#120 Bevz: A Tech Bro Walks Into a Corner Store...

Enoch: Pitch 2, day 2 [clap]

Charles: Bring it.

Here’s a startup playbook that VC’s love: take an unsexy industry that nobody in tech has noticed yet, and build super sexy software for said unsexy industry.

But those industries can be a tough bag of nuts to crack. Today’s founder is trying to sell software to an industry so old school it makes door to door vacuum sales seem fresh. Jason Vego is calling on convenience stores.

Yes, the humble corner store… with its snack cakes, and beers, and resistant owners, who don’t want any of this new-fangled Silicon Valley nonsense.

You’d need an army of door to door salesmen to sell these guys. Which is decidedly unsexy to VCs.

Will the investors slam the door on this founder or will they be down for some late night snacks ‘n smokes with ordinary folks?

I’m Josh Muccio, welcome to The Pitch. Where real entrepreneurs pitch real investors for real money.

Paige: Hi I’m Paige Finn Doherty, founding partner Behind Genius Ventures

Neal: Hey, I’m Neal Bloom, managing partner at Interlock Capital

Elizabeth: Hi, I’m Elizabeth Yin, general partner at Hustle Fund

Mark: I’m Mark Phillips, founder of 11 Tribes Ventures

Charles: Hi I’m Charles Hudson, managing partner, Precursor Ventures

The pitch for Bevz is coming up after this.

And if you want to watch the video of this pitch, go to pitch.show/youtube. Episodes premiere on Wednesdays at 7pm eastern. 

-

The information provided on this show is not intended to be investment advice and should not be relied upon as such. The investors on today’s episode are providing their opinions based on their own assessment of the business presented. Those opinions should not be considered professional investment advice.

Jason: Hi everyone.

[hellos]

Jason: Jason. Nice to meet you. I'll sneak around this way.

Elizabeth: Elizabeth. Nice to meet you.

Jason: Jason. 

Paige: Nice to meet you.

Charles: Hey. Nice to meet you. 

Jason: Hi everyone. I'm Jason Vego, the CEO and cofounder of Bevz, and we're on a mission to power the snack and drink industry through convenience stores. I assume you've all been to a convenience store or liquor store at some point in your life. What technology do you remember seeing when you went in the store? 

Charles: Maybe tap to pay. Maybe.

Paige: The Slurpee machine. Those are my favorite.

Jason: Rarely. But sometimes, yes.

Mark: Yeah. Point of sale unit.

Jason: Point of sale. Cool. That's pretty much what you'll see across the 150,000 convenience stores in the US and the 1.2 million convenience stores globally. And there's a ton of restaurant technology, companies like Toast, Chow Now, etc. The problem is none of that really works for convenience stores. The other big factor is that these stores are really reluctant to technology in general and outsiders. We really know this customer and this market, because my cofounder has owned and operated convenience stores for 38 years. He literally is our customer. And we built Bevz, which is a SAAS platform that helps convenience stores stock the products that their customers want and then easily sell those products in store and online. Today we have 330 stores using the SAAS platform, we're growing 21% every month, we have a 95% conversion from free trial to paid subscription, and we have a 99% monthly retention. And today we're raising $1.6 million that we're gonna use to acquire 2000 convenience stores, build six more product integrations and reach a $3 million run rate ARR before we raise our next round. 

Paige: Well, thank you. Welcome. Can you talk a bit more about like your personal story and why this is something you're really excited to be working on? 

Jason: So prior to Bevz, I started a software platform for dog groomers. That failed quite miserably for a lot of reasons. But I've always been really excited about helping a specific vertical and especially SMB. I've known my cofounder Victor, who I just mentioned, since I've been a kid. So I met him when I was six years old. We were neighbors. He was my basketball coach. He calls me in 2019 basically saying, like, no one's building anything for convenience stores. Like, we gotta do something about it. and it felt like this perfect opportunity to team up with my kind of close friend for a long time and solve the problem. 

Paige: So there's 330 stores using the platform today. Can you walk us through a) if there's any like specific geographic concentration. And then b) like how you onboard 

Jason: Yep. So 88% of our stores are in California today. In terms of onboarding them. We built everything to be self-reliant, so we have a Zendesk integration, allows them to walk through the entire steps, pick what ecommerce apps they wanna use, whether they wanna order inventory, etc. And we still get calls, and we still get messages. But it's surprisingly minimal for what you would expect with a really not tech savvy customer. 

Elizabeth: What percentage of people start the free trial and then cancel?

Jason: Five percent. So 95% conversion.

Elizabeth: I see. 

Jason: And then we're keeping, like I said, a 99% monthly retention. We've lost 13 stores in the last nine months, so super strong retention rates, which even bears the question of should we be charging more? Should - should retention be that high? A lot of questions. But yeah, 95%.

Elizabeth: Can you talk about pricing? 

Jason: We charge $79 per month to use the SAAS platform. Where we're increasing our revenue is we do advertising partnerships. So we'll work with brands and use our solution to advertise their products through the platform to the store, and they'll pay us a monthly rate. And actually right now, we're doing $44,000 in average monthly revenue from advertising partners. But yeah, 79 bucks a month for the SAAS, and then ad partnerships.

Elizabeth: Sorry, you're making 44,000 per month off of ad revenue?

Jason: Yes.

Elizabeth: And then how much are you making off the SAAS revenue?

Jason: $25,000. 

Elizabeth: Oh, interesting. 

Mark: How do you think through your customer acquisition strategy? Talk us through that process.

Jason: Yeah. So we're inside sales driven, but there is an outside sales component. But overarching, we are sales driven. We've tried marketing, we've tried different mechanisms. But today, I can consistently add stores through sales. It's a pretty quick sales cycle. Usually a couple weeks. What we'll do is we'll start calling a territory, close deals over the phone, and then we will supplement that with outside sales, physically send the person to go meet the stores that were like right on the cusp. And then they almost always, when a salesperson goes to a location, they'll get other stores that they didn't plan to meet or things like that. So inside sales driven. We know how to scale that up. And each sales person can get 20 convenience stores every single month consistently. 

Neal: So unfortunately I have a pretty close competitor in this space called Mercato. They're doing inventory for markets, independent grocers and bodegas. And they've picked up on this as well, too, where they're able to digitize revenue for offline stores. And now they're seeing all this data and able to do wholesale buying So for now, I'm gonna sit out for the rest.

Jason: Yeah. Cool. Yeah. 

Paige: Can you talk a little bit more about how much you previously raised? So what the timeline's been on that?

Jason: Yep. So we've raised 930,000 total to date. That came in a few chunks. So we did a $300,000 family and friends round in 2019. We were a very different company before this. We were an alcohol delivery marketplace. If you're familiar with Drizly or -

Charles: Drizly. 

Jason: Yeah. We were Drizly copycats. 300,000 went toward that business. That's gone. Then we bootstrapped. We did an accelerator. Raised 25,000 from that. And then we did a pre-seed round summer of last year. That was a $605,000 round at a 5 million post money on a convertible note. 

Paige: So how much equity do you own as the founder? 

Jason: So I have 14%.

Paige: 14%.

Jason: Yep.

Elizabeth: Oh, you have 14%?

Jason: Our founding team together has about 70%. So it's a combo of me, my cofounder Victor, and my CTO Victor transparently owns the most equity for a couple reasons. One is he started it when I wasn't ready to come on, so I am cofounder, obviously. But I wasn't there in that year of really getting it built. The second and really the biggest one was when we pivoted, he paid me personally a salary because I couldn't live off no salary at all. And so the agreement was, you get to have more equity and I need money to live off of, and here we are. 

Oof. Jason only owns 14% of his company. Founders have had the door slammed in their face for less. Literally. This happened on last week’s show. 

Alright, time to grab some Sour Patch Kids and pizza flavored Combos. When we come back, the founder equity saga continues.

[break]

Welcome back from the corner store. For ads! Jason was crushing his pitch until he dropped a number that triggered the investors – he only owns 14% of his company.

Also, that army of salesmen he’s gonna need? That’s a problem too. Here’s Charles.

Charles: You mentioned, I think quite clearly, like this is a sales-driven company.

Jason: Yes.

Charles: Do you envision a world in, is there a future state in which there is more of a self-serve, or is there a bigger role for marketing or do you think just given the nature of the customer, even as you grow your customer base, it's sales is still gonna be like the primary customer acquisition vector?

Jason: It's gonna be sales driven for a while. 

Charles: Okay

Jason: What I like about that, though, is it is controllable for us. Yes, there are humans and things like that, but we're not relying on Google ads or, someone to sort of control that. We can get people and sell it, but I do see the trend slowly, and the more our brand builds, I'm absolutely sure we can do sort of big marketing efforts and get people to apply inbound. 

Elizabeth: Mhm 

Charles: Is there any difference in selling to the independents and the small chains? Is that sales motion any different?

Jason: So it depends. So independent and small chain. 71% is represented. That's who we're targeting today. There's a blend in the middle of that. So we - we acquired a 23-store chain last month. That was an independently-operated store chain. 

Charles: Oh.

Jason: Quite a similar sale. They definitely tried to negotiate us harder because they have 23 stores, they have a little more power, but that's more of the independent sale. Then you have franchise models, which are getting really interesting. So actually today we have 7-Elevens, Circle K, Shell, Chevrons on our platform. Very few. With those, it's tricky.

Charles: Yeah. 

Jason: They can onboard just as an independent, cos they really run their own store, right. But what we're finding is, to really get all of them, we're gonna have to go to these like local franchise models. So I think short answer to your question is it's relatively similar. So we've talked to like a group like GetGo, they have you know like 400 stores, things like that. That is a different conversation, when you get to corporate. So I'd argue it's not like chain. It is - are they a corporate? Or are they more like independently operated franchise? The corporate typically requires certain things. They're gonna want POS integration. Another thing would be like we, depending on if they sell hot food or not hot food. So just little features like that. All very buildable, but today it's we can go plug and play to pretty much any independent or small chain. Not a corporate yet, though.

Charles: Thank you. Super complete answer.

Paige: I think you have a really excellent retention number. I'd be curious to hear more about the 13 stores that left. Why - why did they leave?

Jason: Yep. So I can give you sort of exactly why all of them left. There was an outage in Coachella weekend that caused a few stores to leave. Even though it wasn't our fault. It was one of our ecommerce partners. We get the blame. Another couple is, we had a store, sort of a middle California. no ecommerce orders, because there is nobody ordering from those places. it's not enough ROI for the platform. Those were the two most common. And then I'll give you the third one, which I think is funny, but it's only been like two stores, is I'm fairly confident they were afraid to say no to our salesperson, where they were just like, I just need to - to like say yes so this person stops talking to me.

Charles: Get this guy -

[laughter]

Jason: It's only been a couple.

Mark: That's a good salesperson.

Jason: Yeah. it's a couple stores, right. 

Paige: Well, yeah, like two out of 330 is not -

Charles: It's not bad.

Jason: And that's gonna happen, right. We want them to be aggressive. 

Paige: What valuation range are you looking to raise on? 

Jason: So we're doing a 9 million post money valuation cap, another convertible note. We’re raising the 1.6. And we have 1.3 committed already. 

Charles: Oh nice.

Elizabeth: Great. Congrats.

Jason: Coming along. Thank you. Not a fun time to raise money. but uh 

Charles: I really liked this, I rarely meet people with this level of extemporaneous ability to like talk about every facet of their business in like a level of honesty and detail - it's honestly it's quite impressive.

Jason: Thank you.

Charles: Like your command of the business. but I'm gonna be out. I think I visibly winced when I heard about the cap table. Just cos it's clear to me you're doing so much. 

Jason: Yeah.

Charles: And it's not even just the absolute amount of ownership. It's the amount of ownership combined with what I think the business is gonna need on the capital side -

Jason: Yeah. 

Charles: If this was something where I was like, oh, you know, we could probably do this skinny, it's a lot of marketing, it's a lot of inbound. But I think you were honest and correct in what it's gonna take in the intermediate period to get your customers on board. And I just worry that given the current level of ownership, and what I think it's gonna take - I just think you're not gonna get the reward you deserve for your effort. So I'm out. I'm really sorry - 

Jason: Can I ask you a couple questions?

Charles: Absolutely.

Jason: Yep. So one question would be if cap table adjusted fast, would that affect your decision?

Charles: It would. Yeah. It would. 

Jason: I think that's doable. So Victor and I, like I said, we go way back. If I called him after this and was like, we're gonna close the round, you need to literally send me 5% right now, I could probably do that overnight. So I'll say that's the one. The second is - I think if I showed you the model, sales-driven sounds expensive. It's not as expensive as it sounds. So for us, the 1.6 million gets us to 3 million run rate and we're on the cusp of profitability. If that affects your decision those two are actually I feel quite… 

Charles: Yeah. I mean I - I don't know if it's a five - I don't know - I don't have an exact number in mind. I'm happy to have that conversation. I also want to respect the fact that it's - Victor put in real money. This isn't sort of like phantom ownership. He really put up real cash. And so -

Jason: He put up real cash, yeah.

Charles: But that adjustment would change my decision. If we could get to a level where the balance felt better.

Mark: So I'm a pass as well, actually. I think - We have some background in our fund working in the convenience store space, So one of my colleagues at 11 Tribes has owned and run convenience stores. And there is a lot of - it's just gnarly. It's just gnarly getting into all those different spaces. and so I - man, your control of the business is incredible. But more from a getting into that convenience store space perspective, it's gonna be a pass for us.

Jason: Yeah. 

Paige: I think what would be exciting to me is a business model that was more focused on either the retailer or the brand partnerships. It complicates the customer relationship if you're like retailer first, but you're also selling to them. And so I think like that monetary aspect can complicate how you think about going through both like product development, and then also like the sales cycle if you're selling to two different customer bases. So for that reason, I'm out. But I was incredibly impressed. And I do hope that you get more equity in the business. Thank you.

Jason: Yeah. 

Elizabeth: Have you already had a conversation with Victor about your equity? 

Jason: Yes. 

Elizabeth: And what is his perspective on that?

Jason: That I deserve more equity. I mean, transparently, it's - this is not my focus right now. It's like, I'm hearing it now more as we're closing this round; you're not the first people to sort of mention something similar.

Elizabeth: Sure.

Jason: But it's - to me, it's like, it's never - if I had 1% or something like that, that'd be like horrible. But it's a meaningful chunk, and to me, this is like - we're here to change this industry and win. And there's an emotional piece to this where I was literally couldn't afford - I was in my MBA, too. So it was like, I need to get paid. And for someone to pay me out of their own pocket when the company wasn't making really money yet, to me was meaningful, why it's here now. I can guarantee that there will be transfer, and I just haven't spent the time, because I wanna see success over my personal equity. 

Elizabeth: Um, so here are my thoughts. I am out for now, for all the reasons that Charles cited. But I think you've been incredible. And if there were a few modifications here, then I would be in.

Jason: Okay.

Elizabeth: So one is I - I do agree with this general sentiment that I think you need to be rewarded.

Jason: Thank you.

Elizabeth: I mean, you are raising this round also, so you're putting in the work in capitalizing this company. I think you have to be at least a 20%. A lot of things are psychological and maybe you're okay with things now, but as you go along and everybody gets diluted down, like, you're gonna feel less excited about the company as things go on.

Jason: I can see that. Yeah.

Elizabeth: I don't like it when people end up feeling bitter about their own companies.

Jason: That's fair.

Elizabeth: So that's thought number one. The second thing is like convertible notes are generally all over the place, so I would definitely want to see what the details on that look like. But I think if you can solve for those two things, I would be very interested in investing in this round.

Jason: Awesome. 

Jason: I could almost guarantee I could have that 6% from Vic directly. But actions speak louder than words, so let's see if I actually do it. You can see if you believe it. My question would be, and obviously this is not a commit, because there's no commitments yet, but I guess where would you play, I guess, both of you, 

Charles: We would do like probably 50. Something like that.

Elizabeth: We would do 50k.

Jason: Cool. Just cos -

Charles: Especially given what you have left.

Jason: Yeah. We're getting close, so. Okay. Very cool. 

Charles: All right.

Paige: Cool.

Mark: Good job, man.

Elizabeth: Awesome job.

Charles: Awesome. Really nice to meet you.

[nice to meet yous] 

Paige: Wow. That was impressive. It was like, every single question, he was like, boom, boom, boom. Also there's this other thing you should consider, and here's like the direct numbers on it. I was like, this is very detailed.

Elizabeth: Very good at communicating.

Paige: Yeah. 

Neal: Why - I'm just curious about 20, in your head, 20% -

Charles: I was gonna say 22. I was like 6 to 8 - I was like, cos he's gonna get more dilution and like - 

Elizabeth: I mean, I would've wanted to ask for more, but I - I don't know.

Mark: It's a tough question, too. Cos he has this close relationship with this other person who's clearly done meaningful things for the business.

Elizabeth: And funded his MBA.

Charles: Yeah, that's the thing. I think it would be different if it was just sort of like funny money, oh, I started a year - but like this is like, this is a real, that was a real sacrifice and I think that has to be respected.

Mark: Yeah. I agree with that. That's well said.

Josh: Do you think you'll come in if it's 20?

Charles: I would be happier at 22. But I mean I'd probably do it at 20.

Josh: That's very specific.

Charles: Yeah. 

Josh: We might do a quick turnaround. 

Charles: Quick turn.

Josh: We do need you guys to leave so we can set up this mic. 

Jason left the room with 100k in commitments I think? from Elizabeth and Charles. IF he gets more equity from his cofounder Victor. Jason seemed very confident he could get that equity, but conversations around ownership usually aren’t that straightforward.

We caught up with Jason a few weeks later to see how it all went.

Josh: In the room you said, I think I can get that equity transferred in a week. how did that conversation go with Victor? 

Jason: So the first started in the car on the way home So I'm calling him like, so, crazy situation. I know you were, you know that I was on this show, but this is the scenario. So a little like, why are we having this conversation on a Friday? What happened in the last two hours to sort of warrant the speed? Because frankly, I was kind of like, I said five days, so we need to do this. Like, this weekend We hashed it out, we got our attorney to help pretty quickly, got the paperwork tied some valuations to it too, I think that was fair, which is don't just give me the equity this second, it is let me prove and hit certain company milestones, and then I get the equity, company's worth more money, you win, I win, investors give us money. That's how it went. 

Josh: So did you tie it to the successful raise?

Jason: So we tied it to a company valuation. And so we did two valuations. So it's at a 40 and an 80 million valuation, I'll get two buckets of equity. To me, it's, that's the point. We're here to do this really big. If it doesn't get that big, then I don't get the equity. And if it gets that big, then I will.

Josh: Yeah, I mean, the investors concern was less about how much you own right now, but more about how that's gonna get whittled down over time as you raise subsequent rounds and get diluted. 

Jason: Yep

Josh: So you've basically got these incentives at each point where you would get diluted, you're gonna get… 

Jason: more!

Josh: …additional equity at that point to stay motivated. 

Jason: Yeah, I think they might have even preferred the style we took it because then it was I really gotta hit those milestones for me to get the equity. So It took a little more than a week. 

Josh: oh!

Jason: So it wasn't as fast, But yes, the equity transfer went through. And I did what I said I was going to do.

With the equity transfer complete, Elizabeth was ready to start her due diligence. And while summer has come to a close, it’s still grilling season at Hustle Fund. 

Elizabeth: Startups never really die of starvation. They always die from overeating. So, how do you think about balancing all of this? 

Elizabeth: What are the top reasons for somebody not buying? 

Elizabeth: It almost seems like it's over a six month payback period. Is that a fair estimate? 

Elizabeth: Isn't it kind of a lot of work to constantly be updating items? 

Elizabeth: If I buy alcohol through DoorDash from some store... 

Jason: We're running it on the back end. 

Elizabeth: ………Uh huh. 

Whew. I’m sweating and she wasn’t even asking me the questions. 

After the startup steak was very well done…

Jason: Elizabeth invested.

Jason: Hustle Fund, uh, is part of the team, and we've been working with them a little bit. Elizabeth and hustle fund would’ve been my favorite choice. I’ve been following Elizabeth for years now probably on social and the way she talks about startups, helps them, I was a huge fan 

Josh: Yeah, Elizabeth's great. So what ended up happening with Charles?

Jason: Charles did not move forward. We didn't actually talk after, so we we sent some follow ups and probably not a fit

Josh: What did he say?

Jason: Nothing. 

Josh: NO!

Jason: No response. 

Josh: Charles! 

Jason: The good news is I filled the rest of the round. It was a 1.6 round and we have about 90 percent of that wired

Josh: That has to feel amazing.

Jason: It does. And I have more interesting news too. A lot has happened since the show 

Josh: I can't resist a tease like that. What happened? 

Jason: So we've really been consistently growing. Adding stores, building technology, hitting a couple of the revenue streams that didn't exist prior. So people, as we were growing, and that 9 million post money valuation cap still existed, we were getting a lot of interest. And so, we got a few more offers. At the very end, uh, like more than we can take, we ended up getting about 2.25 million committed on the 1. 6. But the more exciting news is we're now actually looking at the next round, which is very fast turnaround. 

Jason: And it'll be, hopefully, we don't know yet, but something like a priced round around a 15 million valuation. 

Josh: Oh my word. 

Jason: Things are happening, that's for sure. 

Josh: So why do you think you found so much success when raising this round? 

Jason: I'll tell you a little founder secret, right? Which is, I knew these questions would come about equity and things like that. Certain things will trigger. Someone to not be as interested, and if that happens too early, I lose them before I even really get a chance for them to know me and me to know them. And so I'm pretty purposeful about how I now do the fundraise. I have a running list of things I know will be some of the biggest concerns of investors, and I will get to them, but at specific times. You've gotten to know me a little better. I'm a super transparent person. 

Josh: Yeah. 

Jason: And in the early days of fundraising, that hurt me a lot because I was like I should be upfront, honest. From the jump and that's true with the caveat of don't tell them every single bad thing that's going on It's a startup if there's no bad things and you wouldn't be a startup fundraising I could have brought up equity early and been like you'll probably want to ask about this. But my strategy is get them to conviction first. And that's literally what happened, right? 

Josh: You know, you filled out your round, which is awesome. you mentioned some of the commitments you're waiting to come through. Is the pitch fund one of them? 

Jason: Yes, you guys are one of the investments still waiting to come in and I will keep my word on the nine million valuation cap as part of this round 

Josh: Alright! The only question we had was, you know, we just felt like you needed to own more of your company. But it sounds like you fixed that. 

Jason: I did. I did the thing.

At the very last minute, an investor swooped in with a new term sheet for $1.3 million. Bringing Jason’s total fundraise to 3.1 million dollars. So it turns out that lots of investors are down for some classic door to door sales.

If you would like to invest in Bevz, actually you still can, as an LP in The Pitch Fund. We just crossed $2M committed from 110 listeners in fund 1, and it’s been a great group so far. But we’ve still got room for a few more. If it sounds interesting to you, you can learn more and apply at thepitch.fund

Next time on The Pitch…the Peloton for horses

Al: What did it cost you to get the recordings done, getting them put into the app. Like what did that cost?

Kinsey: Yeah, so it's $100 on average per lesson. 

Beck: That's it? 

Beck: Wait, though, that sounds exceptionally cheap. 

Kinsey: We're scrappy, you guys.

We’ll see you in THREE WEEKS in the pitch room.

Applications are open for next season of the Pitch! We’re gonna be in Miami in January. 18 startups will pitch the investors on our show. So if you or someone you know is raising pre seed or seed, go apply at pitch.show/apply. Even if you’ve applied before, apply again. See you in Miami in January.

This episode was made by me, Josh Muccio, Lisa Muccio, Kerrianne Thomas, Anna Ladd, and Enoch Kim with casting help from Peter Liu

Music in today’s show is from Saberteeth, Indigo Jewel, Dame Asu, Our Many Stars, Onders, Breakmaster Cylinder, and The Muse Maker

Thank you so much for listening to the show. If you’re enjoying the podcast, we’ve actually set up a special URL to make it super easy to share it with a friend. It’s pitch.show/text. Try it out! pitch.show/text

And if you want to listen to The Pitch ad free, subscribe to Pitch+. You’ll also get occasional bonus content, like the episode we dropped last week. Plus, it’s a really good way to support the show. Just go to pitch.show/plus to learn more.

The Pitch is made in partnership with the Vox Media Podcast Network.

-

The Pitch, Inc. and their respective employees and affiliates do not provide investment advice or make investment recommendations. The information provided on this show should not be used as the basis for making investment decisions. Listeners should conduct their own research and consult with their own investment advisors before making any investment decisions.