Ray Reddy founded PushLife which was a mobile commerce platform for mobile operators. He sold the company to Google and after spending 4 years there he went on to launch his next company, Ritual. The company is a social ordering app that taps into networks of co-workers and colleagues for fast and easy pick up and pay at a wide variety of local restaurants and coffee shops. So far Ritual has raised $120 million from investors such as Greylock, Insight Partners, or Golden Ventures.
In this episode you will learn:
- The process of selling to Google
- Dynamics of Google and lessons learned from them
- Strategic reasons to open an office outside of a major tech hub
- How to raise capital from top tier investors
- Liquidity in market places
- Retention rates from successful funnels
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.
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.
ACCESS THE PITCH DECK TEMPLATE
About Ray Reddy:
Ray Reddy is currently the co-founder & CEO of Ritual – the order ahead app that taps networks of co-workers and colleagues for fast and easy pick up and pay at a wide variety of local restaurants and coffee shops.
With Ritual, users can mobile order and pay at all their favorite local eateries and coffee shops and have it ready to pick up when they arrive. By also uniquely giving friends and colleagues the ability to add their own food orders onto an existing order, Ritual gives customers the choice of either picking up themselves or having their food brought right to their desk.
This ‘social ordering’ saves customers time and drives incremental orders for merchants. The best and busiest quick service restaurants and coffee shops in major cities across North America are using Ritual to give them a competitive, technological edge, driving profitability, and a more personalized way to connect with their customers.
Prior to Ritual, Ray co-founded mobile commerce company PushLife that was acquired by Google in 2011. At Google, Ray led mobile product management for shopping and commerce. It was while at Google that Ray saw the potential to better leverage a social application to unlock mobile commerce and thus, Ritual was born.
Connect with Ray Reddy:
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FULL TRANSCRIPTION OF THE INTERVIEW:
Alejandro: Alrighty. Hello, everyone, and welcome to the DealMakers show. I’m excited because today we have someone that is out of the U.S., which is really lovely. So, without further ado, let’s say welcome to the guest today. Ray Reddy, how’s it going?
Ray Reddy: Hi. I’m doing really well. Thanks for having me on the show.
Alejandro: I’m very, very excited to have you on board today. How was growing up in the Middle East for you?
Ray Reddy: Growing up in the Middle East was definitely a really interesting experience. My parent immigrated to Canada when I was in grade 10. Basically, we spent most of elementary school there. It was very different than going to school in North America. I think childhood and stuff was very normal, and probably somewhat comparable. It was just very hot. But I think from a school perspective I think the focus on learning was very different. I think it was a lot about content, and knowledge, and memorization of things, and I just found that in North America, it was a different focus on learning and understanding, and the pace was very different. That part of it was definitely an adjustment.
Alejandro: So, then you go into the University of Waterloo, and you did computer science. Then also, you did your Masters of Business and also Entrepreneurship and Technology. How was really getting for the first time present to the world or the idea of building stuff?
Ray Reddy: The math degree and computer science degree I did was—computer science and programming was something that I was always interested in growing up and had taught myself a lot about it even before university. So, that was like the natural progression for me. I think through school, one of the things that I wondered about was business like math and engineering in the sense of the way to approach certain programs in math and engineering, there’s a right way and a wrong way to do it. If you don’t know the right approach to solving very complicated problems, you will likely never get the solution. What I wasn’t sure of because I had done very little in terms of business and marketing and things like that. I had taken a few courses in undergrad but hadn’t really spent a lot of time doing those types of things. What I was really curious about at the end of school was: is business the same way? Is there definitively a right way and a wrong way to approach complex problems, and strategy, or marketing, and things like that? I think what I found at the end of it all was the answers are actually very different than math and science. It’s much more about common sense and experience than it is about definitive approaches and how to solve some of these problems. I think that was my main takeaway from spending a year doing business school.
Alejandro: Now that you’ve had this access to business, to solving problems with that mindset of computer science, and also having perhaps reviewed or studied some biographies of other founders. Why didn’t you go straight at it? Why did you go to work for three years at Research In Motion?
Ray Reddy: That’s a good question. I don’t know that I ever really aspired to be an entrepreneur. I liked building things, and I remember meeting people that said, “No matter what, someday I’m going to go build a company,” or they really aspired to do that. I think for me, it’s been less about that. It’s always been about building something and building something that I found had purpose, and that I could really connect to. I’ve never forced ideas or forced leaving to start a company. I think for me, it’s always been very organic. So, the default path for me out of school was just to learn, to find a job. I had never really worked in the corporate world before in an operator-type role. So, I think for me, it was getting a sense of like how companies and businesses really work. The first three years were just really learning. I happened to end up at BlackBerry and serendipitously, ended up learning a whole lot about mobile and how mobile was going to transform computing. That was more serendipitous and luck than it was any clever plan.
Ray Reddy: I think that ended up being sort of really pivotal point in my career because I think it was really the birth of mobile computing in the early 2000s and how it was really going to transform everything over the following decade. I got to see that transformation from a very unique viewpoint being at BlackBerry in the early to mid-2000s.
Alejandro: Your profile is remarkable because most of the people that have the engineering background like yourself, they typically perhaps will join a company or maybe like a startup. Then they have like the CTO, or maybe like the software development engineer role. Then eventually, they transition into either a business role, or they become a co-founder and CEO of their next company, but in your case, you went straight into being corporate strategy at BlackBerry. You were doing M&A, Venture Investments. Really, incredibly shocking for you to go straight at that.
Ray Reddy: Yeah. I had done some jobs as an intern where I did more technical jobs, but yeah, that’s right. My first real fulltime job was—I had nothing to do with computer science or programming. I think having a math or engineering background gives you the ability to navigate complex problems and be able to hold a lot of complexity in your head. I had no real experience, but I think I learned some good foundational principles and how to approach complicated problems and how to learn quickly. Really, I think that’s all I really had coming out of school. Very little of what I learned had any practical knowledge of applicability. I think with my career my focus has been where can I learn the most? I’ve stayed in jobs when I felt I was learning a lot. I often left when I felt like that was tailing off, and I could learn more doing something else. I think a lot of it through my career hasn’t been very planned out and thought through. I just kind of reevaluate things on short timeframes. When I feel like I’m learning a lot, then I stay. When I’m not, I’m not, and I leave.
Alejandro: So, in 2008, you’re obviously not learning a lot at BlackBerry because you decided to go out and start your own thing. What pushed you to start PushLife?
Ray Reddy: Yeah, I think at that point in mobile the one thing that I observed was just that the mobile phone was starting to consume other portable electronics. I think it became clear at that point that things like portable navigation, portable GPS, handheld units, portable media players. If you think back ten years ago, there were a lot of peripheral devices that people had on the go with them. They’ve all now consolidated into the phone. I think in the mid-2000s, I think that was very clear to a few people, especially people who could see the trend-line in mobile. I think for me, this has always been the reason for me to start a company. When I feel like I have a lot of conviction in something, and in this case, it was the convergence of handheld devices into the phone. When it feels like this is going to happen, and no one seems to be addressing the problem, and I think it’s a meaningful problem to solve, that’s when I decide to go solve it myself or build a team of people to go after it. I think that’s all that really happened. It was a combination of seeing something that felt like it was going to be a big deal and looking out into the ecosystem and seeing that no one was really paying attention or solving this problem, and I decided that I would learn more—even if I wasn’t successful, that I would learn more trying to solve this problem than I would staying put and doing what I’d done for the last three years.
Alejandro: And it was obviously successful because it was acquired by Google, but we’ll get into that in a little bit. What was the founding theme of PushLife?
Ray Reddy: It was a time prior to the iPhone, and what I believed was that all portable media players would basically be consumed by the phone. The challenge was not the phone’s capability to play media. It was that the consumer experience of getting music and content between—at the time, the cloud didn’t really exist, so everyone had all of their contents stored locally on their computers. Getting that to your phone was a difficult thing to do. That’s the problem we focused on was building an experience that made it very easy for people to move content back and forth between their phone and their computers, specifically music. Music had just gone download-free in 2008, which was a big change. We built a consumer experience that basically made normal phones, and it gave it an iPod-like experience on Android, BlackBerry, Nokia, and all of the handsets that mattered at the time. It was interesting how different the world of mobile was. If you go back ten years, Nokia had 40% market share. BlackBerry had something like 20% market share, and the iPhone was less than 1%. So, we were basically building a media experience for 99% of handsets that weren’t the iPhone at the time. It’s incredible how quickly the world changed.
Alejandro: It is. It’s really unbelievable. BlackBerry, I remember at that point, every single person at least here in New York City, everyone had a BlackBerry. Then all of the sudden in a couple of years, everything changed so rapidly that everyone had an iPhone and nobody cared anymore about BlackBerry.
Ray Reddy: Yeah. I think what I really took away from that experience is in technology how quickly the world can change. Sometimes, it feels like things are taking a long time, and that’s the funny thing about exponential curves is that it sometimes can feel like it’s taking a long time, but as soon as you get into a certain part of the curve, it just feels like the world changes overnight. That’s what it felt like in mobile. It felt like in the span of four or five years, it went from a very diverse ecosystem. Back in the day, building apps for phones was a big problem. There were like four or five different platforms you have to build for. There was a lot of tooling and infrastructure and how to deploy an app across so many different platforms. When it converged into a two-platform world, it fundamentally changed how mobile computing works, and with the app stores, and things like that. Yeah, the world changed very, very fast.
Alejandro: Got it. As well, let me ask you this here. What ended up being the business model and how were you guys monetizing?
Ray Reddy: We ended up licensing our software to carrier. There were a lot of interesting changes happening in content. So, in the mid-2000s, carriers had sold—again, this was one of the big changes. When mobile was very diverse, when there were a lot of different phone platforms, people were actually more loyal to the carrier than they were to a handset brand. People actually switch handset brands all the time. They’d search between BlackBerry and something else, and try the iPhone. So, people would switch to different types of phones, but it was almost like their primary content account was with their carrier. And carriers had made a lot of money selling ringtones. If you remember back in the early 2000s, carriers had made billions of dollars selling ringtones and wallpapers and content like that for mobile. So, our model at the time was to focus on how to help carriers be more successful in content as the handset market changed. Even though we were building consumer software, we were actually licensing it to carriers to deploy across their base. At that time, the app stores didn’t really exist, so getting distribution on mobile was actually a really difficult thing. There was actually only one path which was through the carriers for the most part on how to really get massive distribution. It’s funny when you think back to that. The world was just so different ten years ago that none of that would even make sense today. That was the business model at the time.
Alejandro: How did you capitalize the business?
Ray Reddy: We’d raised a small round of financing. We’d raised a very small Seed Series A Round. It got us to enough of a point where we had some fairly large global carriers on the platform in Europe and in North America as well. I think what we started to realize was we were actually starting to see the royal change in mobile. We were starting to see how things were consolidating into two platforms and how carriers were really losing their stronghold over content. Their big asset they had was that billing system, but people were increasingly starting to buy content from other sources, not from them. That was the point at which we started to broaden our focus and actually started to focus more on commerce and other types of digital good transactions, not just content. It just kind of lined up with the time that Google was trying to make a really big bat in commerce themselves. They ended up acquiring us to bolster the larger bet that they were making on deals and local commerce.
Alejandro: Let’s talk about the M&A transaction. How did that happen? Was there a point where you guys thought it would be a good idea to start an M&A process and knock on the door of Google, or did they come to you? How did that happen?
Ray Reddy: It started very organically. I think that as we started selling into more and more carriers, there was a natural discussion that came up on partnership with Google on their handsets and how they were thinking about content on Android. So, the discussion started there just around partnership and if and how they could be helpful to us on their platform. I think from there we were approaching having to make a decision on taking another round of financing and betting bigger on content in the platform.
Alejandro: How much did you raise at that point?
Ray Reddy: We’d only raised a few million dollars, I think. It was a very small amount, and we were at the point where we had to decide whether we were really going to go after this in a big way. To be honest, I think we had some trepidation around how much mobile had changed and if what we’d focused on content—it almost felt like we would have to reinvent our business I guess would be the—our business was working, but we could kind of see the changes happening with carriers. In fact, even then, I think we couldn’t have predicted how fast things would change. In hindsight, it was a very good decision for us because the world changed even faster than we had predicted. I think this was the time at which Groupon was really exploding, and it felt like there was a really big opportunity in local commerce. Again, for me, it was really following the same ethos that I’ve always had, which is where do I feel like I’m really going to learn the most? The honest answer for me at that point was joining Google. I really did feel like the vision that they painted and what they were trying to accomplish in local commerce and the learnings that I had during the four years I was there, it was a really incredible experience.
Alejandro: How big was PushLife at the time of the transaction?
Ray Reddy: It was pretty small. We were about, I think, just under 30 employees. So, it was a fairly a small team, and most of us joined the office, the Canadian Google office here in Waterloo in Canada. Then my co-founder, Rob, and I ended up moving out to Mountainview to Google headquarters. I ended up running a few larger teams. I ended up running the mobile commerce team for a product. Then towards the end, actually was part of the launch team for Google Shopping Express which was their same-day delivery effort in retail. Again, through all of those things, just ended up learning an immense about local and commerce.
Alejandro: I can imagine, and the M&A process, how long did it last from the time the conversations when to like, “Hey, maybe it makes sense to explore doing an acquisition” to the point it was actually closed?
Ray Reddy: It was pretty fast. Google, they’re an M&A factory, so they are true professionals at how they handle M&As. I would say no games. Very straight up. They commit to timelines. They outlined how the process would work. It’s interesting when companies do—the difference between four or five acquisitions a year, then each one of them feels one-off and unique, and sometimes you have weird dynamics with core dev teams trying to overoptimize for certain results. But I think the difference with companies like Google is when they do hundreds of acquisitions a year. They really turn it into a mass production factory. So, I actually think that’s great. It’s very organized. There are no games. They are very straight-up. It doesn’t feel like anyone is trying to overly optimize a negotiation. At the end of the day, it makes a lot of sense because the transaction is the beginning of the relationship and what you actually want is a group of people to come in and be energized and deliver a lot of value over the upcoming years. It’s being a little bit pennywise, pound-foolish when M&A teams try to get a little too cute doing the process. I had heard rumors of other companies approaching things in that way, but I would say the process of Google was the way you’d want it. Really fast, very clean, and just a very good first impression of the company.
Alejandro: Really cool. What were the terms of the deal, Ray?
Ray Reddy: The terms were unannounced, so there were no figures announced.
Alejandro: Got it. You were with Google doing what they call the vesting and resting for about three and a half years. So, you went to Mountainview, but one thing that really stood out for me is why being there where the action is happening, how do you end up back in Toronto?
Ray Reddy: Yeah. That’s a good question.
Alejandro: And especially with a new company. First, walk us through how you came up with the concept and why once you’re thinking about launching a company, you don’t go to the capital of the world for launching your company, but you go somewhere else.
Ray Reddy: Yeah. That’s a really good question. To answer the first part of your question, Google is a very special and unique company. I learned a tremendous amount from them. To be honest, the decision to leave wasn’t—until probably the very last month, I actually wasn’t sure if I was going to leave or not. So, there was definitely no pre-conceived notion of when vesting ends that I would leave. In fact, until the very last minute, I was exploring interesting roles that would have even had me stay at Google. So, I think it came down to, once again, feeling like there was—I had spent a long time in local commerce, and what I kind of concluded at the end was I cared about the space, and I was very curious and interested on how digital would change local commerce because it seemed the one massive vertical that had been completely intuitive from technology and from digital. There was an attempt at Groupon on how to connect people with local businesses, but it didn’t really work in the end for many reasons. So, I was deeply interested in this problem. Really, what I concluded at the end was structurally, a big company wasn’t set up to solve this problem. I really believed that by the end. So, it’s not that there wasn’t an option to try to build something interesting at Google. I just believe that you had everything working. Even with the resources of a big company, you had everything working against you. That’s why I decided the right thing was to try and build this starting very small and ground up. The question of why Toronto? A few reasons. One was that the Valley’s a really interesting place. On one hand, as you said, it is the capital of technology worldwide, but I think there’s also some really weird dynamics there. The biggest one is you’ve got a very high concentration of very wealthy people, and they’re all early adopters. In my opinion, when you look at almost the collapse of the entire on-demand space, everything from on-demand valets to cleaning services. If you recall, four or five years ago, this was like a category of startups, and it had a name: the on-demand space. I actually think that there was a massive false-positive from the Valley because when you have places like Palo Alto where average household incomes are north of 2 million, you can fool yourself into thinking that there are enough people who will pay a big premium for convenience. I think that when you look across average neighborhoods and cities in North America, so exclude SF and New York, I don’t think that’s true. I think you lose sight of that in the Valley. You lose sight of the average person. So, if you’re trying to build a mass market consumer product, I think you just have to be very careful on false-positives that can come from something working in the Valley. So, I felt strongly about that, that what we were trying to build was something for the mass market. It wasn’t for rich people, and in fact, I actually questioned at the time whether what we were trying to build would even work in the Valley because we were trying to solve a problem of people going into businesses and making that experience better of how you would order and pick up coffee, lunch, and potentially other things from local businesses. One question I remember getting at the time from the Valley is, “Well, why would anyone do that when they can just have it delivered?” Right?
Ray Reddy: I think the interesting part of the question is, the types of investors that ask that question are not at all sensitive to paying a $10 delivery fee for having a $10 item brought to them. That doesn’t seem weird to them. But I think that’s actually not the norm. So, I actually questioned whether what we were trying to do would even work in the Valley. What I concluded, in the end, was what mattered was it working everywhere else, and it would be nice if it worked there, but that wasn’t the audience that we were necessarily building for. So, I think that was one big reason. Then when we went and looked at—you know there are other things in terms of just the reality of building talent there, and hiring, and cost, and a lot of those other things. We couldn’t have imagined what Toronto has been on an incredible pace right now for just technology growth. It wasn’t that way five years ago when we started here. I think it has started to pick up over the last few years. I think we got particularly lucky choosing Toronto. It was also where I grew up, and for a lot of reasons, it made sense. But it ended up being a very good decision.
Alejandro: How did you meet your co-founders as well, Ray?
Ray Reddy: My co-founders and I actually went to high school together in a suburb of Toronto where we grew up. So, yeah. It’s an unusual story of us all being best friends and starting to build businesses together from a very early age. We tried to build our first business at the end of high school and early university. Pretty much everything we did at that point had failed. But I think we got just tremendous learnings on how to build and deploy products at a very early age. That ended up being very useful when we started PushLife.
Alejandro: Did you like call them with the idea and say, “Hey, guys. I’m coming home, and we’re doing this”?
Ray Reddy: They were all at Google because we all worked together at PushLife.
Alejandro: Okay, fine.
Ray Reddy: We were doing different things at Google, but I think we still ended up spending a lot of time together.
Alejandro: Really cool. What ended up really being here the business model and the strategy behind it?
Ray Reddy: Of Ritual?
Alejandro: Yes, of Ritual.
Ray Reddy: Yes, of Ritual. We look a lot like any other third party that connects people with anything like a food-delivery company and economics. You basically take a fee on transactions and incremental orders that you drive. So, the business model is the same, which is consumers don’t pay an extra fee, but were able to drive incremental revenue to local businesses and we take a percentage of transactions. But because we don’t have drivers and logistics, our fee is dramatically lower. It’s a third of what delivery companies would charge because they have to pay someone else to move things around. That’s the business model.
Alejandro: And you guys were just getting a cut of that?
Ray Reddy: Yeah. We take a cut of transactions that we drive.
Alejandro: Then what were some of the early days like? What were some of the challenges that you were experiencing building this?
Ray Reddy: I think that one of the things that we had to prove in the very early days—the way that I like to approach these types of problems is try to break down a very complicated problem into something simple that we can quickly prove, and then that gives us a lot of confidence to invest heavily in solving the very complicated problem. In our case, the problem was a lot of companies, and a lot of venture capital has gone into trying to solve this problem which is how do you connect people with local businesses in a digital way? Some companies try to solve this problem via loyalty. There are two or three different companies that tried this and some dollars that went into that. We weren’t the first mobile-ordering product to launch. I fact, I would say to somebody we were the last one. There were many that tried to do what we tried to do ahead of us. So, some companies tried it from the deals angle. Some tried it from the ordering angle. Some tried it from the loyalty angle. Some tried it from instore-payments angle. There are many different categories of companies, but the end result is they almost all failed. The proof of that is that people—the way prior to Ritual, the way that people transacted with local businesses was really unchanged for the last 15 or 20 years. You did what you did yesterday. What we believed was it wasn’t a software gap. It was what we called coverage or density. What we realized was that local is more like social than it is like SaaS. I’ll just unpack that for a second. I think a lot of companies believed that if they built a good product in local, and a good product means it works well; it looks nice. That was enough. Which is generally how SaaS products work. But if you think about social, if you think about something like Instagram or Facebook or Twitter, the platform can be very capable, but if you’re not connected to anyone, then the platform has your value. So, it’s only as good as the network that you’re connected to. What we realized about local was it was the same thing, meaning if you’re in a neighborhood and there’s this theoretically amazing product that can help you save time, pay on rewards at businesses in your neighborhood, but let’s say it worked in only one out of ten businesses. That’s not very useful to you. That’s the equivalent of a social product that none of your friends are really on. So, we approached the problem differently whereas most companies went really wide. They focused on let’s get thousands of restaurants. Let’s get a lot of businesses on the platform. In order to do that, they’d end up going really wide. But to a customer, what we realized was, you don’t care that we have a thousand businesses across the country because you don’t buy from a thousand businesses across the country. You buy from five restaurants that are within a five to seven-minute walk of your office or where you live. So, we understood that the problem was actually at a very small scale. It was a hyper-local problem. So, we actually proved this in three months of starting the company. We built a barebones app. We focused on not just a city and not just a neighborhood, but we focused on a building. We were in an office building that had 300 people, and we said if we can get the 15 businesses within a five-minute walk of this building and build a product for these 300 people that worked everywhere, that had high-coverage, can we prove that that’s what makes the product sticky and causes people to use it? That’s all we did, and it worked really, really well. We had incredible retention. We had incredible purchase frequency. We saw all the things we’d hoped to in a very small 100% sample size.
Alejandro: Would you say, Ray, because retention, I think, is critical. I’m very happy that you touched on this so that I listeners, especially the ones that are building marketplaces. I think that just like you were saying, when you go local, having that liquidity in the marketplace that you’re building is critical. At the end, that builds retention because if you don’t have what people are looking for, then they’re never going to come back. So, would you say that that liquidity is ultimately what triggered that good retention rate on your end?
Ray Reddy: Yeah, definitely. What creates liquidity in our marketplace is having good coverage. If we have most of the businesses in a neighborhood or half of them at least, the product feels like it works everywhere. The moment that happens, we achieve liquidity. To us, it’s not even about having good retention. What we find is that it’s not linear. There’s a step-function change. I think what people don’t realize is, for example, if you have 10% coverage, you don’t get 10% of the transactions. You get zero. The product’s not useful. So, there’s almost like this binary state change where a product goes from it’s not useful to it becomes useful. For us, we know that we have to get a certain amount of coverage for that to happen. That happens in the 40% to 50% coverage mark is where we see that we start to get liquidity. Then it’s exponential. Once we get to that point, value just starts to increase exponentially when we go from 40% to 50% to 60% coverage, for example.
Alejandro: Because, for example, when you guys have raised a bit of money, and we’ll talk about that in a little bit, but what were some of the metrics or the metric that let’s say VCs were the most interested in?
Ray Reddy: I think in businesses like this, what it comes down to is really two metrics, which is your payback and your lifetime value. I think from the very earliest days, that’s really what mattered because, in our business, the margins are thin. You’re talking about selling $3 coffees and $10 lunches. In a business like this, you have to have incredible retention because you’re making pennies on transactions sometimes. So, you need to figure out a way to have very low acquisition costs because you’re paying back in very small increments. If you think about it, it’s a tough problem. You need to have low acquisition cost, very high purchase frequency in order to have reasonable paybacks on spend. I think that was what we were able to figure out was you can’t make that happen at a national level. You have to break it down into cities and neighborhoods and really go one neighborhood at a time which seems at first like it would be unscalable, and it seems overwhelming to say that you’re going to watch this thing in maybe tens of thousands of neighborhoods. But it’s really the only way to unlock local. It’s one neighborhood at a time.
Alejandro: So, how much money have you guys raised so far, Ray?
Ray Reddy: We’ve raised 120 million dollars to date.
Alejandro: Really cool. You guys have really, really good people. Like I see inside Venture Partners. Georgian Partners are the ones that were in your last round. So, the Series C. Is that right?
Ray Reddy: Yep. So, Greylock did our Series A out of the Valley. Insight did our B out of New York. Then Georgian is based out of Toronto. They led our C.
Alejandro: Really cool. I mean, Greylock, they’re really unbelievable for marketplaces, so a shout out to them. So, what was your strategy in terms of getting in front of these guys and closing them?
Ray Reddy: Are you talking about VCs for fundraising?
Alejandro: Yeah. How did you get in front of these guys because Greylock and Inside Venture Partners, we’re talking about the best of the best?
Ray Reddy: Yeah. My fundraising strategy, I think, has been very different than what I hear most entrepreneurs doing. It works for me. I know very few other people that approach it in this way. So, I believe in having an ongoing conversation with investors rather than—I think some entrepreneurs say, “I don’t spend time fundraising until I’m fundraising.” I think about it differently which is you should always be talking to investors.
Ray Reddy: I’m always talking to the next stage of investors and trying to build that relationship. The way I think about it is, it comes down to trust and do they trust your judgement? And do they trust that you can do what you say that you’re going to do? I actually think that if you’re able to distill all of that down on what VCs are looking for, it’s not one thing. I think sometimes entrepreneurs, there’s a lot of advice that is overcomplicated, but I think, for the most part, especially the later and later the stage gets, investors aren’t really looking to get that involved in your business. Especially during last stage rounds, they’re talking to you once a quarter. They really want to know that they can trust you.
Alejandro: It’s all about relationship building. Trust.
Ray Reddy: Yeah, that’s right. I don’t even know if I would say it’s necessarily, but it can be about relationships, but I think that they need to know that you will do what you say you’re going to do. I think the problem is that how do you convince them of that in one or two meetings in a short timeframe because you can go in and say, “Here’s my plan and look what we’ve done,” but what I find is that the easiest way to build that trust is over a period of months to say to someone, “Here’s what we’re going to do in the next three months or in the next two or three quarters.” When they see that you’ve followed through with that and you did what you said you were going to do, and even if you didn’t achieve all of it, but you did most of it, or when you didn’t, there were good reasons why you didn’t. I think that builds more trust than anything you can really say in one meeting. That’s the philosophy that I followed which is why I’m always spending time with a handful of investors. Not very broad. I think that’s equally important is these people take seats on your board. You’re going to have to spend a lot of time with them. For me, it’s never been about the investor that gives us the highest evaluation. It’s been also about who do I want to work with and who do I want to build this company with, and spend time with. So, I find that there’s an element of that of getting to know someone. Also, a good example is let’s say you have a plan, and you don’t achieve that. What is that discussion like with an investor? I think that those are very good predictors of how someone’s going to behave on your board. What happens when you don’t achieve your plan? So, for all of those reasons, I’ve always felt in almost all the cases of all of our rounds, they’ve all come together almost organically, meaning I’ve had a relationship with each one of those investors for about 9 to 12 months before we did the round, and when it came time for fundraising, it was a no-brainer each time.
Alejandro: It was very smooth, like falling into place on its own.
Ray Reddy: Yeah. In many cases, there were often more than one interested investor, and that helps with fundraising dynamics. So, it was not that they were necessarily the only ones, but there was only one obvious choice, I would say at each round. There was enough trust that the process did come together quite smoothly.
Alejandro: Got it. So, how big is Ritual today?
Ray Reddy: We’re about 300 people globally right now.
Alejandro: Wow. That’s amazing. How do you, for example, embrace culture because you said that you’re global, so I’m sure that different offices, different cultures. How are you on top of that?
Ray Reddy: I think we are purposeful and thoughtful about it. Part of the culture that we’ve built here is—it’s hard to explain how we built it. I think a lot of it stems from the people we’ve hired. I would say for the first 50 to 100 people we didn’t pay a lot of attention to this. It was just, hire the right types of people, focus on doing the right things, and it kind of just works. I think once we started to grow into the 100s of people, now we have a larger people-ops team and we’re starting to just be more thoughtful about how to encourage the right behaviors because they don’t just sometimes naturally happen. I think a lot of times it’s not about the words; it’s about weaving it through all aspects of the company. So, how do you really reflect and hire based on the values that you say you have and the culture that you say you have. Then when people are not good culture fits, but they are high performers, how will you deal with those types of people? I think the change now is that we have to be very intentional about it, and we have to make sure that it’s not words. We demonstrate it through actions, and that requires just being very thoughtful about it.
Alejandro: Got it. There’s one question that I want to ask you here, Ray, and it’s a question that I typically always ask the guests that come to the show. That is, knowing what you know now—I mean, we’re talking about here you are. You built a couple of businesses now, and you’ve been through the ups and downs and really learned a lot on the way, so knowing what you know at this point, if you had to give your younger self one piece of business advice before launching a business, what would that be and why?
Ray Reddy: I think the main advice that I would give my younger self is just the attitude and approach to how to deal with failure. I think 15 years ago, I really viewed—and I had a lot of failure through the university and with some of my earlier companies. Some of them were really tough; were really, really hard learnings. Sometimes, investing capital that I didn’t really have to invest, which had very negative consequences in my life. At the time, I remember when I’d fail at something, I would just have a super negative attitude about those kinds of things. It really did feel like failure, and I viewed it as a big setback, and be really hard on myself about it which was actually just counterproductive in the end. I think it’s taken me almost a decade. It’s unfortunate that it’s taken me—what I had to see happen was how some of my biggest and earliest failures actually became the biggest contributors to my success today. The challenge is I wouldn’t have believed it if you’d said it to me ten years ago. People probably did say it to me, and I probably just didn’t believe them. It took fast-forwarding ten years and realizing that I’m able to navigate some very complicated problems and make significantly better decisions today because of the failures that I had before. I think that’s had a really transformative change on my leadership style and how we think about failure at Ritual where we really encourage it to some degree. We, in fact, try very hard to not make it a bad word and to focus on learnings and not failures where we celebrate the learnings that come out of things not working out, and in fact even for us over the last four or five years, nothing we’ve done has worked on the first try. Pretty much nothing has. It’s typically taken two or three attempts. Our team now is repeatedly learning this which is failure is just the knowledge that you gain on the path to something really working out. That’s a bit of a long-winded answer, but I think I would try harder to believe that when I was younger because I think I would have been able to learn faster and better had I believed that rather than being negative and critical towards it.
Alejandro: Really cool. I have to say that I agree. Our biggest successes or biggest learnings or breakthrough moments really come from failures. I think it’s either you succeed, or you learn. You’ve just got to keep it moving. So, I’m glad that you really touched on that, Ray. So, what is the best way for folks that are listening to reach out and say hi?
Ray Reddy: The best way is just [inaudible 49:25]. I’m pretty active there. My Twitter handle is @raymondreddy. Both of them are good ways to reach out.
Alejandro: Amazing, Ray. Well, it has been a pleasure to have you on the DealMakers show. Thank you so much.
Ray Reddy: Thank you. Thanks for having me. It was pleasure doing it.