raised two million, but we could have raised three and a half million dollars. People love us.

Paige Randall: So what does it mean by 80 and that's so funny how I said prescribe just ignore that

But almost by 80 percent what I'm trying to like understand in my brain what that that

Jason Yeh: I don't want to do public math here. Cause that's hard, but let's say you raised. 2 million. And if you did 80 percent over, I think that's like 1. 6 million over. So it would have been like he wanted to raise 2 million and there was [00:49:00] enough demand where he could have raised 3. 6 million is my guess is what he was saying. And he probably ended up oversubscribing that he was going out to raise two and he decided he would take in. 2. 5, you know, so he, he let it oversubscribe by another half a million dollars.

Paige Randall: Wow. So he could have, yeah, that's super interesting. And I'm assuming a reason why maybe you wouldn't always want to fill up your round, you know, too much, I guess, is so you can focus on, like, with more money comes more, uh, responsibility or potential milestones you then have to hit. Uh, I don't know. Do you have any, like, thoughts or opinions?

Jason Yeh: There are, there are a lot of reasons, including that one, why you wouldn't raise more than you were expecting. So, um, but there, there are two things that can happen when you raise more money. One could be that you keep your valuation, your post money valuation fixed as in, let's we say post money valuation is 10 [00:50:00] million. If you raise 2 million at a post money of 10, now we're going to get really complicated with the math. That's a 20 percent dilution, right? 2 on 10. 10 posts is 20 percent dilution. If you keep that post money valuation fixed, when you raise more than two, let's say you do two and a half, the 10 stays fixed.

And so now you're diluting by 25 percent as opposed to two. So one of the reasons you might do it is because you don't want to dilute so much. If you go the, there's another way to set valuations, by the way, where raising more actually makes your post money. Get larger. So you, you fix the valuation on your pre money valuation.

Paige Randall: You're starting to lose me here.

Jason Yeh: I know, but let's, let's go detailed here. Uh, I do want to give this explanation. If the valuation goes higher as you raise more money, you aren't necessarily like diluting as much. [00:51:00] But to your point, you're increasing your valuation, which might actually make it harder to milestones, build momentum towards the future round.

So you don't always want your, your valuation to go higher. And, you know, sometimes more money isn't always like, The best thing you might really not need that money. And, um, you know, I think being judicious with how much money you raise is a really important thing. So variety of reasons not to raise more money.

And, um, also by the way, you might not actually want everyone's money. Like not all money is equal. You could have some assholes out there that really want to invest your money, your Their money in your company and maybe if you didn't have all the money lined up, you might accept them. But if you are oversubscribed, why would I take that asshole Paige's when I don't have to?

Right. Like

Paige Randall: Yeah,

Jason Yeh: leave her off that cap

Paige Randall: I wouldn't take her money. Um, yeah, no, that was, um That was super [00:52:00] helpful. I, I think that is going to be the debrief so that the listeners and I can process everything that you just said

because it's

Jason Yeh: I do think,

Paige Randall: very important. That was a lot

Jason Yeh: think, I do think we, we spend a lot of time in our content about valuation calculations. So if that little spiel blew your mind, or rather went over your head. out to us. Let us know if we should put, do more content, maybe on the back channel where, where I can explain some of that.

Paige Randall: smart. Honestly, I, we should do that because I'm going to look and I'm going to, yeah, I'm going to re listen to this exact part of the debrief actually. It's time to study.

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[00:53:00]

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