SaaS Interviews with CEOs, Startups, Founders
Why he shut down his $40m Revenue Grocery company and moved into data recovery
09 Jan 2024
Chapter 1: What is the main topic discussed in this episode?
You are listening to Conversations with Nathan Latka, where I sit down and interview the top SaaS founders, like Eric Wan from Zoom. If you'd like to subscribe, go to getlatka.com.
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They have three pilot customers currently in the Berkeley batch, which invested $200,000 for a 7% stake. They raised $400,000 in their seed round. The company helps with automated cloud discovery backup platform. He learned a lot at his first company, Fridge No More, scaled it from zero to $40 million of revenue, but then ended up having unprofitable lines of business.
Ultimately, couldn't keep up and had to shut that company down, learned how to liquidate, which was painful, but good lessons to learn. We're obviously rooting for him here. Hey folks, my guest today is Pavel Danilov. He, before co-founding Ben Udata in November 2022, is co-founder and CEO of Fridge No More, an ultra-fast grocery delivery company.
They scale that from zero to 40 million bucks of revenue, 30 dark stores, 85,000 customers in New York and Boston from 2020 to 2022. Before that, he worked in investment banking for eight years, and we're excited to have him on today. Pavel, you ready to take us to the top? Yeah, thank you for having me. You bet.
I have to talk about the Ghost Kitchen stuff because I had many people on, many people on in 2021, 2022. Alex Cantor at Order Mark is one that rings a bell. These guys were crushing it. And then all of a sudden, Ghost Kitchen just went off a cliff. And Alex basically shut the company down. What happened at your company? Did you see any of these patterns?
So my business was technically speaking Ghost Kitchen. It was a dark store. So we were selling groceries. But I think the trend is similar. The market is, well, the economics is very hard. The very operational business and a lot of costs. And the main problem is career related costs. So you pay them per hour and it's very high. So basically it's really hard to get to the break even.
And every time you start a new store, it's a new market. You start from zero. You need to reach this break even. So you grow fast. You end up with a bunch of stores making losses and only a few stores already profitable. So it's hard to deal with that without extra capital injection. And in 21, beginning of 22, it changed. So how much did you guys raise at Frige No More?
We raised around $35 million. $35 million? Yeah. Okay. And what happened? You guys shut it down, flash sale, big exit? No big exit. We negotiated exit.
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Chapter 2: What led to the shutdown of the grocery delivery company?
We had a conversation with a few potential investors, but then at the last minute, they walked. So that's what happened. So you didn't make any money on it. You just sort of shut it down. Basically, we shut it down. Yeah. Okay. Well, thanks for the transparent. People need to realize it's part of being an entrepreneur. You know, you got to swing the bat. Sometimes it doesn't work out. Yeah.
It's not just like we shut down. We shut down and then I worked for almost a year on liquidation. On what? Oh, liquidation. Liquidation, yeah. And I paid all the salaries, all the taxes, but then I needed to negotiate all the suppliers and real estate. So it was quite a cumbersome process. Not just like a day you walk to another business.
So was there something that you were exposed to at Fridge No More that enabled you to come up with this idea for Benudata? Are they connected in any way? they're only connected through one of my investors. So one of my angel investors introduced me to Dimitri and Pavel, my co-founders, and Bernadette. And that's how we met. And I realized that I still, I have a scar from the human experience
human-intensive business with a lot of employees. So I wanted to build something which doesn't have a lot of employees, just software and B2B. So there's two of you, two co-founders? Ben and I did. Three co-founders. Three of you guys. Did you just split equity evenly at the start? Yeah. Okay, good. So you were very diplomatic. All right. What's the company do?
So we are building automation for disaster recovery process in the cloud. So the thing is, the backup is a huge business, right? How you backup your servers, your cloud resources. It's automated. But with the recovery, how you actually bring this backup back to life, back online, is very manual still. And we found this opportunity that...
in the cloud, all the cloud platforms provided all the necessary blocks, the cloud API, native backup. Basically, now we are able to automate that. We collect data through API, we create those plans, and we can bring this end-to-end automation for recovery. So what it means when a disaster happens,
I think ops or whoever is responsible needs to push just one button and the whole infrastructure, all applications will be recovered in a different environment. You told me before the show your pre-revenue today, which is great. When do you think you'll have your first paying customer? What's your plan? So our plan to launch, to release our first product by the year end.
And in Q1, we will start acquiring customers, hope to acquire three to five in Q1. How will you price it? I mean, is this the enterprise motion? Is it low ARPU, freemium PLG model? I think we're going to, we actually have both. So we will be selling kind of inexpensive product to late stage startups through AWS marketplace.
So without extra, you know, integration sales or whatever, you know, process. How much will that be? It will be 500 to 1000 per month. Okay. And that's to create us recovery plans and update them regularly. So have that ready in case something happens, some disaster happens. For mid-size enterprise, we define it as our second segment.
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Chapter 3: What lessons were learned from the liquidation process?
sort of shut that company down, learned how to liquidate, which was painful, but good lessons to learn. We're obviously rooting for him here with Benudata. Pablo, thanks for taking us to the top. Nathan, thank you.