Building a tech startup in a downturn
Interview with TaskRabbit Founder Leah Solivan
Jane VC recently sat down with Leah Solivan, founder of TaskRabbit and General Partner at Fuel Capital. Leah has over 15 years experience building and creating technology products that have reached millions of people around the globe. In 2008 Leah founded TaskRabbit, the leading on-demand service marketplace in the world. We’re sharing the highlights from our conversation below.
Q: What is the founding story of TaskRabbit?
The idea for TaskRabbit came to me in February 2008. I coded TaskRabbit for 10 weeks after leaving my job at IBM as a software engineer, I launched it in August of ’08, and the stock market crashed in September. At first I was in panic mode, but it turned out to be the best time to launch a company like TaskRabbit! People were looking for new ways of working — the first Task Rabbits were actually highly skilled professionals who were out of work. The future of work was changing at the time due to the recession.
Q: What did building TaskRabbit look like in the beginning?
I gave myself 6 months to “make something happen”, but it was such a hard time to raise money. I cashed out my $25k IBM pension, met every VC in the Boston area, and ultimately was able to secure $50k in capital, then $150k in capital from Boston-area VCs. It took me 18 months to become fully capitalized, and for those 18 months it was just me, maxing out credit cards, wondering if this was going to work. In October ’09 we raised $1M on a $3M valuation, then $5M on a $13M valuation.
In the beginning, we didn’t have the money to hire people, but being so close to the customer was both a blessing and a necessity. I was the first TaskRabbit! I was able to connect with the customer’s needs and the tasker’s needs. Being on the front lines allowed me to develop a sense for what we needed to build into the product and into the business. I saw that people were excited about what we were doing, and that gave me the confidence to continue on.
Q: What advice do you have for startups currently raising in this market?
- Give yourself the time and runway to wait out the market
- Use this time to understand your customer’s needs
- Get lean about the business you’re building
- Valuations are headed down and metrics are being revised
- See the next year as survival mode — prove that customers need what you’re building!
Q: What is your experience with pivots?
In the beginning of TaskRabbit, we were taking cues from eBay. Once mobile emerged, we realized we had missed the boat, and that we needed to create an on-demand, instant booking platform. We threw away the entire code base and started it from scratch.
London was also quickly becoming our 4th largest market, so we knew something was working there. We had to restructure the entire team, including laying off 30% of the team to reallocate headcount to mobile and community management. It was very hard to start over from scratch, but it’s what brought us to scale. Our customer had been trained on mobile/on demand, and we needed to evolve with the times. It all goes back to understanding your customers.
Q: What is your advice for startups right now?
- At Fuel, we’re telling our portfolio companies to have 24 months of cash on hand. Don’t expect to be able to raise outside funds.
- Cut your projections at least in half.
- If you have to cut headcount, cut deeper than you think you’d need to. You don’t want to do a second round of layoffs. Ask yourself: what are the mission critical roles going forward? If you need to adjust salaries, upping equity can be a good way to go.
- Be in communication with your stakeholders. Transparency is key, and investors will want to know if you have enough runway and how you’re changing your plans.
- Overall, it’s a great time to be an investor and founder. Customers don’t change behavior easily and it takes a jolt like this for people to be open to new behaviors, ideas, and solutions!
Q: What does the investor landscape currently look like from your perspective?
Investors are likely looking for startups that are scrappy and lean right now. They will always take meetings, but it’s not really clear how many deals will get done during this uncertain time. The struggle is that it’s tough to set valuations in this market. I can tell you for sure that investors are looking at companies with a new lens and will be asking themselves “Is it recession proof?”. For B2B and B2C, the question will be, “Can businesses/consumers actually pay for these products?”.
Q: You were the sole founder of TaskRabbit, what is your opinion on being a sole founder vs. having a co-founder?
Initially I wanted a co-founder, but I never found them and eventually I just hired my team. It’s great to have a co-founder in the trenches with you, but if you don’t, find ways to tap into your passion for what you’re doing. The mission of the business will keep you going!
Q: Advice on engaging investors remotely?
Definitely leverage video calls! If you can, have a video call instead of a phone call to get that human interaction. Be sure to leverage product demos, as well! Back at Task Rabbit when we would have investor meetings, we would use the app to actually order a task to the folks we were pitching to. It was great to be able to show them in real time how the product actually worked.
Q: For startups in a two-sided marketplace, where should they focus?
My advice is to focus on one side first, and then hop back and forth between them. The trap is that you really can’t build both sides at once. Avoid trying to pull too many levers at once, otherwise you won’t understand the connection points.
At TaskRabbit, we chose to focus on the taskers in the beginning. We met with the first 50 taskers in every market. We explained to them that it would be a slow ramp-up, but that if they stuck with us, they would be the first ones to build their businesses on the app, and they would enjoy advantages because of that. It’s all about transparent communication, personal touch, and setting clear expectations.
Q: How are you helping your portfolio companies today at Fuel Capital?
We’re currently doing lots of virtual events, along with meditation events every week, webinars on how to operate, and making sure we’re checking in and supporting the health of our founders!
Leah Solivan is the founder of TaskRabbit, and is General Partner at Fuel Capital, where she invests in early-stage companies across consumer technology, hardware, education, marketplaces, and retail. She’s passionate about supporting teams who are taking on world-changing ideas.
Leah relates so well to founders because she is one herself. She created one of the most widely recognized consumer brands of the past decade with TaskRabbit. As TaskRabbit’s CEO for eight years, Leah scaled the company to 44 cities and raised more than $50 million. In 2016, Leah transitioned into the role of executive chairwoman and in 2017, TaskRabbit was acquired by IKEA.
