Do you want more funding?

YES, I WANT MORE FUNDINGNO, I HAVE ENOUGH FUNDING
Neil Patel

I hope you enjoy reading this blog post.

If you want me to do your fundraising for you, click here.

As a child, Xu was taught to be both resourceful and hardworking. He learned from his father’s enterprises and started building websites from an early age before turning into an entrepreneur. Today, he has successfully raised more than $65M for his venture from top-tier investors like Newion, Jelte Vrijhoef, SmartFin, and Jerome Laredo.

In this episode you will learn:

  • Consistency when things seem not to work out
  • How to merge two firms and become successful
  • Resilience and running a successful venture on bootstrapping
  • How to start afresh after creating a successful business
  • His top advice on working with naivety to success

SUBSCRIBE ON:

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.

*FREE DOWNLOAD*

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 Zhong Xu:

    Zhong graduated with an M.sc. degree in software engineering (2009), after which he immediately started working for the start-up, Siruna. After that, he worked as a senior engineer for EVS Broadcast, where he created mobile and cloud solutions for customers such as the London Olympics, UEFA, and BBC.

    See How I Can Help You With Your Fundraising Efforts

    • Fundraising Process : get guidance from A to Z.
    • Materials : our team creates epic pitch decks and financial models
    • Investor Access : connect with the right investors for your business and close them

    Book a Call

    Connect with Zhong Xu:

    Read the Full Transcription of the Interview:

    Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. Today we have a super interesting guest. I think that we’re going to be learning quite a bit. He’s done this a few times, so, obviously, a lot of ups and a lot of downs, but definitely, a lot of lessons learned, and I think we’re all going to get quite inspired with his story. So without further ado, let’s welcome our guest today. Zhong Xu, welcome to the show.

    Zhong Xu: Hey, Alejandro. I’m really happy to be here. I love your podcast, and I love to pay it forward where we can.

    Alejandro: Thank you so much, Zhong. So let’s take a little trip here through memory lane. Originally born and raised in Shanghai, but you did move to Belgium quite early. Tell us about your upbringing.

    Zhong Xu: Yeah, I was born in Shanghai in ’85, so the cultural revolution era. At a very young age, I moved to Belgium because my father had an opportunity to do his Ph.D. and study abroad. He was one of the first generations that were allowed to go back to the university again. That was quite inspiring. In his quest for searching for something better, he moved to Belgium. That’s also a bit where my professional journey started because one of the things that he did to survive while he was studying was working in Asian restaurants. Because it was in the ‘80s and ‘90s, some of these restaurants asked him, “You’re a smart guy. Can’t you make software for us for rations to operate and run more efficiently? He bought a book and learned C++ in 30 days, created a point of sales software for restaurants. Today, he still has, in Belgium where I live, over 90% of all Asian restaurants as customers. That’s a bit of how I enrolled in this hospitality software space.

    Alejandro: Wow. You’ve been seeing this since you were very young, and I’m sure that you got very much inspired by seeing your father running his own business and being an entrepreneur himself, so you grew up with it. What were some of the things that you learned from your father that were the most powerful for you and for your journey? And at what point did you realize, “I’m going to be just like him, and I’m going to have my own baby one day.”

    Zhong Xu: I think it’s the reverse. My entrepreneurial life started out of a must because if you have an immigrant as a father, in general, or especially a Chinese father, I think very early on, he will tell you, “Man, you need to work. In life, it’s never easy.” One of the things he told me was, “If you’re not smart, you should just work harder than anyone else.” Luckily, I’m not that dumb, but still, I need to work very hard. So at the ages of 16 and 17, I was already creating websites for these Chinese restaurants. I have hundreds of them. They’re ugly, though, these days, running live. When I was very young, we got to learn how to code, how to create solutions. That was one of the things I think I took through my life. Sometimes, you need to be able to jump and create that first proof of concept, and don’t be afraid to put that at the customer. I’m an engineer. After that, I suddenly stopped engineering, but I’m a very pragmatic guy. I want to make sure that I have something that is useful, that customers can use, and very quickly iterate and using their feedback towards that. I think that has really helped me through the journey.

    Alejandro: Let’s talk about your journey more because, especially after university, you didn’t go and work for your dad. You actually ended up building your own company. Tell us what that thought process was of saying to yourself, “You know what? I’m just going to go and build my own business.”

    Zhong Xu: Yeah. I think I always was inspired to work in startups. I also worked in a couple of big companies, but after my [5:25], I actually worked in a startup that created mobile apps and websites. Back then, that was quite new. You would say, “What’s so special about that?” Well, that was pre-iPhone, so it was a Nokia N95, Blackberry, Symbian in the west, so I really feel old-school, the apps. That was an amazing journey, but it taught us how to do these mobile things. The iPad came out, and the iPhone 1 came out. I finally found a way to fix or create a better solution because one of the issues that my father’s software had was it was not cloud-based, and also my mobile. So it means that sometimes when something breaks, you need to drive there. I still remember once where he was on holiday, and I needed to do service, and an Asian restaurant called me at 10 p.m. and said, “You need to fix it. I cannot enter numbers in it.” So I rode three hours to press [6:29] because the team lady forgot that. Now during that back and forth, six hours total, I was contemplating, “How do I take that business? I don’t want to take over that business.” Once the iPad came out, it was a perfect moment to create that next-generation solution on a tablet, but as well, on the cloud. In 2010/2011, to get with my co-founder, we created one of the first iPad points of sale in the world—one of the first 3,000 apps. That’s completely bootstrapping while working and almost coding during a traffic jam the in, the out. That was an amazing journey, and again, one of the lessons learned was: maybe you don’t need to have a lot of capital. Maybe you should just build the product and get to customers before you do all the rest.

    Alejandro: The company was called POSIOS, but with POSIOS, fundraising was a little bit tough. But even before we talk about fundraising, just so that the people really get it, what ended up being the business model of POSIOS?

    Zhong Xu: POSIOS was gaming changing in technology and cloud, but as well as the business model because the standard point of sale was [7:41] Enterprise Software. You’re buying a big terminal, and it costs 5K, 10K, 20K, and where you buy [7:51]. The alternative side was we allow these restaurants to do on a monthly subscription, where instead of investing 20,000, you just pay $50 to $100 a month, and they had a point of sale. It was using consumer hardware, so the investment was very low and highly scalable. The second lesson was really unique, which in hindsight, that’s a lesson learned. You can make the best software whatsoever, but at the end of the day, you need to have a massive distribution effort. Timing is important, but distribution is as well. Back then, on the App Store, we had this app and selected: where do you want to distribute globally? Every day, we’d have thousands and thousands of restaurants around the world saying, I need your solution. I need to go live. How do we use it? The funny thing was that—that brings up fundraising. Nobody believed us back then. First of all, everyone said, “Nobody’s ever going to use a tablet to run a business.” Second, telling anyone that you get 1,000 leads in 1,000 restaurants that are trying to buy a solution—nobody believes that. Back then, it was like, “It’s impossible. How do you have that?” We really bootstrapped and did everything ourselves to grow as we could.

    Alejandro: Quite innovative, too, because in Belgium and in Europe as a whole, startups have been booming in the last, I would say, five to seven years. I think ten years ago, it was not that sexy, really, to do a startup. It was more like consulting, and becoming a lawyer or a doctor was what people were going after. Now it’s like, “I want to be an entrepreneur. That’s so new.” But in this case, for you guys, I’m sure that raising capital was not easy because the market was still not there, and the ecosystem, the VCs or the investors, and also the startup mentality. So how did you guys go about raising money because I know that you even had to put your house on the line?

    Zhong Xu: I think we were really strong believers, and if I’m honest, sometimes it’s good also to be naive because if you’re not naive, you won’t do this stuff. I think we really believed in it, and we want to go quickly and not just in Europe. We wanted to grow globally, so we set up offices in Singapore, New York, and my co-founder even moved there. Nobody wanted to give us money. We talked to countless investors. They didn’t believe how this would work, so if you have that moment of opportunity, just go for it. My co-founder and I convinced our wives to be just very grateful to say, “Can we borrow half a million euros?” Back then, that was a fortune. So we put two houses as collateral, borrowed that money, and just went all in. In hindsight, I would not recommend it, but as we were naive, but also, we thought, “We’re software engineers. Worst case if this fails, we just do some coding for the next 20 years to pay off our debt.” But at the end of the day, I think it’s paid off. But in hindsight, it was a scary moment. I wanted to make sure that this never happens again. In future ventures, we’re always well-capitalized.

    Alejandro: Yeah, no kidding, because thank God it was a good outcome; otherwise, your wife would have put you to sleep on the couch. [Laughter]

    Zhong Xu: For sure.

    Alejandro: Good outcome. Let’s talk about the outcome because you guys did a merger with Lightspeed, so tell us about this process and how did Lightspeed come in the door and in the picture, and then, also, how that evolved from there?

    Zhong Xu: Yeah, I think that’s part of the nativity that really helped us. We went global. Lightspeed was, back then, focused on retail and got millions of investments from Excel and so on. There, we thought it was the moment to one side going to Europe, as well accelerates in different verticals and hospitalities. The real why of why people found us was although we were a very small team, people were always asking, “How does this company from the suburbs of Brussels do this on a global scale?” We had a big reach, and the reason why is if you’re a startup, sometimes you can fake it until you make it. When we were doing a fair in Las Vegas, most companies, even big ones, only sent two guys there. We brought a lot of our friends and family. We only got one hotel room, but with our wives, we were then four on the boot, and luckily, I had a friend that was doing a conference nearby. We said, “Here are U.S. [12:40] t-shirts. Come during the day, but even more important, when you’re at the party, make sure you walk around. Everyone was thinking, “Wow. That must be a big company. They can send ten people from Europe to Las Vegas to do the show,” so it’s impressive. We did a lot of these events where besides getting customers, we got a lot of noise. I think that’s why we were on a lot of lists of other companies saying, “If there’s a possibility, we should talk to you guys.” In 2014, for example, the guys of Lightspeed are still good friends of mine, and angel investors came to me and said, “Zhong, we want to marry.” That was a very [13:25]. I told them, “Yes, let’s date first.” After a lot of dates, I think us going together was the best decision then. It was something I definitely didn’t regret. Although we were really good at product in our 20s, we didn’t have that experience or the maturity to scale, especially people-wise, a global business, running go to market, noting all the emotions of a company, sometimes it’s very hard if you’ve never done it before. So joining Lightspeed really helped us as they are very skilled in the go-to-market and the product knowledge brought it to the global stage.

    Alejandro: And, obviously, a great outcome. Lightspeed ends up going public. They have thousands of employees today. Eventually, after that amazing run, you decide to put your notice in and go at it and do it again. So tell us about that process and that moment where the idea of Deliverect really came to mind, and you said to yourself, “I’ve got to do this again. I’ve got to go at it again.”

    Zhong Xu: The funny thing is, I told my [14:44], “We’re never going to do this again.” I said, “That was it.” But somehow, entrepreneurs must like pain, so we always go to it again. One of the things when Lightspeed was scaling that was a challenge for me is, as you grow, there’s a lot of silo for me, and it’s very hard to get the motion going. There are always things to do, and there’s always help. We were honestly just tired of doing a lot of meetings as we are doers and less managers. What made a difference is, back then, in 2016/2017, as we were very close in the hospitality space, we saw the shift to online. It’s happened in retail. Lightspeed was also doing retail, so we saw that happening. But slowly, it also happened in the restaurant business. Honestly, back then, every restaurant that talked to me said, “Zhong, this online transition is never going to happen in restaurants. It’s about hot food, creativity, servicing. Who is going to order food online?” But due to the rise of these marketplaces, the delivery companies, all the Ubers and Door Dashes of this world, we saw that restaurants were doing 10% to 30% of their total revenue by these marketplaces. Honestly, our goal was, how do we help these restaurants? They all say, “Zhong, you’re not allowed to go on a sabbatical,” because that was my plan. “You need to help us go through this motion. We want to create a solution to really allow these restaurants to be feature-proof as the number online channels; I think it’s going to explode. So that’s why very early on, we said, “Okay. Let’s set up Deliverect.” I went to every major marketplace around the world. I visited these HQs, created relationships, set up these arrangements, and created Deliverect at the end of 2018. Deliverect today is still a very young company. Now we’re exactly, tomorrow, it’s the birthdate of Deliverect, exactly three years in the making, of which, that’s quite crazy. Two-thirds of the company was in the pandemic.

    Alejandro: That’s amazing. We’ll take about that journey too. In this case, for the people listening and watching to really understand the model, how do you guys make money with Deliverect? How does it work?

    Zhong Xu: I’m very accustomed to SaaS, Software as a Service, so it’s a SaaS model. I think what’s interesting in the Deliverect model is in pure software; it’s land expanding into some modules. We have a transactional voting commitment to it to SaaS or customer growth. It’s a heavy investment of us, but we believe in our product and the average of our customers that [17:52] revenue grows by 50% in the first six months. That allows us to sometimes grow by 30% or even doubling that because they are growing quickly. A lot also has to do with the growth of our space, the takeaway and deliveries they’ve exploded, so that has a side effect on all customers’ growth.

    Alejandro: How much capital have you guys raised to date for the company?

    Zhong Xu: In the last two years, we raised over $90 million. I think that’s quite special, especially because the last round, $65 million and raised without meeting my investors. Of course, we know a lot of people that know them, but still, it’s quite strange these days as we can do this on Zoom while doing such a big transaction in a very short time. That’s the benefit of it, but without social interaction. That has been fabulous on that. I’m actually very allergic to raising capital because I can always learn to bootstrap. I’m a believer that you don’t need a lot of capital to grow companies, and the main reason is, sometimes when the market and timing are right, and when you’re riding a wave that becomes a tsunami, we do need to grow quickly, so hence, we raised a lot of capital to accelerate and help as many restaurants as we can.

    Alejandro: The last round, $65 million and without meeting people in person. How did that work? Can you make the insiders participate in understanding how that unfolded because I’m sure that many people listening are wondering, “How could I do that too? How was Zhong able to do that so that he didn’t have to jump into planes or book hotels or lose all of that time in commuting? I think that the positive is also the way that you’re able to optimize for timing, too, as an entrepreneur and also to reduce the cost of that traveling. And time is money, at the end of the day. So make us all insiders as to how that $65 million round remotely came together?

    Zhong Xu: I often think when you look outside, you convolute how it’s done because from the moment we started official raising to the closing when the money hit the bank was around six weeks. So exceptionally quick. I think what people often forget is offline or online; it’s all about relationships. So most of the time, the investors we have on board, I’ve known them for years. So you build a relationship with them all along a level, and often, there is also some network effect when it’s right. You know an investor that knows them. You have a friend that maybe studied with one of these guys, so there’s always that backchanneling and that relationship building. If you assume that it’s going to be out of the blue, it really happens because, at those ends, you want to be sure that you’re getting someone on board that has your mission aligned. You want to do what you want to do, but all of them, they want reassurance because you can do all the due diligence of the world, they can all check all their papers as one, but at that end of the day, they also are putting trust in the entrepreneur that what you’re saying is legit and it’s backed by numbers. So very early on, we had been talking to these investors, so build that team out. That’s one thing. I think one, you want to hit the moment you say, “It’s ready to fundraise,” it’s actually too late if you don’t have that list of investors that are interested. We have a very big list of interested investors that are ready to go, and we give them an estimated timeline where we want to go to market so everyone is ready to look at the company. They knew that they needed to put that in their planning. So it allows us to actually pitch to a lot of investors in only a two-week timeframe. The first two weeks, I cleared my calendar, and on average, four to five investment calls a day. So five days, two weeks, it’s very intense from morning to the evening, from the Europeans to the people in San Francisco, and did that at a quick rate. If you are prepared and you have your plan, your data, and your work upfront, it’s perfectly doable. I often think people don’t understand the process and are trying to consolidate their numbers, spinning their story, and all the information as to why they’re doing it, and that causes delay. If you have the numbers and data of the plan, the investor will look at it, and if you understand what they want, you can provide. That then goes quickly. So after two weeks, we got some offers where we then looked at, not only on valuation but more as who are the ones that are going to marry us? Investors, it’s not just for the money. They’re going to join you, hopefully for a long ride. You’d better make that sound judgment on that, and they will work closely with you.

    Alejandro: Of course. In this case, what was the main difference that you saw or that you encountered from dealing with European investors to dealing with U.S. investors? I’m sure that they were different.

    Zhong Xu: I think there’s sometimes the mindset of attacking a global market as well as how quickly it can. We had the last investors that joined were DST Global that has a big network, especially in more space of delivery, so we understand really well. But also, these are guys that are big believers in grabbing a big market and going for it. That also means sometimes these investments. On the other side, we’ve got [24:25], and the reason we got them was that we wanted someone that has a lot of [24:31], someone that can guide us through that journey as well. They were very complementary in their network, as well as their skillsets. I think there are other investors that we talked to that are also good and amazing, but sometimes it’s more about the capital they can bring and proceed with the network effect or specific help that you need at that stage. It also depends on what stage you want to be in.

    Alejandro: Yeah, of course. For the people that are listening to get an idea on the size of Deliverect today, is there anything that you can share in terms of the number of employees or anything else?

    Zhong Xu: Yeah. In Deliverect today, we serve all continents. We have 11 offices, so over 14 markets. We are over 250 people, so that has escalated quickly, especially if you know that in the last year, we added over 200 people during the pandemic, so that was quite special. For us, I think we have processed almost 60 million transactions for restaurants. I’m quite proud of that because that’s almost now $2 billion in GMV for these restaurants, especially during these lockdowns in the pandemic periods. It was the difference for them to go bust or survive. So the company is still growing at the rate of 400-500% year over year, and our goal is to keep that trajectory going.

    Alejandro: Amazing. Talking about employees, the last 200 that you’ve added during COVID times. Over 200 people that, for the most part, you haven’t met in person, and then also even the person that recruited them. You haven’t met that person very much up until perhaps recently, so how do you go about that, and how do you think about scaling in a way in which it doesn’t impact the key pillars of the culture that you’re building for this company?

    Zhong Xu: I think that’s quite a story on its own, actually. One and a half weeks ago was the first time I met our Head of People. She is quite experienced [26:55], but she lives in Edenborough, Scotland. I wanted to meet her because she hired over 200 people without my having ever met her. We did her interview completely online. We talked for countless hours. She started and built the HR practice fully remote. That’s one of the astonishing things these days. I think that being said, it’s also maybe the benefits, especially for the company in our startup in our size. You don’t have the legacy way of working. You can attract the best talent wherever you want. Actually, that strategy has helped us a lot. I’ll tell you why because when I was at Lightspeed, it was sometimes very EQ-focused. You have a lot of leaders and had overseas in one office. Back then, [27:52]. So you do have a lot of other people in other countries, but people always felt, “I’m not allowed to make the position.” In reality, it’s just the perception because it’s not that always these decisions are made that centrally, but it’s just because people said that. So very early on, pre-pandemic, we said, “Let’s get our leaders,” not in Belgium, again. Most of our leaders are in a different city. My Chief Revenue Officer lives in London. The Head of [28:23] is in Paris. The Head of Marketing lives in Amsterdam, Shelby. Then you have Jennifer in Edenborough. That allowed people to think, “These guys are happy. This should be the leadership, so wherever I’m joining, that’s going to be an important office, and that’s also the case. This allows us to scale so quickly. We have over 50 nationalities. It’s quite mind-boggling where everyone feels at place because diversity, as well as multi-cultural, is baked in. We’re not all white men sitting in one office. No, it’s a lot of cultures, a lot of differences everywhere. So that really helped.

    Alejandro: That’s incredible. Imagine that you go to sleep tonight, Zhong, and you wake up in a world where the vision of Dilverect is fully realized. What does that world look like?

    Zhong Xu: We have a quite strong mission. What we want to do is build the backbone of an on-demand fleet. What does that mean? We are not an online holding company. We’re not a marketplace. We’re not a point of sale. I will not just integrate. The world we’re building, Deliverect, comes from my personal experience as anyone who wants to go online often encounters a physical part of a restaurant. You need to be able to print a ticket in the kitchen because they need to make the food. You need to have that system operation running. It means there’s a lot of fragmentation in the restaurant space at the point of sales. For example, my father’s system still has 90% of Asian restaurants. If you’re then an online company, Uber or Google, whoever, and you want to access a physical restaurant, it means you need to have access to these points of sales. That’s what makes Deliverect unique. We have built a layer on top of hundreds and hundreds of the largest points of sales around the world, allowing anyone online to access a physical restaurant to do the ordering, processes as well as payments without caring about the infrastructure. You need to compare us like before you had AWS or Google Clouds. If you want to be a SaaS company, you need to build servers. That’s quite distracting. That’s what you call business. Before Deliverect, if you wanted to do online food ordering or delivery, you needed to build these infrastructures with these points of sales. That’s very hard to scale. The reason we’re doing it, that’s my upbringing. We started hospitality; we’re going to die hospitality, but we also know how these systems work. To crack it is a very big challenge and also very ethically challenging. We’re doing it to make that infrastructure for the world at end so at least these restaurants, not only the big ones, can survive but also track. We want to make sure they can sell whatever online and not thinking and caring about how do I do a menu on this platform and other platforms. I really want to help.

    Alejandro: That’s amazing. Imagine that I put you into a time machine, and I bring you back in time to that moment to where Zhong is thinking about launching his first business. Imagine you were able to have a chat with your younger self and to give yourself one piece of advice before launching a company. What would that be and why, given what you know now?

    Zhong Xu: I would tell him: stay foolish. Be a bit naive, and just go for it. The reason why is, you can only look back and say it made sense. So I would not change anything of the journey because it’s connecting the dots. If my father had never started hospitality, point of sale, if I was never in this world, if I had never made a website for him and didn’t understand anything online and space. If I didn’t create apps, he never created unless I was. If I had never been with Lightspeed, we would never have never built one of the biggest restaurant points of sale in the world. If we didn’t have that, this would not exist because we would not have the network, as well, the understanding of this space. It’s all about just doing it, and even when it’s very hard, just push through. The only thing I would say I would remind myself when I was young is, enjoy it, especially hardship. The first time, I didn’t always enjoy it. This time, when we get our ass kicked, and that happens, I’m enjoying it. Imagine we come out of this, and it was a really fun story again to tell.

    Alejandro: That’s it, and that’s part of being alive and building a business.

    Zhong Xu: Exactly.

    Alejandro: So, embrace it. Good stuff, Zhong. I love it. So for the people that are listening, what is the best way for them to reach out and say hi?

    Zhong Xu: You can hit me on LinkedIn. I’m there quite often. That’s a way to do it, or go on our website, and you will find some links, and it’s probably the easiest way to reach out to me.

    Alejandro: Amazing. Zhong, thank you so much for being on the DealMakers show today.

    Zhong Xu: It was my pleasure.

    * * *
    If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com.

    Facebook Comments

    Neil Patel

    I hope you enjoy reading this blog post.

    If you want me to help you with your fundraising, just book a call.

    Book a Call

    Swipe Up To Get More Funding!