Rahul Gandhi is the cofounder and CEO of MakeSpace which is an on-demand storage company that makes it easy to order, store, and retrieve physical belongings. The company has raised $140 million so far from top tier investors such as Iron Mountain, Provenio Capital, Maywic Select Investments, Upfront Ventures, CX Collective, Ten Eighty Capital, 8VC, Founders Fund, and Lowercase Capital to name a few.
In this episode you will learn:
- Filling in the gaps in your expertise as you grow your company
- How they still had to pitch 50 funds to get their first round closed
- The dangers of over-engineering your business
- The challenges of scaling and expanding to new markets
- How and why you should launch your idea in spite of the odds
For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.
The Ultimate Guide To Pitch Decks
Moreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here).
Remember to unlock for free the pitch deck template that is being used by founders around the world to raise millions below.
About Rahul Gandhi:
Rahul Gandhi is a Co-Founder and the CEO at MakeSpace.
Previously, Rahul Gandhi was a Principal at High Peaks Venture Partners based in the firm’s New York City office where he was responsible for sourcing and evaluating investment opportunities across a wide range of sectors and supporting portfolio companies.
Prior to joining High Peaks, Rahul Gandhi was a Senior Manager on AOL’s Corporate Development team where he helped evaluate, manage, and structure numerous high-profile acquisitions and investments for the company. His previous experience also spans across investment banking for Banc of America Securities and venture capital for both Genacast Ventures and Comcast Interactive Capital.
Rahul Gandhi graduated from the George Washington University with high honors and holds both an MS in Accounting from the University of Virginia and an MBA from Columbia Business School. Rahul Gandhi is an active participant in the Columbia Venture Community (CVC) and serves on the board of the New York Venture Community (NYVC).
Connect with Rahul Gandhi:
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FULL TRANSCRIPTION OF THE INTERVIEW:
Alejandro: Hello, everyone and welcome to the DealMakers show. Today we have a really incredible founder. He’s been on both sides of the table, and I think that we’re going to be learning quite a bit on the process of building, scaling, financing, and you name it. So, without further ado, let’s welcome our guest today. Rahul Gandhi, welcome to the show.
Rahul Gandhi: Thank you. I’m excited to be here and tell the story.
Alejandro: Originally, you grew up in New Jersey. Tell us about your upbringing.
Rahul Gandhi: I did. I grew up in a small town in New Jersey, very close to the Pennsylvania border, so on the southern tip of New Jersey in a town called Voorhees. That’s where my parents settled down. They immigrated from India around the ‘70s, so I got my start there, and it was a great place to grow up.
Alejandro: I know that you have a couple of things here that shaped your perspective and your entrepreneurial mindset. Obviously, one, your parents coming to the U.S. going after the American dream, coming from India. Then, also, your father going at it and having his own business. So, tell us about this.
Rahul Gandhi: Yeah. My dad, it was so fascinating watching him and as it unfolded and try to go after his dreams. He was a classic entrepreneur at heart, a heavy risk-taker, and probably overextended on the risk side, but he really learned his trade in the hospitality industry. That’s what he was passionate about. He started his career when he came over here working at various hotels, and he eventually worked his way up to hotel management. For many years in the beginning of his career, he would actually go from our small town in New Jersey, traveling on a bus, coming all the way up to New York because that’s where he was working. He was working at a Hilton Hotel in New York City at the time. The hours and the travel got too burdensome. That was the first time that he stepped back and really looked at his life differently. He wanted to spend more time with me when I was younger and when my sister was born. His dream was to always own and operate restaurants. When I was seven or eight, he opened his first franchised restaurant. It was an Arby’s, believe it or not. That’s where the wonderful world of restaurants and my time with him learning the industry and growing up in that business became various businesses after that. I learned the trade of hospitality from him at a very early age, even as early as the age of ten. I was working behind the register with him and interacting with customers. I would tell you that something magical happened to me in that experience and became very, very important to my career and my passions. I was so fortunate to have that opportunity to learn that – the amazing impact you can have on understanding customer behavior and being able to relate to consumers by listening to them – simple things. I remember vividly being so nervous when the lunch rush would come because we were running the business inside a mall. I was ten, and I would see all these people start to come in line, and there was so much nervousness in me as to what to do. At the time, all I was doing was filling up sodas. I started to, after a few times of this, see different patterns, and I saw the same faces coming over and over again. I started listening to their orders and started to understand that this person liked the Diet Coke with their meal with very little ice, or this person loves Sprite mixed with the orange drink that we had. You get that repetition ready, and then by getting that ready before they even ask for it was so magical. That was an important lesson for me that held true through the rest of my career. Unfortunately, for us – anyone that’s running the restaurant industry understands how difficult it is. It’s very cutthroat; it is very capital intensive. You have to be right about almost everything when it comes to inventory levels, to staffing. There was a lot that we did right. There was a lot that my dad, ultimately, did wrong too. I think the biggest challenge we always had when I was growing up was, anytime we saw a bit of success, we would chase after it, and we would start to open up more and more. Ultimately, that led to us being well over what we could support. Growing up, we had gone through multiple bankruptcy processes. So, I saw vividly the downside of being an entrepreneur. That was really hard to go through because one day, when you have a stable life, and you think you’re on top of the world, and for me, that meant that my dad would walk home – at the time, Nintendo was popular – just the standard Nintendo system. He would come home with ten video games for me. Then, three months later, we’re sitting down with lawyers trying to understand how we could keep our house. It was just like the ups and downs and the turmoil that you go through just trying to operate a business like that. It really steered me away from doing that early on in my career.
Alejandro: Was there a point in time, especially here during this experience, where perhaps unconsciously, you made that decision that one day you would have your own business?
Rahul Gandhi: You know. I always aspired to it, and I aspired to it for different reasons than most – I shouldn’t say most, but at least many of the entrepreneurs that I talk to. I never cared, and it sounds weird, about the big payday. Of course, you all want to live comfortably. To me, it was about passion for building, and passion for being able to deliver amazing experiences and to change the way people operated because that’s where the world was moving in the show industries and make advancements. It was things like – the companies that I admire were like – you look at IBM, and GM, and places like that, that had constantly had to innovate – the companies had been around for almost 100 years that changed the face of their organization or their focus to adapt to the times so they could stay. That, to me, was very interesting and passionate. The earlier part of my career was candidly driven by, I wanted stability. So, when I graduated from school – and by the way. Just to even get through school, I had to take out jobs. I was a bartender. I was working in retail stores. I was doing almost everything to help pay my way through school. Then, ultimately, when I came out, I had an opportunity to join an investment bank and learn all about the finance world. That was super interesting to me because I knew there were fundamentals, which I would have to master them in order to eventually be able to build a business that I think could be a business that could go well beyond me.
Rahul Gandhi: I would have my imprint on it, but it would be generational. That was always a dream of mine growing up because I saw how my dad chased it, and I saw how that never really materialized, and that understanding the risk-reward bounds was so critical.
Alejandro: Absolutely. After this, you go to University. Then you do investment banking, so here you’re able to see what makes a good company or a bad company as you’re analyzing it. But after this, this was your segue into AOL, which is where you saw your passion coming together. So, tell us about this.
Rahul Gandhi: Exactly. I had a very unique experience in banking. I spent a lot of time with media companies. That was a sector coverage that I was given. I learned a lot about how financial statements work, how to interact, how to raise capital in the public markets, how to understand fundamentals from the business. But mainly, dissect and discern the data and how it tells you a story on where the business could go and to marry that with the narrative. What was really fortunate for me was that I got to cover Time Warner at the time. Many may not be familiar, but Time Warner owned the AOL asset. I spent a considerable amount of time thinking through with our teams: what could Time Warner do with this AOL asset that clearly needed to move away from a dialup business at the time that had everyone dialing up to a closed wall. You got your email, etc., but that world was changed. The internet was open, and how do you transition into that world? Ultimate, that led me to meet an AOL team, and I ultimately joined them. I joined them in that effort to take all this amazing content and software that they had created and use for different purposes and start to bring it out to the world in more of an open system. The way my job translated was, in order to help monetize all of that, we started to build an ad platform on this content that was basically now offered for free instead of through the dialup world. We used the cash from the dialup world to start to accelerate that movement. I spent almost four years in that business meeting with such amazing entrepreneurs across the country that were solving various different ad technologies because the world was moving in that direction. It started to go back to my history of working with my father. I saw this amazing opportunity that was developing in the world, and that was where I learned patterns and talking to customers that were looking to eat lunch, I started to understand and see the power of software and how that could change experiences for people. AOL opened up my eyes to that. So, ultimately, I left that business and had an opportunity to come to business school. I went to Columbia, here in New York, and I viewed business school as a great playground to be able to launch businesses and meet like-minded people, and also to learn more of that foundational stuff that I knew would be so important in my ultimate goal of building a business that would last even beyond. So, I did try to get multiple companies off the ground when I quickly realized that I didn’t understand how to raise capital. When I finished business school, that experience led me to join a small venture capital firm, at the time, called High Peaks Venture Partners, ultimately transitioned to now a firm called Primary Venture Partners. At the time, it was a 30-million-dollar fund with three partners, no real presence in New York City outside of one of the partners coming up from The Berkshires for two, maybe three days a week, and I was a first hire that they made that tried to take hold of what was happening at the time in the City was, you were seeing the proliferation of a lot of entrepreneurs that were trying to tackle big ideas with technology, but it was still the infancy of when New York Tech was coming up, which is when we had first met. Ultimately, I had a chance to meet with great entrepreneurs, and it started to grow more and more until eventually, I had no choice but to scratch it. Then, I left that business in late 2012, early 2013, to launch what you see today with MakeSpace.
Alejandro: Let’s talk about MakeSpace because, obviously, it’s your baby. It’s the business that you’re in now and definitely one where you learn that the early days were not as glamourous as you would probably read on TechCrunch or anywhere else. So, what were the early days like?
Rahul Gandhi: When you think you’re going to be an entrepreneur; it feels like magic. It happens right away that your business is massive, and you built something great. But, no. What I learned quickly – and keep in mind, I had just graduated from business school and had started a career in venture capital. Anyone who is involved in that side of the world can realize it’s a very different lifestyle than what you’d experience when you’re an entrepreneur. Immediately, it almost hit me like a ton of bricks, like, this business that we were trying to build – which, by the way, the opportunity came about because in 2012 Hurricane Sandy hit New York. Traditionally in the storage business, which is what we do, which is the next version of full valet storage experience – you typically are drawn to a storage unit for your physical items when you go through some crazy event. Usually, they call it the 4 D’s, which is death, downsize, divorce, disaster. I had gone through a disaster, which was Hurricane Sandy. I teamed up with two other entrepreneurs who had experience similarly the self-storage experience at the time, and we were taken back at how little experience there really was. This totally went against what I had grown up with, which is, you can change customer behavior and have an impact on someone by just understanding their behavior and listening to them. The storage industry didn’t do any of that. So, we started to ask ourselves why? Ultimately, we realized that because of the design of the industry, which is very real estate based. It’s about the real estate asset, not the customer experience of storage that they serve you on top of that asset. We had this really great opportunity. We thought of ourselves very differently and thought of ourselves as a consumer business. So, we simply went to the whiteboard, which then allowed us to understand: what were the friction points that we had? 1) We had to go to the storage facility, which if you live in a city, that’s a really bad and hard experience at times. 2) We had to do all the work, pack all of our stuff, pack our boxes, mark our boxes, and take it to the facility. 3) We had to be the expert. I had to figure out what kind of space size I needed. Then I had to hope that storage facility had that space size available for me. If that was the case, then I could go rent it. The entire experience was on me, so how do we flip that, and how do we start to say, “No. Don’t go to the storage facility. We can play Tetris and be a logistics expert better than you, and we’ll do all that heavy lifting and hard work for you, and we’re going to use software systems to help us do that.” In theory, that was amazing, and we were so excited. We were described at the time as self-storage facility meets Dropbox, manage stuff like your files, the Dropbox for physical things. Those types of descriptions started to come our way in the early days. What we didn’t realize, which is where it gets to your point, it’s really hard to get a business off the ground, was “We want to do all these things, but, by the way, software doesn’t solve the challenge of going to the customer.” It can help you get to the customer, but someone has to do it. All the sudden, I was thrust into this situation where we had no idea how to build a logistics system. I’d never managed or driven a commercial truck before. We didn’t even know how to lease one or get one set up. I was a finance background with a history of entrepreneurship. My co-founders, one was a branding person and product; the other one was a technologist, and we were sitting there trying to figure out how to build the last-mile transportation system. What I learned quickly was the easy way to do it, and the way you would think to immediately do is to go hire someone to help. But when you have a few hundred thousand dollars in the bank and no way to pay that person, you’ve got to do it yourself. So, that’s what we did. I remember vividly walking into the, believe it or not, a Mercedes dealership because I had seen on the street a Sprinter van. I was like, “I can’t drive a big truck because I don’t know how to do it, but I can drive one of those sprinter vans.” I saw a Mercedes symbol on it. We went down to the store in Manhattan on 58th and 10th, I believe. We walked in, and we asked for a Sprinter van. At first, we got a couple of laughs, but eventually, we signed personal guarantees on those Sprinter vans, myself and Sam. We had five vans that we leased. But, again, that wasn’t even the harder part. The harder part was I had to learn how to be the first driver. The first 200 appointments were all me because we had to understand what our customers wanted, and I knew that, and we didn’t have the resources to go hire someone to help us learn that. It meant that each one of us had to pick different roles in order to get this business off the ground. My role was on the operations logistics side, which meant I went from graduating from business school to being a venture capitalist to, all the sudden, driving a van 15 hours a day, six days a week. That’s what it takes to get a real business off the ground. I can tell you our first early capital raises were enormously hard. You think you’ve got someone with a VC background, myself, a product person and serial entrepreneur, my other founder, and then a technologist. But nowhere in that equation did we have a logistics or operation expertise, and that was the challenge we were trying to solve. So, we met with over 50 funds until we finally convinced a handful that we were audacious enough and scrappy enough to go figure this out ourselves, and that there was a real, massive, huge opportunity here because the industry wasn’t changing, so take the bet on us. That’s how it ultimately unfolded, but really, I spent two years of learning the trade of how to be a last-mile logistic run.
Alejandro: In that aspect, so that the people that are listening get it, what ended up being the business model of MakeSpace. How do you guys make money?
Rahul Gandhi: We’ve gone through iterations of this, and I think, again, it goes back to one fault of my prior experience was that because I came and was doing things at larger companies or finance services organizations, I thought I was really fancy at modeling and understanding business models. What we did was, we over-engineered our business model. We learned that as we were building the business, which was the key inflection and learning point for us. When we started the business out, we knew that there was a storage opportunity. We knew that the current service that was offered to customers looked the same everywhere, so whether I went to an extra space or a public space, public storage unit, they’re selling me that same thing except the building is a different color or the person working behind the desk is different. So we knew there was an opportunity that existed already, but we didn’t know how we were going to build a business around educating customers around that. What we decided to do was, instead of looking at the industry and how they were designed, we decided to communicate with the customer differently. But the first lesson was, we didn’t know what the customer wanted. That was my first mistake, which you would think coming from my background, that would have been the first thing I would think about. We over-engineered the business model in the sense of instead of offering what the industry offered, which was selling you space, we sold you boxes. We asked you, the customer, “We’ll do the heavy lifting for you, but we’re going to contain your experience to what you can store inside of these boxes because that was easier for us to manage in the business, and we could charge you a fee for a box rental. Interestingly enough, that worked very well in New York. So, people understood it. They used us as not a storage replacement, but a supplement, as like something they could have an extra closet space in, and they could get 15 or 20 boxes or even 3 boxes to store seasonal clothes. We saw a huge uptake in our business in terms of demand pretty early on, and specifically in New York. Then, the classic mistake #2 led us to think we had a service that was replicable in every market across the U.S. I’ll go back to an earlier story of when we started the business – it’s a classic thing that all entrepreneurs do or should do. There are two things that you should do: 1) Take as many pictures about your journey as you can because you’ll be surprised at how fast it goes. 2) Come around the table and get a line on what you think is success for your business. We did that early on because I was a classic VC and wanted to define that. I remember pre-work days, where we ran three desks out of a company – with four other companies that were based in China Town. There’s one small Irish part in that area, and we were at it celebrating the launch of the business and our service, the website being up. We were going around the table asking each other what we thought success was. We all had different answers, and my answer was, “I want this service to be available in 25 different cities, and I want it to happen in five years. That’s our five-year goal because then we know we’ve got something that’s amazing, that’s working, the product/market fit is there. We build something amazing that’s going to be lasting again, which is a big thing for me because that’s what I’m passionate about in terms of the business building. It would take a much longer time and a very different way of being able to do that, but we learned quickly that when we started to expand early on, and we went from New York, into Chicago, and D.C. for the first two markets, we entered into that we didn’t have demand for our service, and literally for the first six months of launch there, we heard nothing. We had no customer demand, and we learned quickly that what worked in New York was very different in those cities because the state requirements were there. And, by the way, the customer reaction to what we offered, which was that box rental, that fee that we had, which was over-engineered by me, didn’t resonate with customers because they didn’t actually know what we were doing.
Rahul Gandhi: “Are you a storage company? Are you not? We can’t compare prices amongst what’s available to us here. We don’t know what’s happening.” So, ultimately, we realized that we had the model wrong and had to pivot the business in terms of instead of selling boxes, we started selling space, which then became the inflection point, which totally changed the trajectory of our company.
Alejandro: We’ll talk about that. During this time, when you’re still experiencing product/market fit, getting in there, making it happen, you’re also in parallel dealing with a personal situation with your twins in an incubator. My question here is, how do you get yourself back up and keep pushing when you’re dealing with so much stuff in front of you?
Rahul Gandhi: The stress – there are a couple of different areas of stress. For me, unfortunately, it all hit at the same time. I’m a dad to two beautiful and amazing twin daughters. They both were so excited to join us that they decided to come almost 3½ months too early. That started our key battle with basic survival for them for the first 6 ½ to 7 months of their life. It was a really profound experience for me that changed my perspective on life, on the way I operate, around risk-taking. This was before we started the business. When they were one-year-old, and they’re both doing fantastic after having gone through several early surgeries, and a tremendous amount of services that we had to offer or the city was able to offer to keep them at pace with other children that were their similar age, it really gave me the confidence that life is so precious, and you’ve got to take your chances. It brought me back having a much better understanding of my father and the risks that he took and his passions, where I didn’t really appreciate growing up because we always lost. It was: you’ve got to take your shots. You can’t overthink it. You can’t over-engineer things. Even then, I still made those classic mistakes as an entrepreneur. But being a father and having that lottery ticket of kids that only had maybe a 5% chance of survival at the time was a tremendous learning experience and foundational in my ability to get this business off the ground. But also, to go through the ups and downs that we experienced and ultimately finding product/market fit that happened almost three years after we started the business, which was incredibly scary after you’ve raised money and are building this business, and then realizing that maybe you’re not doing it the right way. So, you quickly move in a different direction that does resonate. All those lessons became very critical for me in righting the ship and making sure that we eventually listened to our customers and did address their needs, and then the business took off. But, being a father and going through that situation, and ultimately the stress of it all, trying to survive every day in the business. In an entrepreneur’s world, it’s very different from a large company. Large companies think of their lifetime in years or decades. I think of my lifetime, even today, in hours and minutes. You’re stress level of not knowing whether your business will be around, whether you’re going to get that legal letter from a big company that’s going to try to get you to shut down, which has happened, or whether you’re going to hit payroll because you’ve got to get through a fundraising process, and it’s not done yet. What do you tell all these people that have bought behind the mission and are trying to build this? And you’re going to have all those inflection points. They say, and I believe it, and it’s true with us that you have at least two or three moments in the business where you’re going to die. You think it’s going to happen. There’s no way out. You’re in a box. There’s no door, and what are you going to do to get out of that situation? I think becoming a father and seeing how hard my daughters fought and with the little probability of success that they had, but yet, achieving it gave me all the confidence in the world that no matter what the challenge is ahead of you, you’ve got to stay logical; you’ve got to stay calm; you’ve got to do it for the team that’s around you. If there’s a will, and if there’s grit, and you’re going to knock down walls, you’re going to find a path. I think our success today is largely a function of that. That also transcends to your team. Your team starts to act that way. It’s a very interesting lesson for me, and it’s a lesson I’m so grateful for from my father all the way to my kids who gave me that confidence that no matter what, as hard as it gets, you’ve got to keep fighting. You can’t give up.
Alejandro: 100%. Obviously, I’ve dealt, and as you know, and the listeners know, with a very similar situation with my twin girls in incubators for 180 days. So, I totally agree. Definitely, this type of stuff gives you a ton of perspective on life and on everything.
Rahul Gandhi: Right.
Alejandro: Moving on here to the financing side. How much capital have you guys raised to date?
Rahul Gandhi: We’ve raised north of 150 million dollars to date. That sounds like an enormous amount of capital, and it is. It goes back to early on as furry-eyed entrepreneurs, we didn’t appreciate the bigger-scale picture because we didn’t know it. We weren’t sophisticated enough at the time, which I think was the only reason that the business got off the ground, so I’m so thankful that we didn’t know what we were getting into. What we realized was that 1) we had this enormous software challenge, which was – as I was driving the van understanding that we have to have a customized routing system because we need to tell drivers where to go and how to get there. We also had this challenge of we’ve got all this stuff coming into our system, which is very different from an eCommerce business, which would go off the shelf. Instead, we’re keeping stuff, and we’re keeping it for years because that’s how long customers use the service. It’s a multi-year lifetime. How do we store that? Where do we put it? Now, all the sudden, we realized that we needed to open up all these warehouses because we can’t afford to have real estate sitting inside of the city, but these industrial parks offered a great opportunity for us to be able to create storage space. All these things had cost. Not to mention the technology that I mentioned in the real estate, but you also have to market your service. We didn’t appreciate how capital-intensive it was the first five years. It goes back to my story on where we wanted to be five years after we started the service. We had raised 78 million dollars; we’d raised from mostly technology VCs that many are familiar with that are either based in the Valley or in LA or in NY. It was around the promise of if you build the systems the right way that can scale-out, ultimately, you could solve the infrastructure real estate problem. But they were two very different things, and they were phased approaches. The first phase was the software development, which took us five years. At the same time, we entered into four markets. Believe it or not, it took us 78 million dollars to support that business, just to give you a sense of how capital-intensive it was. Back in 2018, once we had found success in our business model, we knew we had product/market fit. Finally, in Chicago and D.C., they were ramping where we wanted to go. We were selling space. We had the attention of the incumbents. We now had this next phase, Phase 2 of the challenge, which was how do we go into 25 markets, which was the goal. At the time, the only thought process I had when we entered that phase, and we started the fundraising path in the fall of 2018 was, I have to go raise a ton of capital. I have to go raise hundreds of millions of dollars to go build this infrastructure. That meant going to open up warehouses, and that meant I had to become a real estate expert overnight. I was talking to large-scale real estate investors all the way through the bigger growth funds at the time who were giving enormous amounts of capital to entrepreneurs, like me, to take big challenges for the big outcome like soft banks of the world, etc. As I was going through these conversations, realizing, “I am not nearly enough of an expert to give the confidence of something that’s tried and true. This is not a new playbook. I can go hire a real estate person to help me figure this strategy out. I certainly am not built to do that. Yet, I’m going to ask these large-scale investors to go bet on me to figure that piece of it out.” Something seemed off. So, as I was going through that process, I was introduced to a large public company called Iron Mountain. Many of you are probably familiar with them based on their document storage business, their large-scale, 20-million-dollar enterprise-valued company that serves today over 95% of Fortune 1000 businesses in terms of just the documents storage. Fascinatingly enough had built an early presence in consumer valet storage, which is what we were doing because they viewed that – the infrastructure that they built, they knew that could actually work for this type of business. But they didn’t have the capabilities on the marketing and technology side. Yet, we did. Simple enough, when we had first-level conversations, it was, “What if we could marry our strengths somehow?” Obviously, with a big company like that, you don’t talk about that from a fundraising perspective. That immediately turns and shifts gear, especially to their organization, “Should we acquire this business? Should we build it under that Iron Mountain infrastructure? Is there a path to do that?” That wasn’t completely of interest to us, and I think my board, which was, at the time, consistent with many early-stage investors, were really enamored by the idea of taking on hundreds of millions of dollars and going to build this infrastructure ourselves. But I knew the challenges and risks in execution around it and didn’t have their support to think more strategically about it upfront. But I had to navigate a very complicated process where you have to figure out the incentives of this large public company. But what if we could create a joint venture that married both of our strengths and then raise capital on that and solve this scaling problem because I could use Iron Mountain’s backend infrastructure, and they could now use MakeSpace’s frontend software technologies, including logistics technology that they didn’t have, and could we marry these friends together and remain independent and then change the trajectory in the business? That process took nine months, and we announced it in March of 2019, a joint venture with Iron Mountain that immediately took us from 4 markets to 24 markets, then ultimately into 31 markets. It took a several-hundred-million-dollar effort and brought it down to roughly 30 million dollars, which is the round we raised at the time, and we set up the scale that was so impossible to even think at the time because we looked far more strategic. After months and months of convincing to the board, I think they understood that the risk in the market is changing. The risk in going to take on large-scale leases – this is pre-we-were. So, people hadn’t realized that there was a lot of risk in how key businesses were operating and how aggressive people were being in terms of risk. They finally came around to understanding what the power of this platform could be if we could just be in a lot of different markets and offer this service in scale. So, after a lot of internal conversations and battles, I was able to convince them. We recently announced over the pandemic – we raised another 55 million dollars as Iron Mountain is our anchor investor to now really fuel the growth because we were so successful in building that scale.
Alejandro: That’s amazing. We’re talking here about the markets, and probably the listeners are wondering how big is MakeSpace today? Anything that you could share around employee count or anything else?
Rahul Gandhi: All together supporting the business, we’ve got roughly 550 employees of which we labor-share with Iron Mountain, so many of the warehouse workers and drivers that interact with you on a day-to-day basis sit under that Iron Mountain infrastructure as part of the joint venture, and that’s roughly about 70% of the workforce. The rest is comprised of marketers, brand marketers, performance marketers, technologists, a product team, various engineering resources for the logistics and routing software system to the WMS systems that we build, internal strategy team, finance, accounting, HR, and all that fun stuff. That comprises what I would call the frontend MakeSpace consumer experience portion of it, whereas the backend is roughly the bulk of the business in terms of the employee counts that we have.
Alejandro: That’s amazing. What a remarkable journey, Rahul. Now, I want to ask you the typical question that I ask the guests that come on the show, and that is – it’s amazing how far along you’ve come. I’ve had the privilege of watching you grow, as well, because you and I met when you were at High Peaks. Now, if you had the opportunity to have a chat with your younger self, with that Rahul who was thinking about doing something, and you had that chance of giving your younger self one piece of business advice, what would that be and why knowing what you know now?
Rahul Gandhi: I think it would be two things. It would be one, which was a classic mistake that I knew growing up, and I tried to understand; I should have had better pattern recognitions around it is, don’t assume that you’re more sophisticated or analyze things to death in terms of over-engineering because you think you know what the customer wants. When you’re building a consumer business, your job is to listen. That’s what I would tell myself is, go back to when I stood behind that cash register, and I was nervous, and I started to recognize pattern recognitions, and I started to listen, and I started to understand the customer better. That’s what I needed to do early on. I understood that I had to get to the customer and listen to build the platform out, but I didn’t listen enough. I think if I had done that better, the business would have understood quickly that the product/market fit wasn’t quite – we would have been able to address that a lot sooner. On the same vein, understanding the risk-taking portion. I hear so many times, I’ve talked with entrepreneurs that have this amazing idea, and they want to vet it out and with as many people as they can talk to. I can tell you, the people – and I did the same thing early on. I can tell you that the one mistake that I made was to listen to a lot of opinions. A lot of people told me that I had a terrible idea. I think a journalist wrote that “This might be one of the worst ideas of all time” for MakeSpace when it came out. That didn’t change my conviction around it because I knew that world wasn’t going to change, and that I could have a dramatic part of the process of the innovation. I continue to tell myself, “Don’t overthink things.” The last thing you want to do is have an idea that you never execute on. I try to take that to heart today when we think about innovations. Because, look, MakeSpace, even if we’re seven years old, we are so far from being generational. Again, that’s my goal. We need to think about the next innovations of what storage we’re going to go from here by listening. What else are customers asking us for? How can that guide us to the innovations of the platform that we want to build over time, whether that’s taking things for junking or donations or other issues that you have in trying to create more space in your life? And how do we facilitate all that? And how do I get out of my way in trying to overanalyze things like a bigger company and having debts created and models built? Sometimes, you’ve just got to be scrappy and just do it. That’s, I think, one lesson that I continue to learn and that I’ll take with me in the future is, I might be wrong, and it’s good to be calculated, and it’s good to have some conviction, but sometimes, you’ve got to have the ability to react on imperfect information and take your shot. I thought that I had that growing up, and I thought that I knew that lesson, but clearly, in building this business, I’ve learned the hard way that you’ve got to put yourself in some very uncomfortable positions and take those shots.
Alejandro: Absolutely, and very, very profound, Rahul. Thank you for sharing that. For the folks that are listening, what is the best way for them to reach out and say hi?
Rahul Gandhi: Feel free to reach out. I’m on all social media platforms. My Twitter handle is @rgandhi10. You can also find me on Instagram, on LinkedIn. The easiest way, always, is by email: [email protected], and I’m happy to have a conversation. And thank you for taking the time to let me tell the story, and hopefully, it does have an impact on some of your audience.
Alejandro: Amazing. Thank you, Rahul. Thank you for being on the DealMakers show.
Rahul Gandhi: You’re welcome.
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