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How These 20-Year-Olds Raised $13M And Built A Massive Food Tech Company

This post originally appeared on Forbes.com

Being a young, first time entrepreneur is hard. Without a stunning success story or years of applicable experience, a new founder can face significant challenges starting and growing a company. A study by the University of California indicated that the average venture backed founder is 38 years old with 16 years of work experience. That’s quite a gap when it seems today that every new startup founder is in their early 20s.

What challenges differentiate a veteran entrepreneur and a newcomer’s experiences? What are strategies a first time business owner can employ to maximize the chances of success?

Eat Street's Office in Madison, WI
Eat Street’s Office in Madison, WI

Eric Martell started EatStreet, the largest independent food ordering company in the United States, when he was 20 years old with two classmates at the University of Wisconsin. EatStreet has raised $13 million and powers the online ordering of 15,000 restaurants nationwide. The startup, founded in 2010, exists in a cohort of foodtech and delivery companies that have some impressive deal flow: Instacart raised $220 million at a $1 billion valuation, Postmates has raised $138 million.

I recently chatted with Eric about starting a business in college and about the explosive growth of the food and delivery tech sectors.

Dan Reich: Speak to the challenges of starting a company at 20 years old.

Eric Martell: Early on, and to this day, we’ve had to convince others to take a risk on us, because we’re young and don’t have any pre-EatStreet experience running a tech company. In 2010, we had to convince the restaurants to take a chance on us. Matt was walking into every restaurant in Madison, WI with a simple pitch that our service would bring the restaurants more orders from new diners. Restaurants were wary of the entire idea, because if we took an order online and didn’t properly ensure that the restaurant received the order and could fulfill it, the diners would blame the restaurant for the poor experience. Additionally, we accepted payments online, which meant that we had to pay the restaurant every week, so they had to trust us with their money. Matt looked young for a 20 year old, and he heard more than once that the restaurant “just didn’t feel comfortable doing business with a kid.” Matt was able to sign up five restaurants when we launched February 1, 2010. With some results under our belt, we were able to expand that list to over 100 Madison restaurants within a year.

Additionally, in order to process online payments, we needed the trust of a credit card processor. We applied for six processors before getting approved… there was a lot of inherent risk to accepting online payments and transferring out the payments to restaurants on a weekly basis. It took over two months of searching before someone took the risk on us.

If it weren’t for those five restaurants and the credit card processor taking a risk on us, EatStreet would not exist.

Dan Reich: Do you still face challenges similar to these?

Eric Martell:  Although the nature of the challenges has changed over the years, we still face obstacles from being first time entrepreneurs. We’ve raised over $13 million from venture capitalists, and every single one of them has taken a risk in betting on our drive. We also form strategic partnerships with companies like Yelp, Google, Single Platform, and Hotel Communications Network. These businesses need justification to take risks on a company like ours. I’m glad to say that we’ve always been able to put up results, and the company is the strongest it’s ever been.

Dan Reich:  Do you think the current trajectory of food and delivery business funding and acquisitions will continue?

Eric Martell: We stand by what we’re seeing. GrubHub IPO’d a little over a year ago, and has consistently held its value as a multibillion dollar company. Over in Europe, DeliveryHero has raised over $1.5 billion, and Just-Eat also had a very strong IPO. With even Amazon and Uber eyeing the food delivery space, we’re happy to be where we are, with strong relationships with thousands of restaurants.

Dan Reich: Do you have any advice for first time entrepreneurs facing challenges regarding their experience levels?

Eric Martell: Persistence and results. Matt went to over 100 restaurants and only signed up five for our business’ launch. We could have called it quits after five credit card processor rejections. Our investment pitch historically has had less than a fifty percent success rate. Accept the failure as inevitable, and push forward. We’ve had restaurants that initially refused to sign up with us tell us today that when they finally did sign up with us, the additional orders we drove saved their business from going under.

Results might not always be present, but they speak louder than the best sales pitch. Focus on the aspects of your business you have control over, and grow like crazy. We didn’t raise a dollar until we had over $1 million in food sales, and that first million was the product of thousands of hours of promotion and hard work. It’s much easier to convince someone to believe in your vision if you have a track record of growth and hard work to back it up.

Acquisition Breathes Life Into Emerging Digital Death Industry

This post originally appeared on Forbes.com.

Nathan Lustig and Jesse Davis are the cofounders of Entrustet, a company that helps you access, transfer and delete your digital assets when you die. The company was acquired by SecureSafe, a the market leader in secure online storage and digital inheritance. Entrustet is Lustig and Davis’ second company that has been acquired.

I caught up with them today to ask them a few questions about the deal and about their experiences starting a company.

Q. Where did the idea of Entrustet come from?

A. Jesse was reading The World is Flat by Thomas Friedman which explains the story of Justin Ellsworth, a US Marine who was killed in Iraq. His parents wanted more to remember him by, so they asked Yahoo for the contents of his email. Yahoo said no way, it’s against our terms of service.

A few months later, a Michigan judge ruled that Yahoo must turn over the contents of Justin’s account to his parents. We thought three things: 1) digital assets are real things that have economic and sentimental value, 2) you shouldn’t have to go to court to gain access to them, and 3) what if you have digital assets you don’t want anyone see?

We looked around and there weren’t any services to help solve the problem and decided to start. Our vision was to build a product that easily and painlessly let people decide what would become of their valuable online accounts and computer files after they pass away.

Q. You built the business in a place other than silicon valley and NYC? Please explain.

A. Entrustet has taken a long and winding path. We started the company in Madison, WI, which in our humble opinion is an up and coming startup hub in the Midwest. Our initial plan was to stay in Madison to save money during the bootstrap phase and build a great team, then move to NYC or Silicon Valley after we started to build some traction. Madison’s ridiculously cheap cost of living is one of its greatest attributes. Add that to a creative and helpful community of smart people and you’ve got a nice place to try to start something.

After a year, we had a product built, users and press, but not the massive scale traction we wanted. We saw an article in Forbes about a program called Startup Chile that was inviting startups to Chile and giving them $40,000 of free money. We wanted to extend our runway and we thought exchanging the brutal Wisconsin winter for Santiago summer.

After our 6 months in Chile, we came back tom Madison and continued to work until the acquisition.

Q. Did you raise money? How did you do that?

A. We raised a round of angel money from angels in the Midwest and East coast, plus a grant from Startup Chile. We built our prototype, launched it and then took it to potential future investors. Our biggest step towards fundraising was showing angels that we were serious. We had a prototype built, a full business plan, and showed tremendous support from the local business community.

Q. What is Startup Chile and how did it help?

A. Startup Chile is a program from the Chilean government to foster entrepreneurship in Chile. They give startups $40,000 of free money if you move to Chile for 6 months. It gave us a longer runway to help us perfect our business model and continue pivoting without having to give up equity. We met entrepreneurs from all over the world, including startups we ended up working with.

Q. How did you get clients?

A. Our main sources were via our blog and the press we generated, via attorneys recommending Entrustet to their clients. We also worked with websites to refer their users to Entrustet so that they could have a standardized policy for user deaths.

Q. How did the acquisition come about?

A. We’d been working in the market for three years and got to know the SecureSafe team very well. We strongly believe that the future successes in of digital estate planning are companies that help users equally while they are living and when they pass away.

SecureSafe passes both of these tests and we were very interested in figuring out how to work together. We also have most of our users in North and South America, while SecureSafe is concentrated in Europe. As our relationship developed, we realized that our visions were very well aligned and we decided it would be a classic win-win if we joined forces.

Q. What are your future plans?

A. Nathan is returning to Chile to work on a Chilean startup company called Welcu that was funded by 500 Startups and Tomorrow Ventures. Founded by Sebastian Gamboa and Nicolas Orellana, Nathan is helping them expand in Argentina, Colombia and Brazil. Jesse accepted a job with Buddy Media, a fast-growing late stage startup in its own right, based in NYC.

Connect with Dan Reich on Twitter – @danreich. (Disclosure: Dan is also a current employee at Buddy Media)

Google, Microsoft head to MadTown

The amount of countless hours I’ve spent in UW-Madison’s Engineering Hall, should earn me the “GAL” or “Get a Life” award. Instead I will receive a degree in Electrical Engineering from UW-Madison. And perhaps the same reasons I decided to attend this University, are now being considered by Google, as they too plan on setting up shop in Madison, Wisconsin.

In a statement to The Badger Herald, Google representatives said, “We are opening an office in Madison because the city offers an excellent quality of life, a deep local talent pool and commitment to education at all levels, including the University of Wisconsin.”

Madison, WI

Photo © UW-Madison University Communications

And anyone that has ever stepped foot in Madison could agree with that statement. But being that Google is a worldwide leader in software and computer architecture, its main focus will be within the department of Electrical and Computer Engineering. Leading this Madison/Google operation will be “retired professor emeritus of Electrical and Computer Engineering James Smith and 1980s computer engineering graduate James Laudon.”

Add a new Biomedical research to the list as well, and Madison will continue to lead the way as one of the premier research facilities in the world.

Some other great programs within my department, that I have been lucky to be a part of.

  • WEMPEC – Wisconsin Electrical Machines and Power Electronics Consortium
  • WCAM – Wisconsin Center for Applied Microelectronic Devices

It is extremely rewarding to see that my department, its students, and faculty members, have yet another great achievement to add to the list. 

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