Can Authenticity Drive Bottom-Line? This Startup Shows You How (Part II)
Q&A with Alan Zhao, Co-Founder and VP of Engineering at YC Startup Warmly,
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This story is part of the Entrepreneurship of Life series, a collection of interviews with immigrant startup founders, venture capitalists, and tech business leaders.
Warmly, Experience & Reflections (Cont’d)
You guys consummated several successful fundraisings last year, including a $2.1MM round led by NFX with participation from Y Combinator, Matchstick Ventures, Scribble Ventures, Mike Vernal of Sequoia and Harry Stebbings’s 20VC. Anything learnt?
One thing that really helped us was starting to build relationships with prospective investors very, very early on and being relentless. Max has been talking to some of our current investors for years, long before Warmly,. He had pitched one of them seven times on different ideas and got rejected seven times before they finally funded us.
We are also religious about updating our network frequently: since our early Techstars days, we have been sending weekly (now bi-weekly) business updates to an expanding group of mentors / advisors, current and prospective investors, and basically anyone who has supported or is willing to support us as we grow. The update would recap our progress and learnings for that week, actionable asks for help, and gratitude for those who helped. It has proved a fantastic way to not only let prospective investors get to know us but also nurture and leverage our broader network. We often receive dozens of responses to our calls for help, and without such support, we would not be where we are. [Keyi note: Alan’s co-founder Max wrote an in-depth piece on the power of the weekly mailing list.]
For a seed-stage VC pitch, the top two selling points are traction and team credibility based on our experience. Head off the conversation by showing real momentum with users, and your investors’ ears would perk up. Then you can delve into the big problem you are tackling, the market opportunity, etc. It is also crucial to highlight why you are the right people to pursue this opportunity.
What do you personally focus on as VP of Engineering? What has been the greatest challenge for you in this role?
Up until recently, I did not yet manage a big team of engineers as VPs of Engineering typically do. I sometimes work alongside our engineers (less so as we grow), but more importantly, I need to constantly think about gaps in our technical capabilities and operations and how to address them. For example, how do we capture job changes as close to real-time as possible? This is our bread and butter, and we must both stay on top of the data industry’s state-of-the-art tools and have our own secret sauce. I make sure we learn from the best industry experts, including some who used to run our largest competitors. For example, Derek Schoettle (ex-CEO of ZoomInfo), Allison Pickens (ex-COO of Gainsight), and Alex MacCaw (Chairman & Founder of Clearbit) are our angel investors and offer us incredible advice from his experience.
For me personally, the greatest challenge is not anything technical but rather finding the highest-leverage way to impact our business. Counterintuitively, what adds the most value often takes the least time and is more often about people than about things. Making incredible hires, empowering and motivating them, building a win-win partnership with our competitors rather than dodging them — such things create far more impact than spending nights and weekends producing “perfect code”. A lot of that code would be thrown out anyway as we iterate through ideas.
The size of our engineering team has grown a lot in recent months, which means my role is rapidly transitioning into a managerial one. It is a steep learning curve to climb but an exciting one too. We have ambitions of building a world class engineering culture at Warmly. So the whole engineering team actively meets with experienced CTOs, from recent YC founders to engineering leaders who have taken their companies through IPO. The idea here is that every engineer at Warmly, will be a great CTO of their own startup one day and can have this wisdom to draw upon. But it also enables us to see further than our experiences would allow us by standing on the shoulder of giants, as we build the right engineering culture together.
Two books I recently read, Extreme Ownership (Recommended by one of our own, Casey Dyer, an experienced engineering leader) and The Score Takes Care of Itself (recommended by a friend and fellow YC founder Paul Dornier), gave me good food for thought on leadership. The teachings resonate the most when you have context to apply them in.
You once mentioned the very different personalities of yourself and each of your co-founders. When starting from different positions, how do you achieve consensus on key decisions?
We try to exchange thoughts in writing as much as we can and only use live discussions to resolve any sticky points and make final decisions. We have a shared document where any of us can raise issues, propose solutions and explain ourselves. Everyone else would then document whether he/she agrees or has alternative ideas and why. With asynchronous thinking, each person gets enough time to process the issue, understand others’ positions, and put his/her best thoughts forward. This makes our weekly co-founder meetings focused and productive, and consensus a lot easier to reach.
Was there one experience or moment that really solidified trust and glued the four of you together?
Our time at Techstars was a beautiful bonding experience. We lived under the same roof and spent almost every waking hour of those three months together. Outside work, we shopped groceries together, cooked together, and took turns organizing weekend bonding activities such as group painting sessions and martial art practices.
As a daily ritual, Carina insisted that each of us share a personal story after dinner. It might be about a past relationship, something memorable from childhood, or even a lingering regret. Out of it came so many moments of voluntary vulnerability, nonjudgmental support and profound connections. Each of us has cried in front of the group during those sessions. We are really pushing the envelope to become not just co-founders, but also best friends.
Alan’s Personal Journey
What was your path of self-discovery towards entrepreneurship like?
I have craved creating something of my own since I was a kid. In middle school, I read my first book on entrepreneurship — Delivering Happiness — the story about the trailblazing online shoe store Zappos, told by its co-founder Tony Hsieh. Its authentic “customer centric” philosophy left quite an impression on me. To ensure happy customers, Zappos started with happy employees. They pioneered a number of out-of-the-box work policies, such as offering all new hires $2,000 to quit after training in order to weed out anyone not passionate about the job and just here for the paychecks. They also innovated in every aspect of their business to make online shoe purchases a seamless experience — back when ecommerce was in its cradle and Amazon was still mostly selling books. Their happy customers then became a growing army of Zappos “sales reps”, and they barely needed to spend on marketing. This book was a true inspiration, revealing to me how a well-run business can be a powerful source of positivity and not just a money-making machine.
I kept the entrepreneurship idea back of my mind through high school and college, where the prevailing mindset was to get good grades and then good jobs along a few well-defined career tracks, such as finance and consulting. I remember discussing career choices with a mentor in my senior year of college. He himself has a one-of-a-kind background: once an economist at the Fed and on Wall Street, a lawyer at a prestigous firm, and a director at the Treasury Department, he is now a second-time startup co-founder and angel investor. He cautioned me that schools tend to shape students into familiar “molds”, which should never define my opportunity set. He encouraged me to stay open to nonlinear career paths, changing directions, and roads less traveled. I became a credit derivatives trader right out of college, but I kept his words in mind.
Having spent two years on the trading floor, I became convinced that professional service isn’t for me. I decided to bring the entrepreneurial voice from the edge of my mind to center stage, but before making the plunge, I needed to learn how startups are run from the inside. So I joined one called x.ai and learnt a ton there over the next two years. I also taught myself software engineering when I realized it would be a valuable skill for what I wanted to do.
In early 2019, I got a call from my childhood friend David. He acquired a Vietnamese restaurant in Dallas called Urban Caphe and asked if I would run it with him. And that was not his end game — David saw potential in a Zillow-like tech-enabled platform for restaurant buyers and sellers, and he wanted to use Urban Caphe as a guinea pig. I was sold, and within a few weeks, I transplanted myself from New York to Dallas and became a restauranteur.
The “Zillow for restaurants” idea did not ultimately take off, as we realized it would be difficult to recoup investments needed to build out the platform given the market size and monetization challenges. Neither did Urban Caphe work out unfortunately, but the learning experience was irreplaceable. In many ways, a restaurant resembles a startup: you need an attractive front end — the interior décor, the waiting staff, the menu etc. — to interact with customers, while the back end — the kitchen — is a constant tornado of chaos and holds key to the quality of your products and efficiency of your operations.
For a 2-week period that summer, our AC was broken. Can you imagine going to a pho restaurant on a humid 100-degree day without air conditioning? Neither could our customers! We were desperate to get the AC fixed, but the “market” for commercial AC contractors was like a jungle. We got quotes ranging anywhere from $10,000 to $50,000, which would be more than everything we had in the bank. Eventually, a friend of friend called in a favor and got us the “don” of local commercial AC mechanicians, who took care of everything for — 50 bucks. You heard right, someone else just tried to charge us 1,000 times that for the same job! After this incident, we thought about pivoting the tech platform idea into a “Bloomberg for restaurant owners” that would aggregate market data such as vendor costs and bring greater transparency to this opaque world. We didn’t end up pursuing it as I mentioned earlier, but it was an interesting thought experiment.
In the fall of 2019, I left Urban Caphe to join On Deck where I would soon meet Max, and everything followed from there.
Have you ever felt uncomfortable in a situation as an Asian/Chinese American?
Fortunately, I never had an identity struggle growing up. My environment was friendly, I had many well-adjusted Asian American friends to inspire one another, and we never felt held back by our cultural backgrounds.
Things got trickier as I entered the workplace. The trading floor where I worked was predominantly white at the time, and while it could be disorienting for any fresh graduate with its industry lingos etc., it was doubly so for someone like me who was not native to the dominant “bro culture”. For one, it felt almost socially unacceptable to not take or fake an interest in golf, when everyone else around office was watching Jordan Spieth on one of their monitors during the PGA season. Also, my coworkers would often quote American movies from like the 80s that I, unlike most white kids, did not grow up watching. As these references generally mean little to someone without the context, my coworkers would see the blank look on my face and joke about assigning “homework” for me. I knew they meant no harm, but I also became aware that our cultural differences made relating harder, especially in an environment that lacks diversity in background.
Things got notably better when I moved into tech, where diversity in background is keenly sought after, and Irish dancing and Indian food can be equally celebrated as football. In my experience, “purple cows” stand out in the tech industry rather than get punished or painted black and white.
What is one cultural heritage you are most proud of (it can be any object, tradition, idea, etc.)?
I have been a Wushu zealot since the age of 5. I was fascinated and determined to learn after watching Wushu movies like Crouching Tiger, Hidden Dragon. My family moved six times when I was a kid, and I insisted on finding a Wushu school nearby at every new home. The only time I could not, I managed to continue training out of a Wushu master’s home basement for three years.
Wushu is so closely tied to the Chinese culture, that you need to understand some of the language to appreciate its teachings. For example, a lot of moves have poetic and graphic Chinese names, such as 白鹤亮翅 (bai he liang chi) — white crane spreads its wings, and 野马分鬃 (ye ma fen zong) — parting the wild horse’s mane. And Wushu emphasizes 精神 “jing shen” a lot, which means some combination of spirit, grit, mindfulness, and concentration that is impossible to convey with one English word.
The years of Wushu practice instilled in me key values such as discipline, respect for the master, and trust in persistent hard work. I would be a very different person without this defining part of my life.
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