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Speaker 1: A young entrepreneur in Austin, Texas, had a problem. Asim

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Speaker 1: Ali was the founder of a food delivery startup called Birtbie.

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Speaker 1: It was one of the first services of its kind

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Speaker 1: in Texas and initially things were going well. When we

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Speaker 1: had gotten started in two dozen twelve. Um, I remember,

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Speaker 1: there was just this awe of like grocery delivery because

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Speaker 1: it was quite new to everyone in Silicon Valley. Tech

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Speaker 1: investors were excited. Food delivery startups were raising millions of dollars.

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Speaker 1: One company in particular was attracting the bulk of it,

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Speaker 1: with same day grocery delivery Instacart, competing with giants. I

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Speaker 1: see realized it was only a matter of time before

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Speaker 1: Instacart would arrive in Austin, his home market, and it

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Speaker 1: was scary at the time. I'm not gonna lie. I

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Speaker 1: mean what it was is that you heard this big behem.

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Speaker 1: It's like Instacart raising millions of dollars out of the valley.

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Speaker 1: Soon things went from scary to terrifying when an even

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Speaker 1: bigger company made a move into the same market. That

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Speaker 1: company was Amazon. A scene was left asking himself, you're

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Speaker 1: going up against these guys, You're like, how Are you

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Speaker 1: going to survive? Hi im aki Ito and I'm Olivia's

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Speaker 1: Aleski And this week on Decrypted, we'll see what happens

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Speaker 1: when one of the world's largest companies moves into your market.

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Speaker 1: It's a familiar story for so many start up founders,

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Speaker 1: especially today, is the tech industry's biggest companies search for

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Speaker 1: new opportunities to get even bigger. So how does a

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Speaker 1: small company stand up to a threat like that? Does

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Speaker 1: it even stand a chance? Stay with us? The story

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Speaker 1: starts in the Land of two stepping in pork barbecue.

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Speaker 1: A few weeks ago, I went out to Austin to

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Speaker 1: see a scene we met at a tech incubator space

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Speaker 1: downtown called tech Stars. A scene was laid back and upbeat.

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Speaker 1: He smiles a lot, and he dresses like every founder

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Speaker 1: you'd ever meet. Tennis shoes, jeans, a T shirt, and

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Speaker 1: a hoodie that he picked up while visiting Apple's headquarters.

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Speaker 1: Cuppuccino seem fits right in with the other entrepreneurs. He's

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Speaker 1: had a dream from a young age of making it big.

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Speaker 1: Growing up in high school, I was always kind of

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Speaker 1: independent in the sense that I've always wanted to make

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Speaker 1: money myself and not work for anybody. A Scene found

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Speaker 1: a mentor in his cousin's partner, a Zeem Macinosia, not

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Speaker 1: to be confused with their main character as Seem. The

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Speaker 1: two friends would often trade startup ideas. One day he

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Speaker 1: called me and he was like, what do you think

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Speaker 1: about starting a company where we can get anything and

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Speaker 1: everything delivered for people? And I was like, dude, that's awesome.

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Speaker 1: This was back in the summer of a Scene was

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Speaker 1: actually still in college. Along with five of his closest buddies,

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Speaker 1: a Seam decided he would give it a shot and

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Speaker 1: try to build a business. They called their company Burp.

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Speaker 1: So we started Burbe with the slogan order it, get

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Speaker 1: it Burpit to kind of tailor it to our college

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Speaker 1: market and the demographic of a college student, Seems. Idea

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Speaker 1: was college students are hungry, but they're also lazy about cooking,

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Speaker 1: so it seems that they could make a business at

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Speaker 1: a delivering food to them. But college SuDS don't really

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Speaker 1: have the disposable income to pay for like a premium service.

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Speaker 1: Seem wasn't deterred. He and his founders decided they would

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Speaker 1: just target a different type of customer. So we then

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Speaker 1: quickly shifted our focus towards working professionals and dialing from family.

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Speaker 1: Is anyone sick, elderly that really needed the service, And

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Speaker 1: this strategy started to work. Burbie began to grow, relying

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Speaker 1: heavily on a team of delivery workers who get paid

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Speaker 1: for dropped. It seems like so long ago now, but

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Speaker 1: in this kind of business model was exploding startups like Burpie.

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Speaker 1: We're part of what was called the gig economy. It's

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Speaker 1: kind of an uber model where we have like a

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Speaker 1: round robin of individuals who are active and who can

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Speaker 1: do the delivery. They'll go to the grocery store that

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Speaker 1: was selected by the consumer, picked the item's, shop them

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Speaker 1: as if they were a personal shopper for that consumer,

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Speaker 1: and then take them to the consumer themselves. Over the

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Speaker 1: next few years, Burpie grew steadily, turning into a viable startup.

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Speaker 1: When we had initially gotten started, it was just kind

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Speaker 1: of like a front project, you know, something to do

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Speaker 1: with friends. As soon as as we realized that this

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Speaker 1: is something people really want and need, we started focusing

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Speaker 1: really heavily on the business and um, it was just timing.

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Speaker 1: Burbie was starting to become a household name. In key

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Speaker 1: cities around the state. What we've always focused on is

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Speaker 1: trying to be a Texas player and trying to dominate

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Speaker 1: to Texas market. We've been able to capture Houston, San Antonio, Dallas,

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Speaker 1: and Austin market fairly quickly because we were one of

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Speaker 1: the early movers in this market. At its height, Burbie

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Speaker 1: was bringing in thirty five thousand dollars in revenue a month.

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Speaker 1: Seem says. The business was humming, with new customers signing

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Speaker 1: up for the service, many of them spending a hundred

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Speaker 1: dollars and more on their grocery orders. But as a

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Speaker 1: seam in Burbie were making ways in Texas, another startup

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Speaker 1: nearly two thousand miles away in San Francisco was attracting

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Speaker 1: the attention of some of tech's biggest investors. That startup

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Speaker 1: was insta Cart. Instacart got started around the same time

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Speaker 1: as Burbie. Just three years later, in instacart had raised

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Speaker 1: three drew million dollars and had a valuation of two

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Speaker 1: billion dollars. Fast forward to today, and one of the

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Speaker 1: hottest privately held companies out there is Yeah, an online

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Speaker 1: grocery delivery service. I'm talking about the San Francisco based

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Speaker 1: insta Corn, which received the two million dollar evaluation its

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Speaker 1: most recent round of fundraising. With so much money behind it,

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Speaker 1: instacrat grew like crazy. The company expanded across the US

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Speaker 1: and forged major partnerships with Whole Foods, Costco, and Target.

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Speaker 1: Seems family friend and mentor remembers it well. I think

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Speaker 1: insta card actually helped us if they were actually doing

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Speaker 1: our own marketing for us, spending the big dollars in

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Speaker 1: marketing that people started. We started seeing a huge influx

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Speaker 1: of the searches that were being done on Google for

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Speaker 1: grocery delivery, groceret delivery in Austin. It was just a

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Speaker 1: booster for us rather than a negative, Let's put it

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Speaker 1: that way. As food delivery started catching on, other competitors

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Speaker 1: got more funding too, Fresh Direct, a company out of

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Speaker 1: New York, and good Eggs to start up with operations

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Speaker 1: in New Orleans in Los Angeles. At the time, are

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Speaker 1: just a couple of the other companies vying for a

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Speaker 1: piece of the market. But soon Burbie started feeling the

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Speaker 1: impact of Instacart's popularity. Instacart might have initially helped at

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Speaker 1: the margins, turning customers onto this new service now though

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Speaker 1: it was starting to look like more of a liability.

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Speaker 1: They'd have to compete with with their model rate of drivers.

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Speaker 1: That mean we were paying dollars lower than what they

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Speaker 1: were paying, but we had to increase our rate a

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Speaker 1: little bit kind of make sure we retain those drivers.

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Speaker 1: Instacart went on to raise over a billion dollars. It

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Speaker 1: received a major investment from Whole Foods, which was founded

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Speaker 1: in Austin, which was where Burpie had been doing a

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Speaker 1: lot of business too. By contrast, Burpie had raised less

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Speaker 1: than two hundred thousand dollars with Instacart gaining. Burbie's dominance

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Speaker 1: in Austin seemed under threat at a certain points, seems

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Speaker 1: as he realized he couldn't continue running his company the

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Speaker 1: way he had before. And it was scary at the time.

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Speaker 1: I'm not gonna lie. I mean, what it was is

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Speaker 1: that you hear this big behem. It's like instat cart

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Speaker 1: raising millions of dollars out of the valley and going

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Speaker 1: up against these guys, You're like, how are you going

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Speaker 1: to survive? A same Macnogia, the family friend who had

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Speaker 1: helped to see him get started and who would become

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Speaker 1: his mentor says they spent many late nights on the

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Speaker 1: phone together trying to figure out how to save the business.

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Speaker 1: He would call me three three in the morning, uh

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Speaker 1: point in the morning at time. He would just call me.

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Speaker 1: Any time you need anything, and any big decision he

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Speaker 1: would he would just pick up the phone and just

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Speaker 1: call me. But there were times when he would face

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Speaker 1: difficulties and he'd be like, Hey, I'm losing motivation. I

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Speaker 1: don't know what to do here. They decided Burpie needed

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Speaker 1: to make a shift so that it was no longer

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Speaker 1: competing head on with instat cart. So we started looking

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Speaker 1: at other avenues or other markets that were similar and

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Speaker 1: needed some digital transformation. The same thought, instead of delivering

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Speaker 1: groceries to people's homes, maybe Burpie could use local gas

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Speaker 1: stations in convenience stores as the pickup point instead. It

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Speaker 1: felt like a natural shift both a seam and his mentor,

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Speaker 1: a group and families that worked for owned and ran

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Speaker 1: convenience stores. It was just something that made sense to

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Speaker 1: us that, Hey, we have the connections, we know that

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Speaker 1: we know the target audience. Let's go ahead and target

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Speaker 1: that Customers could still order from their favorite grocery stores

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Speaker 1: online seem hope this new strategy would set Burpy apart

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Speaker 1: from Instacart and the others. But before a scene could

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Speaker 1: execute his new plan, and even bigger shark entered Burbi's waters.

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Speaker 1: So a scene was busy implementing his new strategy to

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Speaker 1: stave off competition from insta cart. But then we are

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Speaker 1: getting some breaking news on the Whole food life. Would

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Speaker 1: you gasp? Amazon, the world's largest retailer, decided it wanted

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Speaker 1: a piece of the action in June and announced it

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Speaker 1: was buying Whole Foods for thirteen point seven billion dollars.

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Speaker 1: It is get out of dodge time. I mean this

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Speaker 1: is a threat. I'm taking that numbers everybody who sells food, everyone,

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Speaker 1: because you can't compete. Amazon had been trying for some

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Speaker 1: time to develop a presence in the grocery market. It

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Speaker 1: launched a service called Amazon Fresh, but that was slow

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Speaker 1: to catch on. A Few experts had been speculating that

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Speaker 1: Amazon might make a giant acquisition to kick start its

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Speaker 1: grocery business, and Whole food has already had the successful

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Speaker 1: delivery partnership with Instacart to build off. The deal sent

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Speaker 1: shockwaves through the eight hundred billion dollar grocery industry. That

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Speaker 1: day when the acquisition was announced, shares of Walmart fell

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Speaker 1: by seven percent and Kroger, one of the largest grocery

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Speaker 1: chains in the US, dropped seventeen For a scene, the

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Speaker 1: merger of Amazon and Whole Foods was devastating. It would

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Speaker 1: take many millions of dollars to fund and expansion big

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Speaker 1: enough to take on the combined might of instat Cart,

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Speaker 1: Whole Foods, and Amazon. Burpie didn't have access to that

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Speaker 1: kind of money. We realized that it's gonna be very

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Speaker 1: hard to raise and really grow the company the way

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Speaker 1: the scale that we wanted. Once more, a Seam turned

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Speaker 1: to his mentor a zem for advice. There were multiple

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Speaker 1: other conversations just between that instant Cart and Amazon period

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Speaker 1: where we were kind of discussing if this is the

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Speaker 1: right path to the company and are we going to

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Speaker 1: be able to compete. This was a difficult time for

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Speaker 1: a scene. As CEO, he tried to put on a

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Speaker 1: brave face for his employees, but inside he was harboring

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Speaker 1: a lot of fear and a lot of doubt. Because

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Speaker 1: sometimes you're on a lonely island. You know you can't

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Speaker 1: say everything to everyone and give your thoughts and everything

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Speaker 1: because you don't want to ruffle feathers or you don't

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Speaker 1: want to create fear in the company or anything like that. Eventually,

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Speaker 1: even though Amazon's acquisition of Whole Foods came in the

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Speaker 1: middle of burkee strategy, shift seem decided he wasn't ready

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Speaker 1: to give up yet. Okay, hey, Olivia, I can see

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Speaker 1: you again, so guys can see this is the Murpury

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Speaker 1: Market store here in Austin near the airport by Burlison Road.

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Speaker 1: UM At the end of my trip to Austin, a

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Speaker 1: seam asked me to swing by a gas station on

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Speaker 1: my way to the airport. I pulled up to a

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Speaker 1: large convenience store that had a massive orange sign on

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Speaker 1: the door. It said Burke in big bubble letters. The

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Speaker 1: store is actually branded Burpee Market, and that's kind of

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Speaker 1: been our first store that we've been running a various

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Speaker 1: test and kind of making sure the systems are integrated

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Speaker 1: with the back office and et cetera. Inside, all of

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Speaker 1: the convenience store workers were wearing Burpee branded T shirts.

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Speaker 1: Seems building a checkout app for convenience stores. It lets

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Speaker 1: customers scan their own items to pay without having to

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Speaker 1: go through a checkout line, so you can order things

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Speaker 1: that you'd find traditionally at an h GB or costco

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Speaker 1: and have those products delivered to you or ready for

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Speaker 1: pickup at the store. So that's convenient for you to

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Speaker 1: pick up on your way home. So it's kind of

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Speaker 1: like a distribution hun for us. As a Seam showed

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Speaker 1: me around, I couldn't help it get the impression that

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Speaker 1: he was pretty much running the show alone. I asked

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Speaker 1: him what happened to his other co founders. Yeah, so

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Speaker 1: I am the last man standing. The founders gotta either

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Speaker 1: when on their own path with the corporate or side

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Speaker 1: of things, or went on to school for their master's

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Speaker 1: program or something. I seem later acknowledged that not everyone

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Speaker 1: had felt comfortable with the new direction Burpy was taking.

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Speaker 1: As the co founders got older and started families, they

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Speaker 1: couldn't weather the volatility that comes with startup life. They

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Speaker 1: wanted a sure thing, he said. We predominantly have had

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Speaker 1: worked with a team in India and we've had to

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Speaker 1: are also marketing and business development and also are kind

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Speaker 1: of product management taking care about it in the US.

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Speaker 1: Running Burpie's technical operations out of India makes sense. For

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Speaker 1: a scene. He has strong connections there and the labor

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Speaker 1: is significantly cheaper. Money is constantly on a scene's mind

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Speaker 1: building a company far from the startup investors in San Francisco.

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Speaker 1: Seam built Burpie with less than two hundred thousand dollars

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Speaker 1: from investors. His main financier was his mentor a scene.

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Speaker 1: You know, at some point you have to understand that, um,

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Speaker 1: you've only raised a certain amount of money, and for

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Speaker 1: you to even think about going up against like the

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Speaker 1: behavements in the space, like Amazon Instancart, you have to

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Speaker 1: have the capital to do so. After all these setbacks,

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Speaker 1: Seems come to believe that selling Burpy might be the

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Speaker 1: only way to ensure it can survive. For many entrepreneurs,

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Speaker 1: getting acquired by a bigger company isn't a sign of failure,

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Speaker 1: and if the startup is acquired at high valuation, it

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Speaker 1: can create a big windfall for the founders and the investors.

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Speaker 1: Seem has a lot to be proud of, even though

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Speaker 1: he hardly raised any money from outside investors. He says

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Speaker 1: his company is in solid shape financially. With that two

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Speaker 1: thousand and we've been able to reach cash flows of

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Speaker 1: our sorry revenues of almost four million dollars a year,

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Speaker 1: and I think the amount of money we rasources, the

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Speaker 1: revenue and the cash flow that we've generated from the

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Speaker 1: business is quite significant. But as he looks for a

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Speaker 1: potential buyer, there's no escaping the fact that it seems

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Speaker 1: first choice would have been to keep growing Burpy as

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Speaker 1: an independent company. As we were saying goodbye to each

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Speaker 1: other in Austin, seemed told me something in interesting. He

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Speaker 1: said he almost applied for a job at Whole Fits,

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Speaker 1: hoping it might put Burke beyond the company's radar. It's

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Speaker 1: a possible acquisition. It was on Awtin Digital Jobs and

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Speaker 1: it was a pretty like it seemed like a senior position,

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Speaker 1: and I almost considered to apply to it because you know,

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Speaker 1: he's like uncertainty of like, you know, it's like that's

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Speaker 1: another way that's chin to pros acquisition is like find

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Speaker 1: a company that has a position that fits kind of

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Speaker 1: what I've done in the last five years exactly. But

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Speaker 1: until the sale comes through, a Seams plan is to

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Speaker 1: keep going with his new strategy. But I think we

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Speaker 1: really have feet with what we're doing with the communist

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Speaker 1: source of stuff. If you really believe in what you're

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Speaker 1: doing and you haven't lost hope or anything. You'll find

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Speaker 1: a word and that's it for this week's episode of Decrypted.

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Speaker 1: Thanks for listening. Do you have a story about how

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Speaker 1: Amazon influenced your startup or small business. You can send

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Speaker 1: us a message at Decrypted at bloomberg dot net or

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Speaker 1: find me on Twitter. I'm at Olivia's Aleski and I'm

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Speaker 1: at Akita seven. If you enjoy listening to Decrypted, please

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Speaker 1: recommend us to your friends, and if you haven't already,

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Speaker 1: please take a moment to rate and review our show

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Speaker 1: that helps us find new listeners. This episode was produced

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Speaker 1: by Pia gut Cary, Liz Smith, Magnus Hendrickson and Tob Foreheads.

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Speaker 1: Fancesca Levi is ahead of Bloomberg Podcast. We'll see you

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Speaker 1: next week. Two