COMPANY
Company name:
derivatived
Company url, if any:
If you have an online demo, what’s the url?
(Please don’t password protect it; just use an obscure url.)
http://warehousing.derivatived.com/#/[email protected]&pass=ycombinator
What is your company going to make?
API for warehouse services. We are the only way to buy warehouse services instantly.
Product companies currently use the GUI version of our API to book warehousing services. They send our API their product dimensions & weight and sales data and we return the total cost (including transportation and shipping).
Our ultimate goal is to be a physical equivalent of a CDN. We are working to remove friction from distribution.
If this application is a response to a YC RFS, which one?
Internet Infrastructure
Where do you live now, and where would the company be based after YC?
Right now — New Jersey; Post-YC — Bay Area
Please enter the url of a 1 minute unlisted (not private) YouTube video introducing the founders. (Instructions.)
Please tell us about an interesting project, preferably outside of class or work, that two or more of you created together. Include urls if possible.
In 2010 we co-founded iMadeIT (now NU.io), an entrepreneurial club that teaches students to create their own websites. Our members were mostly business majors with no background in programming. Within two years, we became the biggest entrepreneurial club at Northeastern University. The club still runs successfully today and grew to over 100 active members by the time we graduated.
http://www.northeastern.edu/entrepreneurs/programs/northeastern-io/
How long have the founders known one another and how did you meet? Have any of the founders not met in person?
We have known each other since 2010 at Northeastern University. We met at a hackathon James organized which we eventually turned into iMadeIT.
PROGRESS
How far along are you?
We have a web app with beta customers and a beta warehouse. In the warehouse, our software manages 500,000 orders per month and growing. We have signed up 5 customers.
If you’ve already started working on it, how long have you been working and how many lines of code (if applicable) have you written?
Working on warehousing systems since January 2014: 20,000 lines of code
Working on API for warehousing since November 2014: 10,000 lines of code.
Which of the following best describes your progress?
Taking Preorders
How many users do you have?
5
Do you have revenue?
Yes
How much revenue?
$6,110.30
What is your monthly growth rate?
(in users or revenue or both)
100% monthly user growth
If you’ve applied previously with the same idea, how much progress have you made since the last time you applied? Anything change?
We applied for W15 batch late.
1. Feedback: Our idea was too broad
* We narrowed the product by only dealing with pre-packaged products that require no additional preparation (i.e kitting/inspections) in the warehouse.
2. Feedback: Seems like an opportunity for seasoned logistics professionals
* We brought on a logistics law firm, a growing warehouse with 15 years of experience, and an advisor that ran his own factory and e-commerce company. They helped us reframe the problem as a software engineering problem.
Our new web app reduced our sales and on-boarding time from one person full-time for 3 weeks to self-service system in less than an hour. Consequently, we went from one to five customers. This is in addition to now charging 10x ($0.10/order to $1.00/order).
If you have already participated or committed to participate in an incubator, “accelerator” or “pre-accelerator” program, please tell us about it.
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IDEA
Why did you pick this idea to work on? Do you have domain expertise in this area? How do you know people need what you’re making?
Originally, we were making software to improve shipping times and increase storage density in warehouses to dramatically lower costs. That experience led us to learn a significant amount about warehousing cost structure and why warehouses have so much trouble investing in technology. Praful also knew the difficulties of managing and pricing warehousing from his previous hardware startup.
We also both knew the problems that product companies have from our experience mentoring startups. Within two weeks of starting this business, we were able to get our first customer and revenue.
What’s new about what you’re making? What substitutes do people resort to because it doesn’t exist yet (or they don’t know about it)?
We are abstracting away the relationship so companies can easily choose warehouses instead of being stuck with long-term contracts. Our goal is to remove the friction from developing distribution strategies.
Typically, start-ups go two different routes:
1. They do the fulfillment themselves. This means a large portion of their resources is taken away from product development and marketing.
2. They find a 3PL. They do not know what the actual pricing will be until their product is already in the facility. Most often, they are overpaying and the facilities are initially misinformed about the product which delays shipments. They maintain a long-term relationship which makes it difficult to transition to another warehouse or even have short-term processing.
To find warehousing today is a long and arduous process of calling individual facilities to see if they can manage a given product. Each warehouse has a slightly different pricing structure, different process of fulfillment, and different understanding of the same product.
Who are your competitors, and who might become competitors? Who do you fear most?
As of now, no one has developed a robust network of warehouses and abstracted the relationship from the warehouse.
Today our competitors are: Amazon, ShipWire, Symphony Commerce, Wombat, JaggedPeak
Fear the most: Amazon
What do you understand about your business that other companies in it just don’t get?
Our competitors focus too much attention on the differences between each company’s fulfillment operations. For our first account, it took over 200 phone calls and 10 days to get a handful of quotes. Most facilities refuse to work with startups due to inconsistent volumes. We found by grouping products under a major account, providing a standard procedure and packaging requirements, we eliminated 80% of the fulfillment differences.
How do or will you make money? How much could you make?
(We realize you can’t know precisely, but give your best estimate.)
We charge $1.00/order. The average crowd-funded customer has 2000-3000 orders in the first month so we will make $2000 – 3000/month per customer. The successful companies increase to average 5000 orders/month by the end of the year, providing $5000/month in revenue.
There are 500 successfully crowd-funded hardware projects on KickStarter and Indiegogo since November 2013. This number excludes other product companies such as apparel, non-hardware physical goods, and food-related projects. The number of orders/customer and number of new products are expected to increase exponentially every year.
How will you get users? If your idea is the type that faces a chicken-and-egg problem in the sense that it won’t be attractive to users till it has a lot of users (e.g. a marketplace, a dating site, an ad network), how will you overcome that?
We currently get customers by reaching out to recently over-subscribed, crowd-funded projects on KickStarter & Indiegogo. We have also found startups by partnering with incubators such as TechStars, Northeastern IDEA, Rough Draft Ventures, and Kairos Society.
List any investments your company has received. Include the name of the investor, the amount invested, the premoney valuation / valuation cap, and the type of security sold (convertible notes, safes or stock).
Northeastern University IDEA Ventures provided us a $10,000 grant which includes mentorship from professors who know about e-commerce and logistics.
If you have not formed the company yet, describe the planned equity ownership breakdown among the founders, employees and any other proposed stockholders.
(This question is as much for you as us.)
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Please provide any other relevant information about the structure or formation of the company.
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LEGAL
Are any of the founders covered by noncompetes or intellectual property agreements that overlap with your project? If so, please explain.
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Was any of your code written by someone who is not one of your founders? If so, describe how can you legally use it.
(Open source is ok of course.)
We had a previous founder that wrote code for us. We have an agreement via e-mail that he transferred all his ownership of IP.
Is there anything else we should know about your company?
(Pending lawsuits, cofounders who have left, etc.)
We fired our other co-founder and an advisor in December 2014 because they did not fit. It is understood they will not receive equity.
OTHERS
Are any of the following true?
- You’re the only founder.
- You’re a student who may return to school next term.
- Half or more of your group can’t move to the Bay Area.
- One or more founders will keep their current jobs.
- None of the founders are programmers.
(Answering yes doesn’t disqualify you. It’s just to remind us to check.)
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If you had any other ideas you considered applyingwith, please list them. One may be something we’ve been waiting for. Often when we fund people it’s to do something they list here and not in the mainapplication.
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Please tell us something surprising or amusing that one of you has discovered.
(The answer need not be related to your project.)
One of our customers who sells (completely legally) in several third-world countries has an actual line item in their supply chain budget for bribes just to ship in certain districts.
CURIOUS
What convinced you to apply to Y Combinator?
Sam Altman recommended we apply in December. Lance at MadeSolid and Khanjan at NeverFrost (both who are interested in our services) recommended we keep applying.
How did you hear about Y Combinator?
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See Also
https://mrsteinberg.com/the-hack-that-got-me-into-y-combinator/
The Actual Interview
Justin Kan, Jessica Livingston, and Geoff Ralston shake our hands and greet us.
“Nice to see you” Jessica says to Praful.
“I’m Jessica” she says to me shaking my hand.
I try to smoothly say as we seat, “actually two of you interviewed us only 4 months ago.”
Jessica quickly says “That’s why I said nice to see you.”
Geoff immediately says “I didn’t interview you.”
I realize he didn’t actually interview us and time is ticking. 45 seconds wasted already. Justin is not amused.
“Ok, what do you do?”
My cofounder pitches as I ready our demo and shove it in their face. Let’s just talk face to face they all tell me. Last time they were confused by the logistics industry and we tried to get ahead of that this time.
“It’s 3PLs right?” says Justin.
My god he just said the magic word. He fucking gets our industry. The other two have no idea what that means though, I shove the demo back in their face for their sake.
“No, no” says Geoff, it’s distracting lets just talk. I quickly shut it and explain, they pretty much get it.
The questions are typical and we rattle off the metrics.
Traction
How we make money
Market size
Who is actually paying right now
Boom.
They finally let me show the demo. Instantly clarifies everything. Justin looks thoughtfully out the window.
Final question, “What’s changed since last time?”
Customers, of course. I leave some samples we shipped from our customers. A delicious coffee bar.
Finally, we got in Y Combinator.
At orientation they give us the typical advice. Don’t hire too fast. In fact, probably shouldn’t hire until after demo day. Don’t add another cofounder. Live in Mountain view.
All three founders shouted at me to not live in SF. The ones who do get too distracted. In retrospect, would have been more fun though.
Y Combinator was great. I went through the entire network for hardware companies and pitched our service. Our first 10 customers came from that alone.
Good times.