#0010 - Paul Galatis of Names & Faces

Civitas Team

27 ideas on moving to Silicon Valley, competing internationally and building a world-class company

Paul Galatis is the South African entrepreneur behind the app Names & Faces and one of the founding partners of YuppieChef. By the time Paul was 19 years old, he made R140,000 creating Names and Faces books for schools. While working in London, he joined Andrew Smith and Shane Dryden as an equal partner for Yuppie Chef. After flying to Silicon Valley to secure funding, the trio grew the business to one of the top e-commerce stores in South Africa. A Civitas team member sat down with Paul to discuss his fundraising, growing a business from South Africa and the pros and cons of an e-commerce business model. You can find more about him at his personal website.

Summary the best ideas from the discussion
  • Start a business targeting a global market not just SA
  • Solve your own problem to ensure the problem is real
  • Focus on achieving a high growth rate to attract investors
  • The goal of each investor meeting is to get another meeting
  • Prototype all features before coding them as coding is expensive 
  • Focus relentlessly on growth 

On Silicon Valley and Securing Funding from VCs

  1. The most important metric for investors in Silicon Valley: “It's incredible how important growth is as being the carrot to dangle in front of investors. The idea can almost be as compelling as you like it as you want, as you could ever believe it to be. If people aren't seeing traction, there is literally no interest.” 
  2. The expected growth in Silicon Valley: "We were growing 5-7% month on month and had 80% year-on-year growth. At the time, big companies were doing 30% year-on-year, and in the Silicon Valley environment, this growth is considered a zombie environment. It strikes the fear of God into most people who are trying to grow businesses. But that's really what people are expecting, in this space." 
  3. How to pitch to investors with only 2-minutes: “You're not trying to convince people to invest in your business. All you're trying to convince them to do is have the next conversation with you. So you only have to show enough evidence to secure the next meeting.”
  4. How much money did you raise at YC: "We ended up raising three million dollars on a $15 million post valuation. Accel were our lead investors. We signed our term sheet for two of the three million dollars, and we raised the other million in the following five days."

On fundraising 

  1. “The seed rounds with YC in the US is very much people accepting that they are kind of taking pretty like outlandish bets. So things can move fast. No one's doing particularly deep scrutiny or doing due diligence in the business.”
  2. “I think we were a very understandable business. You know, there are a lot of guys pitching deep Fintech, deep Biotech. You know, things that you had to have a lot of insight and understanding to understand it as an investor. Our proposition was pretty universal.” 
  3. “What's fascinating about the U.S. context and it's not so much the U.S., it's a Silicon Valley context, is that there is so much money. But generally speaking, there's so much money looking for a home in this ecosystem. Investors are everywhere.” 
  4. “The market is so enormous here that if you're producing a product or a service that can serve even a portion of that. You really can build a big business in 24, 36, 48 months.”
  5. Planning a trip to Silicon Valley: “Being able to be here for a few weeks gives you time to strategize and to plan who you should meet and set up those meetings.”

On eCommerce vs physical stores

  1. Would you have opened physical stories earlier? "No, we had an established brand when we opened our first physical store. So we were able to get a positive pull from the malls because we were already a recognisable brand, but we were also exciting and new. Yuppie Chef wasn't just another retail store that everyone had been familiar with for the last 20 years.
  2. The pros of opening an e-commerce store:  “It's easy to grow from a small base without much capital, but once it gets big, continuing growth is really difficult, particularly once you feel like you start reaching the outskirts of the markets.”
  3. The pros of a physical store: “Physical stores, if you've got the capital, you can open a store tomorrow. And if a mall has 5000 people who walk past it every day, all of a sudden you have two and a half of those five thousand people walking into the store and you make sales immediately, which is not how it happens in online”

On hiring as a start-up

  1. "Our first hires were us. Andrew, Shane and me. So we had a designer, a developer and a product guy and we worked for three and a half years without paying ourselves or anyone else."
  2. Invest in your skills and partners as an entrepreneur: "I worry about entrepreneurs who don't have the skills to build it themselves and who don't have the funding to pay other people. It's an expensive road to pay someone else to develop a nascent idea."

On using people vs. systems

  1. Building Systems: “And I think there's something quite important about making sure that the system you're building. You’re building to solve the right problem. You know, there's a strong sense here around companies that hire sales and marketing teams to soon. It's like, do you really know what you're selling? Do you really know what you're building? Once you do, I think, its the time to build systems.”
  2. Prototype New Ideas: “We will use paper and pen or we'll use Google Sheets spreadsheets, as best we can to like 'prototype' new ideas for as long as possible, until we're certain that what we need to build and to code is what we need to build. Because coding is expensive and as much as we think we can change it, it's very difficult to change it once you've built it.” 

On South African start-ups competing internationally

  1. Product-based VS service-based start-ups: “We don't have an appetite to grow that footprint internationally because it means physical growth internationally because it's physical products...We are living in a world where we can sell software or services across borders to anyone in the world, any time. And that's really exciting.” 
  2. “To compete with U.S. start-ups, I think step one is we're going to have to be building businesses that serve a whole world and not just the South African market.” 
  3. “ I think the challenges being South African is that you don't have access to an immediate, enormous market.
  4. “I absolutely think you can solve a problem for the world from South Africa. I think everyone who finds growth and momentum ultimately develops a presence in the US. Not everyone, but most people. But that's mainly to access one, the size of this market and actually base yourself in this time zone and two, to access the capital that's here.”
  5. “The stage of our business meant that I think it's important that I was here, but I think capital is the primary reason people come to this part of the world. But if you've got a good product and it's serving the world, I don't think you have to be here to do it.” 

On solving problems 

  1. “Solving your own problem is the most valuable way to know you're solving a real problem.”
  2. “For me, a really important metric [for solving a problem] is whether people are willing to pay you for it.”

On internal processes and metric tracking

  1. Automated Systems: “We're trying to move more and more of that to like automated systems. We're about to take on a tool called Charge B, which is a subscription billing system, so we don't have to manage our billing manually.”
  2. Shifting Focus: “I think it's important to know what is the most important thing for you to be focusing on at the particular times in your company's growth. As entrepreneurs, you need to differentiate what phase of your business you're in. Are you in a growth phase? Or are you in a foundational establishment phase where you have to actually work out what it is you need to be doing to then click into a sense of growth.”
  3. “And it was hard because you want to be reporting positive sales growth all the time. But I know that if we did that, we would be failing to build the foundation that we need to actually take this business into the next level, and that's and that's where funding helps, you know, funding helps. We had three million dollars in the bank and we could take time out. We had enough breathing room to say, actually, what's wisest for us is to build this foundation now."
  4. “I think it's dangerous to use just a growth metric as a point of focus when what you perhaps should be doing is solving other problems in your business first.”

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