Sanjay Dastoor is the co-founder and CEO of Skip which operates shared electric scooters for reliable last-mile transportation. The company has raised so far over $30 million from Accel, Y Combinator, SV Angels, Menlo Ventures, Initialized Capital, and Maven Ventures. Before Skip, Dastoor cofounded Boosted which builds and develops lightweight, wireless, remote-controlled motorized electric longboards. The company raised $70 million from top investors like Khosla Ventures, SV Angel, and iNovia Capital.
In this episode you will learn:
- Benefits of attending startup accelerators
- Why scooter-sharing is such an attractive model
- Why we don’t have more micromobility and shared vehicle options
- How to test and validate ideas
- The essence of successful crowdfunding campaigns
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 Sanjay Daastor:
Sanjay Dastoor is the Co-founder and CEO of Skip, an e-scooter rental service that aims to solve the last-mile transportation problem and invests in the infrastructure of the cities in which they operate.
Sanjay has been passionately working on last-mile transportation for nearly a decade.
In 2011, he co-founded Boosted and helped design the first portable electric vehicle to use modern EV motor and battery systems.
He received his Bachelor’s degree for Mechanical Engineering from Berkeley, and a Master’s in the same subject at Stanford University.
Connect with Sanjay Dastoor:
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FULL TRANSCRIPTION OF THE INTERVIEW:
Alejandro: Alrighty. Hello everyone and welcome to the DealMakers show. Today, I think we’re going to be learning quite a bit on micro-mobility and then also electric scooters. Our guest has been at it in this space for quite a while, and this space right now is very hot, so I’m excited to have him here. Without further ado, Sanjay Dastoor, welcome to the DealMakers show today.
Sanjay Dastoor: Thank you for having me.
Alejandro: So, your parents were originally from India, and they happened to meet here in the U.S. Then you were born and raised in Atlanta originally. How was life there?
Sanjay Dastoor: It was great. It was very suburban. Actually, some of my perspective on transportation comes from the different places I’ve lived. I was born in Atlanta, and then I lived in Baton Rouge, Louisiana, and then Dallas, Texas before I moved to the Bay Area for school.
Alejandro: Were your parents entrepreneurial, or more in academics, or what was their background out of curiosity?
Sanjay Dastoor: My mom’s background professionally was in industrial engineering and operations. But then, she was very entrepreneurial. She actually started her own business, and I learned a bit about what her mindset was going through that when I was younger. My dad was academic. He studied textile engineering and was a post-op and then a professor before he changed careers back into computer science which he’d been interested in when he was in college. So, I had a mix of both of those.
Alejandro: How did you guys land in California?
Sanjay Dastoor: We lived in Louisiana. My dad was a professor at Louisiana State University. Then he switched careers. His minor and hobby in school and graduate school was very large database architecture which is a very interesting hobby to have in the 1980s. When he was doing his academic work, he actually got more interested in computer science. He switched careers, and we moved to Dallas which was the closest technology hub in the south. So, there were a lot of companies there like FedEx had a large technology center there, Lockheed Martin, American Airlines and Sabre, Nortel, Texas Instruments. There were a lot of companies there, so he worked there for a while. Then I went to the Bay area to study mechanical engineering for college.
Alejandro: At what point do you think that you started to develop this love for computers?
Sanjay Dastoor: From my dad, actually. He helped me learn how to program when I was in middle school. We had a computer at home, and I was able to start with QBasic and then with Pascal and started programming relatively early with a lot of help from him.
Alejandro: Really, really cool. Then you go to Berkeley, and then after that, you did an internship, and you actually went to NASA. Then you did your Master’s of Science. I guess at that point, you were already there probably in the Bay Area, understanding what was going on, and you became a researcher. What were you doing as a researcher?
Sanjay Dastoor: My interest in high school turned a bit from computer science into robotics. So, I ended up spending a lot of time in college in an interdisciplinary biology lab that studied how animals moved. It was cockroaches, geckos, crabs, different kinds of animals, and looking at how they would move around and how you could apply what you learned from biology to different fields like computer animation or robotics. I ended up doing some work on the research side at JPL on the robotics side, and then at SRI in Menlo Park, both of which were really interesting. I ended up continuing that work into a Master’s and Ph.D. which I didn’t end up finishing, but was very interesting.
Alejandro: Just out of curiosity, how do cockroaches move?
Sanjay Dastoor: It’s interesting. It turns out a lot of robotics research had said if your leg has 20 muscles in it, then you need to build a robotic leg that has 20 motors. So, you’d have one motor that assimilated each muscle, but it turned out that’s not how your body works. You actually have a lot of mechanical stability kind of like the suspension of a car that’s built into your muscles and your ligaments. A cockroach can run very quickly over many different kinds of terrain because it has the right mechanical tuning like the body is built the right way. It doesn’t actually have to think that hard about running. So, we would study that and then apply those things to things like prosthetics design or robotics.
Alejandro: So, what got you into philosophy because you went to do your Ph.D. at Stanford, and I’m not sure if you completed that or not, and we can get into that, but what got you interested in philosophy because it seems a little bit far off from where you were coming from?
Sanjay Dastoor: Yeah, I was doing a Ph.D., but it was in engineering, not in philosophy. So, it was continuing the research work, but there was a lot more product design in that program. A lot of how do users think about products? Why do products that the designers think are good products, why do they fail? Why do products that you maybe wouldn’t think are as good, why do they succeed? There’s a lot more product design and not just the engineering side of things which is quite interesting as well.
Alejandro: Then let’s talk about your love for last-mile transportation. Boosted was the first company you co-founded, so how did the idea incubate?
Sanjay Dastoor: Boosted was a bit of an interesting story. I had two different friends who were independently working on the same idea. One of them, Matt, had done his Master’s in aerospace engineering and then had finished and gone to go work. He had this idea because he had spent a lot of time in San Francisco, and this is back in 2009, 2010. He snowboarded, and he motorcycled. He said, “Man, I wish I had some way to get around the city that was something more like snowboarding where I had that sense of fun and that sense of freedom.” Different people have different risk profiles. Matt was one of those people who felt comfortable wearing a helmet on his way to work and seeing what he might on a motorcycle. For him, it was just a way to have a lot of fun, but he had this idea that maybe people could use something smaller than a car to get around cities quicker. He thought it could work on campuses. He thought it could work in cities. It’s very interesting. Then separately, one of my lab mates in my Ph.D. program, we were working with these motors and batteries that were just becoming available for a bunch of applications. One big industry that came out of that was drones. So, all the motors and batteries that are used in drones started with remote control airplanes for hobby use. So, the same motors and batteries that John was looking at and said, “I could actually build something to get around campus that we’re on much more quickly.” I ended up connecting the two of them, and the three of us worked on it as a side project for a bit, and it turned into a company.
Alejandro: How did it turn into a company? What was that moment where you guys were like, “Let’s pull the switch, and let’s make this be a little bit more serious and professional?”
Sanjay Dastoor: It was two stages. The first stage was we decided to put some of our own savings into the project, and actually try to file a patent. We didn’t think it was going to be like a massive thing. We just thought people kept chasing us on campus when we would ride the prototype around and asking us, “Can I buy that from you? Where did you get that?” So, enough people were wanting it from us already. We said, “Maybe we could build some of these and sell them.” At the time, this was 2011, 2012, Kickstarter was just becoming something that people could use to fund ideas like this. We were like, “Oh, maybe we’ll file a patent, and then watch a Kickstarter campaign and build 50 of these or 100 of these. So, that was the idea in 2012. That was the first time we thought, “Hey, maybe there’s a company, and this isn’t just like a thing we’re building for ourselves.” Then the second part of that was when we were accepted into Y Combinator and StartX in the summer of 2012 where we actually went from just putting in a little bit of our own money and working in the evenings to having a good excuse to take a leave of absence from school and actually work on it because we had now had some money to do the development process. That was when we actually incorporated.
Alejandro: That is really interesting because in 2012, Y Combinator was very much heavy on technology, and I think that now they’ve broadened up a little bit more their scope. For you guys, applying with this board that has some technology applied to it, it was probably like something new for them?
Sanjay Dastoor: It wasn’t that new. There were a few companies that had gone through with hardware, for example.
Alejandro: I remember. Yeah.
Sanjay Dastoor: Pebble which was the first, so Pebble was a Y Combinator company. The way we ended up applying was I was at a birthday dinner for a friend, and his old roommate who was sitting next to me was the co-founder of a company called OrderAhead. They were doing food delivery. He was like, “Oh, I ride a longboard. Your idea sounds very cool. You should apply to Y Combinator.” I said, “No, no. That’s actually a good fit for us. They do software. We’re doing hardware. It’s completely different.” He was like, “No, no. Trust me. It’s a great program. You’ll like it.” I said, “Okay.” He wrote us a recommendation. We applied. Then when we weren’t sure that it would be something that would be a good fit for us because as we said, they were doing a lot more software products. Eric from Pebble was very kind and gave me some time to chat about that topic. He said, “Look. We’re not going to help you decide which factory to work with to build a component. That’s not their expertise, at least not yet, but they will help you in thinking about how to build a great company, and hire the right people, and think about the culture, and think about fundraising and all the other topics.” We said, “Oh, we hadn’t even thought about those being a challenge.” So, it turned out to be a great fit for what we were doing, and now, obviously, there’s a lot more work they’re doing in areas like biology, hardware, and long-return projects. At the time, it seemed less of a fit, but it ended up being a great fit.
Alejandro: Then when you were coming out of it, how were you thinking about building a great company?
Sanjay Dastoor: There were a few rules, and they’ve been very public about the guidance they give to people like things around hiring and how to think about the first people you hire. Don’t hire too quickly. Things around making a few users really love the product versus having a lot of people who like it. Thinking about the way that you fundraise from investors and the kind of investors you want to work with. There are a bunch of areas that they were very helpful with that set a good foundation for the company, but things that we hadn’t really thought of before.
Alejandro: Got it. So, what was the process of capitalizing the business because I know that Y Combinator has the Demo Day, and that gives a nice boost on the fundraising front, so how did things kickstart for you guys on the financing side?
Sanjay Dastoor: We had thought maybe we would be able to kickstart the company with Kickstarter and do presales and use that to fund our development because we weren’t sure that we were going to be a fit for taking seed investment of venture investment for the company. What we ended up realizing was that we were able to hire some friends of ours who were very talented at what they did and pay them a salary that they needed for a family and for their own expenses. We were able to do that by having that funding, and that changed the trajectory of our work. So, that was the moment for us where we said, “Maybe it’s a really great idea for us to raise some money. Then the process for us was in some ways challenging because people were not clear on what a hardware business would return. There were some investments being made at the time and connected hardware systems, but it was still quite early. Distribution and things like that were still—you didn’t have the same ease of getting into systems like Amazon or onto store shelves or having a lot of customer data. So, it didn’t seem like there was a lot of control over the business as much as there is today, or at least there can be today, or at least there can me today. That was a challenge. On the flip side, we had a lot of support from people who had seen the product early, so we presold five units. We actually got really good advice during YC. When we were planning to launch Kickstarter, they said, “Before you have this massive campaign, just see if you can build five and sell them, and you’ll learn so much more from doing that before you spend a lot of money and time developing something that turns out maybe that people don’t want.” On those first five users, three of them invested personally. So, that was a very interesting dynamic for us where people who knew the product very well were supportive of us, and that helped build some momentum for fundraising.
Alejandro: The Kickstarter campaign, how much did you guys raise with that?
Sanjay Dastoor: The Kickstarter campaign, we raised about $400,000. It was about 350 skateboards at the time. It was a big challenge in two ways. One, we didn’t want to have too many orders because it’s actually much more challenging to build 10,000 of something when you’re planning to build 500 in the hardware world. You don’t have the same supply chain and the same processes set up. It can often take much longer and add more risk, so we actually wanted to limit the number of units that we sold. Then second, there hadn’t been a history in Kickstarter of people backing projects where you might be doing $1,000 or more on Kickstarter. So, we weren’t sure if people would trust us, people they had never met before and put that much money on Kickstarter towards something they hadn’t seen or touched or knew anything about.
Alejandro: What was the price of each electric longboard that you guys were selling?
Sanjay Dastoor: It was between $1,000 and $1,500. It was quite pricey, especially for an online system.
Alejandro: For the people that are listening, perhaps there are a bunch of them that are thinking about the crowdfunding route to presale their product and get some money in. One of the conceptions that I see is that people think that they’re just going put it up, and people are just going to come in and start giving them a ton of money. In your case, what do you think were some of the key lessons and things that you did very well leading up to the campaign to be successful?
Sanjay Dastoor: It’s a good question. I think the biggest lesson that I took away from that process that I didn’t realize at the beginning was that Kickstarter campaign, and more generally presales are selling the idea of how good the product can be. They’re selling the perception of the product, not the reality of the product. So, when you preorder a new iPhone, or when you preorder the Model 3 Tesla, you don’t have much if any experience with how the product will work, and you’re betting on something. What often happens with great Kickstarter campaigns is you can have a mismatch between the perception of the product when someone makes the order, and then the reality of it afterwards. That difference is what really drives how people talk about it with their friends and how they might recommend it to someone else, the word of mouth which is actually the most important thing. So, it’s easy to think that the key to a successful Kickstarter campaign is a great video or very careful pricing studies and different things like this. If the definition of success is to raise as much money as possible, then that is true. But I actually believe that raising as much money as possible for a physical product idea is maybe not the best thing for Kickstarter because then if you put in place all the things to shift that volume, and then people are disappointed, it’s not a replicable thing because people did a thousand orders in that one month campaign doesn’t mean the next month they’ll do a thousand. So, the big challenge is you do this campaign and people may be slightly disappointed or it’s not amazing for them, and then how do you sell the next ones? So, we focused a lot on how to make the product exceed expectations with the product and not overpromise. Actually, my co-founder, John, was really good about this where we said the prototype, for example, was 12 pounds, and he had wanted to budget up to 15 pounds in the spec because he wasn’t sure what the final product would need in terms of protective enclosures for the battery and things like this. My initial draft of the campaign said 12 pounds, and he said, “No, no. You have to put 12 to 15 pounds. We don’t want to underdeliver.” That was very important through the whole process of setting expectations of those first users, and then really thrilling them with what they got.
Alejandro: That’s amazing because the problem that I see there is people get the money and then it’s like, “Hey, it’s time to fill those orders.” It’s not you get the money, and you get to keep it. You’re preselling your product, and you need to deliver. So, unfortunately, there were a lot of people that get disappointed. One of the things that maybe helped you guys with this was from a social-proof perspective to show validation and to show that the market was ready for what you were doing perhaps towards fundraising conversations with the larger ticket-sized investors?
Sanjay Dastoor: Yeah. The larger investors, they cared about things like distribution channels. So, with physical products, the idea of a direct-to-consumer brand if you think about Dollar Shave Club and more recent companies that have done CPG that are all direct. There’s less of that at the time. So, one thing they would care about is what are the margins you have in your product and do they support selling that product on a store shelf? Even if you do sell on a store shelf, what will happen if you have a really great Christmas one year, and less of a great Christmas sales season the next year? You’ve seen this happen with even public companies like GoPro and Fitbit where sometimes performance one year to the next can be slightly lower, and then they have to think about what the next product refresh looks like. There’s a lot of concerns from investors about where you get a very large return for physical product companies. I think our takeaway initially was less concern about that. We weren’t trying to have a successful Kickstarter in order to raise money. It was more how do we make sure that we’re focused on the right thing, which we felt, and I still believe is building a product that people continue to use as opposed to building a product that people buy. So, if you think about software products, we’ve moved from this world where people focused on downloads or installs to one where people focus on retention, and people are still using the app later. That is a better sign of health of a software product than downloads. With hardware products, it’s easy to think about sales because that’s where the revenue comes from, but it’s actually not necessarily a leading indicator of the health of the business because it’s the equivalent of the download. If it goes into a drawer or it goes into a closet as if it’s a physical product, or you don’t recommend it to your friends, or you get bored with it, then the fundamentals of the business may not be as strong as you think from an initial presales campaign.
Alejandro: So then on a hardware product, what’s the equivalent to the retention you get on let’s say a SaaS service?
Sanjay Dastoor: There are two things you could look at. One is more philosophical, and one is more practical. A practical version of this is, do you have a recurring revenue component to the product? If you look at companies like Peloton, they have a subscription to their bike video service where you can do training with a tablet that’s on the bike. What I’ve heard publicly is a retention of that recurring revenue stream is very high, which hopefully indicates that people are continuing to use the bike six months after they purchased it versus it just sitting in the corner of your house. So, there are things you can do like recurring revenue. Obviously, a lot of investors like recurring revenue and it’s good for a business in many ways, but it’s an indication that people are continuing to use the product as well. The other way, which is what we use to think about it was if the product were to break today, like which things do you own where if they broke today, you would go buy a new one tomorrow? That list is actually quite short. Maybe your smartphone, maybe your laptop, maybe your car if you use a car to get to work every day. A lot of the appliances in your house. The router. But not necessarily like certain products. Like maybe GoPros or action cameras for most of us don’t fit in the category. If you’re not in that category, it can be dangerous because you get it because it seems like a good idea. Then it turns out to be maybe less of one in day-to-day use, and then now the question that company has is “How do I sell you another thing?” As opposed to this is something that’s become very useful, and it’s a required part of your life. It doesn’t have to apply to everybody. It could also be products for parents for their babies. You don’t have to necessarily appeal to everybody, but I think for some group of people you do have to be necessary.
Alejandro: How much capital did you guys end up raising for Boosted?
Sanjay Dastoor: We raised a little over 2-million-dollar seed round and then used that money to go from delivering this first few hundred units, and started to fulfill some of the demand we’ve gotten after the Kickstarter which is a process that took about a year to a year and a half, about 15 months.
Alejandro: Then you did your A, your B. Walk us through some of the milestones and progress that you were making from financing cycle to financing cycle.
Sanjay Dastoor: With Boosted, we spent the first three months that we were really working full-time on this to sell five units that we built without any tooling or anything like that, and validating that people liked their product. What we heard from those users was this product changed my life, or it changed the way I interact with my city because it fulfilled this need that people had to get maybe anywhere between half a mile and two or three miles from where they lived or where they worked. There was not a good way to cover those decisions something like a car because of how much time you would spend parking or sitting in traffic, especially in a dense city. Essentially, if you live in a city today that doesn’t have micro-mobility systems getting a mile away or two miles away, really the only option is either walking which can be very lengthy, or if it’s a warm city maybe you’re sweating by the time you get there. Or you’re using a car, and you might be moving on average of five miles an hour because you’re sitting in traffic and waiting for the car to arrive now looking for parking. And it can be very expensive with things like rideshare. To be short trips, it really changed people’s lives. Obviously, the skateboard platform was not meant to appeal to everybody, but it validated that something was there. That was our first three or four months. Then we did a Kickstarter campaign in the fall of 2012, and then spent the next year and three months getting to a shippable product which was a huge endeavor. It was very difficult. We didn’t have a lot of leverage with parts suppliers. We were trying to use automotive grade lithium battery cells because we wanted the battery to be very safe. The people who supplied those cells wouldn’t return our calls because we were too small. So, we had to find creative ways to get access to systems that we thought were the right pieces, and we built a lot of this ourselves because we couldn’t buy them off the shelf. We spent that 15 months developing the product, shipping the first few hundred of them, and then we raised our A Round and used that to expand the distribution and expand the product and develop it further. That was a process that went the middle of 2014 to the middle of 2017.
Alejandro: How much did you guys raise on the A Round?
Sanjay Dastoor: We raised about 10 million.
Alejandro: Got it. So, that would put you a little over 12. Let’s talk about the shift that needed to happen to be able to achieve the B from the A.
Sanjay Dastoor: The A Round helped us test out things like price points and distribution. One, for example, a thing that we were able to test was, we had to raise our prices back between the end of the Kickstarter campaign and started to ship product. We were able to ship the Kickstarter unit at the price we promised, but we had a lot more demand. We realized that the initial cost when you added up all the pieces that we had built with the safety features that we thought were necessary, the actual cost of that vehicle was actually much higher than we planned. So, we said, “Okay. We’ll either keep selling this thing, but at breakeven, or we’re going to lose money per unit. Or we can raise the price and work on how to get that cost down, but to be able to at least make money per unit.” So, we made that decision to raise the price which was difficult, but definitely, the right decision to do. What was interesting to learn there was most of the customers who were most upset really wanted the product. One of the things we did, and again, this was kind of a YC like do things that don’t scale moment was I got on the phone with each of them. I just sent them an email and said, “Here’s my phone number. If you want to understand why we did this, please give me a call.” I think almost all of them ended up actually buying the product at the higher price once they realized why we had raised it. It was really understanding how to connect with customers and understanding what they cared about. As we then were able to test price points and distribution and maybe go into a channel like Amazon or retail channel, we grew that business very well, and then we ran into supply chain issues. So, we had a battery recall. We had two batteries with customers for our second-generation vehicle where some smoke came out of the battery. We found out later it was because of the way our waterproof seal had been installed incorrectly at the factory. The battery essentially was allowing water to enter and cause a short circuit. It wasn’t like the hoverboard type of incidence, but it was producing smoke, and it led us to stop producing the vehicle and make sure we fixed it before we started shipping again. Once we got that in place, we started to build out more of the leadership team, hire some really great people, talented folks. We actually brought in a new CEO, someone who had been a manager of larger teams and companies before but also had a similar robotics and hardware background. Then we started to look at other form factors of vehicles. That helped us raise the next round of funding because we could take the success we saw with the skateboard and apply it to other vehicles because it was really kind of similar to—if you think about Tesla, building the battery for the Roadster and the Model S and the Model 3, it’s kind of the same technology stake, just applied to different types of cars. So, it was the same idea of could you apply all of the learning from the skateboard to something like a scooter which is coming out very soon.
Alejandro: All in all, we’re looking at you guys raised about 70 million?
Sanjay Dastoor: That’s right. Yes.
Alejandro: I see great people. Khosla Ventures, SV Angel, iNovia Capital. So, really great, great people. You were talking that you guys brought onboard this CEO, and I guess that probably allowed you more time to be able to put your head up and see what’s going on around you. At what point do you make the decision to leave your baby and to start Skip?
Sanjay Dastoor: We decided to start looking for the CEO in the early part of 2017. One of the things we were trying to figure out was not just who’s the right person to bring in to be able to scale the business and drive some of these operational goals, but also where can I spend my time most helpfully? We did a lot of discussions as co-founders, and with the board, and with the team about where I could be most helpful. I had some really interesting ideas around subscription and on-demand services for micro-mobility. Not just an ownership model, but a model where I can get access to a vehicle when I wanted. We realized as a startup, you have to focus, and you can’t try to do too many things at once; a mistake I made many times. To try to explore those things within a company that’s very focused on ownership and making sure that business is working well and executing well didn’t seem like it was going to work very well because either I would be working on something on the side which wasn’t core to the business, or I wouldn’t really be able to explore it because I’m trying to stay focused and help to keep the team focused on just executing on what we were already planning to do. So, I decided to remain on the Board of Directors, but take a break for a bit and think about how to pursue that if I wanted to or maybe a different project. So, I remained helpful, but I left the company full-time in the summer of 2017. I remained helpful but took a break for about six months.
Alejandro: Did you stay there in San Francisco, or were you traveling, or what were you doing during that break?
Sanjay Dastoor: I traveled a little bit. One of the more interesting places I traveled, it’s funny. There were some ideas we had about micro-mobility and the idea that you really want to measure door-to-door speed. If you think about software apps, people are very careful about measuring load times and latency in the act. For example, if you’re using Photoshop, then you might be willing to tolerate 30 seconds for the application to load. Whereas, if you’re using something like a WhatsApp, you may not be willing to tolerate anything more than one second or two seconds. It turns out the shorter the amount you’re interacting with the app the faster everything has to be. Similarly, with transportation, if you’re going to take a longer trip, you’re willing to wait more time. You’re willing to go to a gas station and fill your car up if you’re taking a road trip, or you’re willing to wait for the Uber if you’re going to go for 20, 30 minutes. But we’ve all been in a situation where we’ve waited for a rideshare or taxi longer than it took to actually take the trip which is a very frustrating experience. That’s what was so magical about macro-mobility. I’ve been thinking about this, and the only person I had ever seen talk about it was this guy named Horace Dediu who on Twitter goes by asymco. He had been an Apple analyst for many years. He’d look at mobile, and he’d been putting up these graphs about how micro-mobility was actually a very interesting disruptive force, and nobody was paying attention. So, he hosted a small conference in Copenhagen in the fall of 2017, so a few months after I’d left Boosted. I was like, “Man. I’ve been drawing this graph in my notebook and the only other place I’ve seen this graph drawn from this guy’s Twitter. I should go meet this guy.” One of the trips that I took was to Copenhagen, and I met a bunch of incredibly interesting people in micro-mobility. But at this very small conference before any of these companies in this space had really launched and everything was very early. That was maybe the most interesting trip I took and is most relevant. Now, that same conference today is hundreds and hundreds of people in multiple cities. But at the time, it was just maybe 30 or 40 in Copenhagen.
Alejandro: Walk us through the immediate steps until Skip Scooters comes to life.
Sanjay Dastoor: The story of Skip actually starts in the summer of 2017. So, right when I was leaving Boosted, my old co-founder Matt, one of the three of us has started, he had left Boosted earlier. He was obsessed with scooters. He thought everyone was going to be using these and had all these qualities about the micro-mobility that we thought were interesting, but he said, “It’s easy for everyone to use it compared to a skateboard.” I had thought he was crazy. I was like, “There’s no way people are going to ride this thing.” I was thinking it was going to be much more something like bikes, but he was very adamant that scooters were actually a really good platform for this. He and our other friend, Mike had tested this idea of scooter-sharing in San Francisco in the summer of 2017, before any of this craze had happened. They were setting up at the Caltrain Station near the public transit stop, and you could text a phone number and get access to a scooter. Basically, it was a scooter. If you texted the number, the phone number would unlock. Then you could ride it and drop it off at the Caltrain Station. But it wasn’t purely dockless because San Francisco, and indeed most U.S. and European cities had been very restrictive about just allowing dockless vehicles to come in the way they became so popular in China because of concerns around parking on sidewalks and just like a lot of crowding and oversupplied vehicles. So, they were very restricted in a company that had tried to launch in San Francisco called Bluegogo. They actually had to shut down their operations because the city didn’t allow it. The next step for them was “We’re going to find a way to create a permit for the city to test this idea out.” Mike and Matt actually created the first scooter sharing permit I think in the world. Definitely the United States in Washington, D.C. They worked with the city DOT to create a permit that limited the number of vehicles that created ways for the city to hold us accountable for the safety of the vehicle. D.C. as a transportation department was very progressive in allowing these experiments to run. We got that permit right around the time I started talking to them, “Oh, this is actually—maybe the scooters are a good platform.” We had worked together in the past, so we started working together on Skip at that point.
Alejandro: One thing that I saw that was mind-blowing to me was that you literally raised your Seed, Your Series A, and then also a big debt round, I think something along the lines of 130 million or so within the same year. How did that happen?
Sanjay Dastoor: Scooters are an interesting business because, for every scooter you put on the road, you generate revenue. The customer acquisition cost is essentially zero, and each vehicle, each asset generates revenue every day. The ability to double your revenue for most businesses is constrained by something: the ability to acquire customers, or channels, or just the time it takes for someone to make the purchase decisions. If you have enterprise software, you have to make the sale. With Scooter, you could literally double your revenue from one day to the next is you just put twice as many scooters on the road. It wasn’t clear where the saturation point was, but it was high enough that it became something where you could grow incredibly quickly. What’s interesting is as John Dorr had actually had this theory about the Segway back in 2000 if you remember there was a lot of hype about the Segway before it came out, and there was a book published about it. There were these quotes like, “This is going to be as important to the internet. This may be the fastest company to ever reach a billion dollars in sales.” It was very prescient because even though the ownership piece of it maybe wasn’t the right initial approach, this turns out to be one of the fastest growing revenue markets in history because you can control your revenue growth by just deploying more vehicles. The ability of companies to go and deploy a lot of vehicles very quickly is very attractive for Venture Capital because they can turn those investment dollars into a lot of revenue, and growth, obviously, is a huge component of how the venture model works. So, one of the reasons we were able to raise capital along with many other players very quickly was because there seemed to be an incredible amount of growth potential in the business, and especially people who had maybe missed out on things like ridesharing before it was too late to achieve very, very large returns wanted to make sure they didn’t miss the next time that happened. So, there was a lot of interest in the space in a very short amount of time.
Alejandro: And great folks again that you guys onboarded. Accel, Y Combinator, SV Angels, Menlo Ventures, Maven. Really, really great folks. Why did you go to Y Combinator again?
Sanjay Dastoor: A bunch of reasons. Y Combinator was actually a great forcing function for us as a company to get in good habits. Many people I had spoken to who had done Y Combinator a second time had said you learn different things going through a second time, but it was very valuable, and they would do it again if given the choice. When we were looking at whether to do this, actually one of the people who inspired us to really push forward with this was PG who we had not been actively part of Y Combinator more recently, but we had known Trump when we had done 2012 with Boosted. He actually encouraged us to apply and go through the program. So, our experience with YC was very different because we already had a validated product/market fit model, so it wasn’t as much exploring whether people would use this as much as how do we set up a business to scale very quickly? We went through YC a second time, and we actually worked much more with partners who had more breadth experience, and we were working less with the partners who were doing more the early stage—you know, how do you find the users? But it was still a fantastic program the second time.
Alejandro: Really cool. And PG for the ones that are listening, that’s Paul Graham, the founder of Y Combinator.
Sanjay Dastoor: One of the founders. Yes.
Alejandro: Great. A space like this, everyone has been talking about electric scooters. There’s definitely quite a bit of competition. There are other companies that are doing this as well, so what have you learned from operating in such a competitive environment?
Sanjay Dastoor: Initially, the competition was quite scary. It’s very easy for companies to be scared by competitors, and again I keep coming back to things that sometimes people tell you, and you don’t realize how true they are until later. One of those was at YC, a lesson that they keep telling you which is it’s much more likely that you’ll be hurting your company through your own work than from a competitor, and that the lesson is to focus on your own users and how to serve them, and not spend your time thinking about your competition. So, with a lot of money getting raised in this space, there was a lot of focus for us on competition initially, and when we refocused our efforts we said, “Is this a good business? How does this work?” What we’ve realized and where we lean on our experiences with Boosted is that if you think about a service like Uber or Lyft, ridesharing companies, they rely on the maturity of companies like Toyota or Honda or Ford where the car you know is going to work very reliably from one day to the next. But with scooters, we’re still in a very immature phase of the hardware. So, you’re not really sure how long this scooter’s going to last. You’re not really sure when it breaks, how it’s going to break. You’re not really sure that you’ll know something’s broken or there might be an issue with how it’s designed. So, you can end up—you’re essentially trying to start Uber, but with the Ford Model T. If you think about the Model T era for cars, there was no oil change infrastructure. There was no gas station infrastructure. You couldn’t buy tires online and get them shipped to you the next day. There was none of that in place, so you had to build a lot of those infrastructure pieces yourself. What we learned with Boosted was vertically integrating on the hardware plus the software meant that you could control a lot more of the safety and the reliability of the vehicles. So, we started to focus a lot more of our effort on our just getting our fleet to run well, and specifically to run well with a positive UNIQ Economics because the thing people didn’t realize early on in the scooter space is because there was no accounting precedent for how scooter sharing would work. It appeared the economics could be good, but then when you really dug in and included the cost of the scooter, it turned out that it could be very negative. Scaling a business with very negative economics can require a lot of additional capital that you may or may not have access to later. So, we focused, one, on economics through hardware, and the second was we felt like working with cities and making sure that the system would work well for not just the people who ride the vehicle, but the people who don’t use it was very important. A lot of technology companies when you create a product, your users don’t really affect the people around them with the way they use the product. With scooters, they do. Where they park the scooter, where they ride the scooter can deeply affect their neighbors and can even be dangerous if they’re going to ride it on the sidewalk at a high speed. So, you have to think about building a system that serves not just the people who are riding it and giving you revenue, but also the people who are around them, their neighbors in the communities and the cities. Those two focus areas led us to do things a little bit differently from our competitors and just stay focused on our users.
Alejandro: Makes sense. In the space, as mentioned, quite competitive. There are a lot of people and a lot of people actually raising a lot of money, hundreds of millions. Is there at any point a moment in which you fear that these guys with so much money could do something stupid and create a negative precedent in the space?
Sanjay Dastoor: I think the biggest thing is that cities want this to work well. They have a lot of desire for cities, especially the denser areas of the cities to have fewer cars, and for the right vehicles to be used for the right reasons. Not that they’re against cars, but just cars are great for longer trips maybe to go to the mountains or for vacation or to travel between cities, but maybe not so much to travel inside a city. The cities really want this to work. That’s clear. The devices, the vehicles themselves, scooters or their form factors need a lot of work to make them have the same type of safety expectations we have with other vehicles like cars. Setting those expectations early, like, “Hey, look. You’ll probably fall off of this thing at some point.” That’s important. If we try to grow too quickly, what can end up happening is cities push back harder on the idea of this being a good solution, and you’ll end up with safety issues that crop up because you were not sending the right expectations with the riders. Those are the two places where trying to grow too quickly, raise a lot of money, and then justify the money by continuing to grow very quickly can create some negative effects. But overall, I think this industry is very exciting, and I think the growth potential just shows you how important this is and how much people are adopting it because it is actually a better solution for cities and things like parks.
Alejandro: Then talking about the industry as a whole, micro-mobility, where do you see the industry heading? Where do you think it’s going to be in five to ten years from now?
Sanjay Dastoor: I think it’s going to be incredibly interesting. If you think about the vehicle as a bike or a scooter that just has a lock on it, that’s one way to think about it, and actually that’s the way people thought about feature phones and smartphones was that you would just add more buttons or make the operation system slightly different. But actually, what was powerful about the smartphone that ended up being successful both Android, and iOS, and other platforms was, it was really a tiny computer. One thing that’s going to be real exciting in the next five to ten years is these vehicles are going to be more like a small car in the sense of how much the technology advances on them and less like a better bike or a better scooter. They’re going to be much safer. They’re going to be much more intelligent. They’re going to have a lot of sensors and connectivity on them. This is the first fleet of vehicles in history where every vehicle is always connected to the internet. So, if you think about knowing like where accidents occur or where people are arriving on sidewalks, or how the vehicles are self-diagnosing problems, it’s a completely different way to think about vehicle fleets than any vehicle fleet in history. That’s going to be really interesting. As cities are continuing to get denser like more ridesharing, more e-commerce delivery, and more urbanization, those are all driving traffic and congestion to be worse. You’re seeing the average speed on a car lane in the cities across the world getting lower. Those things are going to drive more people into places like the bike lane where a small vehicle that’s regulated like a bike is faster and more affordable because you can park it in a much more compact space. You can use bike lanes. You can go through areas in a city that are more friendly than where you take a car. The effect of that is going to be more infrastructure for these vehicles and cities that are more livable. I think that’s going to be a really positive change. The first step of this is all these people using things like micro-mobility for the first time and realizing how much better quality of life is when you’re not in a car in a city.
Alejandro: Of course. How big is Skip today?
Sanjay Dastoor: Skip operates today in two major hub markets, San Francisco and Washington D.C. We have a few other cities around those that we test in. We don’t disclose our employee count or anything like that, but we are in terms of our focus, we’re much more heavily on software and hardware engineering than on scaling operations right now.
Alejandro: Really cool. So, one question that I always ask guests here, Sanjay, is—you’ve been at it now. This is your second company, so you’ve been exposed to a lot of stuff during these rodeos. If you had the opportunity to speak with your younger self and give yourself one piece of advice before launching a business, what would that be and why?
Sanjay Dastoor: I think that piece of advice would be there’s a lot of joy that comes with working with people who are really great at their area of study. As an engineer, I’ve always had that experience of working with great lab mates, and great colleagues, and learning that that’s true across a whole organization. For example, a lot of my engineering friends when we were in school were like, “Oh. Marketing is—I’m not someone who believes in marketing. I’m very logical. I make rational purchasing decisions.” But when you work with someone who is great in marketing, you realize what the power of that is in terms of like making some of the people want to communicate that effectively. If I could give myself one piece of advice it would be to seek out the people who are very excellent at what they do, and build that expertise around you more quickly, and have a really fantastic group of folks to help build the company with you versus—I think a lot of entrepreneurs make this mistake of not delegating soon enough, or not hiring for gaps, and instead, trying to become better at things they’re not good at versus doubling down on the things you are good at and complementing yourself with excellent people in other areas. So, if I could give myself that advice early on, it would have saved me a lot of pain and mistakes in the past.
Alejandro: I love it. So, for the folks that are listening, what is the best way to reach out and say hi?
Sanjay Dastoor: You can find me on Twitter @sanjaydestoor. You can email me [email protected]. I’m happy to provide advice. I especially like to help people who are thinking about physical product companies. I think there’s a lot of nuance to how those companies can be successful or not. So, happy to chat. Shoot me a line, and thank you.
Alejandro: Amazing. Well, Sanjay, thank you so much for being on the DealMakers show today.
Sanjay Dastoor: Thank you so much, Alejandro. I appreciate it.