The Process: The Finale (Ep. 7)

Dr. Michael Gervais (0:10)

All right, welcome to The Process. Alex, how are you?

Alex (0:13)

Good, Mike, how you doing?

Dr. Michael Gervais (0:15)

It's been a year since our first episode in The Process.

Alex (0:19)

Crazy.

Dr. Michael Gervais (0:21)

It's been great to see you grow.

Alex (0:22)

It's the one year anniversary.

Dr. Michael Gervais (0:24)

Right now, I know. So give me a quick update on some of the things that have been happening for you and your life, and then you and your business as you've been growing this fund.

Alex (0:33)

Yeah, look, companies are growing.

It is definitely cool to be able to look back in a year and just see how much has already changed. I mean, we've definitely made many mistakes along the way, but I think the first company we were really coming out of the gates talking about was Rhino, which, like I said, could give a renter their entire security deposit back in a time when millennials have historically low savings.

Dr. Michael Gervais (0:56)

Give us an update on that. How's the company going?

Alex (0:58)

Well, we've now returned over $20 million in deposits to New Yorkers.

We have gotten legislation, not drafted, but on the assembly floor in New York that would mandate that landlords at least offer a choice, an alternative to a cash deposit. And we probably most importantly have gotten approval for a nationwide rollout. So we're now in 12 states doing pilots. We are ready to take the country.

Dr. Michael Gervais (1:24)

That sounds like growth. It sounds like change.

Alex (1:26)

It's definitely growth.

It is hard to get this into the actual leasing docks of buildings all over the country. There's a lot of blocking and tackling. It's a lot of dirty work, but people are starting to actually choose Rhino and get their deposit back. And we're starting to see the material impact. And that impact is tied to the growth of the business, the growth of my company.

Dr. Michael Gervais (1:48)

How do you spell it? RH?

Alex (1:50)

Rhino.

Dr. Michael Gervais (1:50)

Like the Rhino. Okay.

Alex (1:52)

Wild animal.

Dr. Michael Gervais (1:53)

Okay. So as a startup, how thin is the runway? Like how do you manage that? And I want to challenge an idea that I've been struggling with. So there's two parts in here. One is how thin is the runway? And I'm just trying to understand startups in that way. But then the other is that you hear runways die because they're not funded. I think that in modern times, it's changing.

That startups die because they eat too much.

But they're not eating the right foods. So it's like they're gorged with all of the things that they could do, and they spend their energy in non-productive ways, as opposed to running out of money, let's say.

Alex (2:32)

Yeah, I think it's a fair question. It depends on the nature of the startup. So with Rhino, it's very different than a consumer business. A consumer-facing business, you are spending money on marketing.

And I mentioned this to you last time, there are a lot of startups that are raising tens of millions of dollars, and the bulk of that is going straight to marketing, which on one hand means it's a lot of venture dollars. On the other hand, it means you could be competing with the biggest CPG companies overnight. So it's an exciting time, and it's a risky time.

Dr. Michael Gervais (2:59)

What's a CPG?

Alex (3:01)

Let's say you were a startup building a gum company. You could be competing with a CPG company like Procter & Gamble.

Dr. Michael Gervais (3:08)

What does it do? Do you know what it stands for? Consumer product?

Alex (3:10)

Consumer package goods.

So on one hand, you can go from kind of zero to one quicker than ever. On the other hand, if consumers don't like you, wow, they're winning a bunch of venture dollars. So I think the traditional school of thought is do some testing, right? See if the consumer appetite is there, raise more money, more money, more money. In the case of Rhino, they can run pretty lean in terms of the business itself. And it's really more about making sure they have the time to nail the integrations so that when you're signing your lease, it's just on page two, it's already there. It's not a whole new thing you have to sign up for or get marketed to.

That said, what Rhino could use venture dollars for is to put someone on the ground in 15 states across the country and use that as a way to expand quicker. To answer your question, it's like I do think that there are a lot of companies that are raising a lot more money than usual to experiment, which can give them that indigestion that you're describing, but there have also been some crazy breakout hits. There was a company called Hymns that essentially came out of nowhere and went head to head with Viagra, but they're advertising during the NBA Finals and they started 18 months ago. The VCs are just sitting there saying, hey, let's give them a war chest and let's just go head to head because millennials like this product more than they like the old one. That's what's happening as I think millennials are really getting a lot of the spending and buying power of the economy.