309. Interview with Eric Netsch, Co-Founder and CEO of Tapcart: The Genius Idea This Founder Used to Make His Company Extremely Attractive to Investors

Susan Sly 00:02
This is Raw and Real Entrepreneurship, the show that brings the no nonsense truth of what is required to start, grow and scale your business. I am your host Susan Sly.

Susan Sly 00:16
Well, what is our Raw and Real Entrepreneurs wherever you are in the world, I hope you're having an amazing day and I've been so looking forward to my guest today for a variety of reasons. As many of you know that these conversations are like having a conversation with a friend over coffee or a cocktail or a cocktail mix with coffee, just you know, whatever you want to do. But this guest today is co founder and CEO of Tapcart, which is a codeless mobile app builder that helps Shopify's fastest growing brands to create an owned marketing channel. so they can reach, engage, convert and retain their audience, which I need to pause there like, that's what we all want, right? And he has been featured in TechCrunch, Business Insider, The Verge. And in 2011, he dropped out of college to found his first startup Vogo, which came to fruition later that year. Since then, he's founded two more successful startups, and earned Tapcart a place on the 2022 Inc 5000 list, which is massive. And withTapcart, he works with retail giants like Fashion Nova, Chubbies, and G signature to multiply their e commerce sale. So he's also incredible. My guest today is the one and only Eric Netsch. Eric, thanks for being here.

Eric Netsch 01:33
Thank you so much for having me. That was, that was a great intro, summed up a lot. And, yeah, I'm really looking forward to getting to storytelling, and hopefully this can inspire the audience. And they can learn a little bit more about how to, the ups and downs of running a company. So thanks for having me.

Susan Sly 01:52
Well, yeah, let's jump right in, because we were talking before and it is Raw and Real Entrepreneurship. My, you know, here we are, we're halfway through the year, what has been one of the biggest challenges for you in your role as CEO this year so far?

Eric Netsch 02:09
So this has been a challenging environment, I think for a lot of companies, more than just Tapcart. And, you know, really what I like to focus on is what is, what is becoming harder for our customers, what is becoming harder for our merchants. And you know, making sure that A, we're acknowledging that the world is changing. I think as an entrepreneur, that is the, one of the most important parts of building a company is A like, own, you know, own a problem and understand how to continue to be relevant with your customers as the world is changing. So that, for me, and for Tapcart has looked like a lot more focus on retention. So our customers are having their own retention problems. How can our brands work with their audience to get them back into their experience and continue buying their products and engaging when consumer sentiment and consumer spending is down a tad from previous years. So that has been, you know, consistent challenges to work through with our own product and our own team and especially with our customers. So that's challenge number one, which is an exciting challenge. I think another big challenge is that the world is changing. You know, we dealt with COVID, and for ecommerce, a retail collapse, so to speak of physical retail and a massive digital explosion for ecommerce brands. Everybody was at home shopping on their mobile devices, shopping on web. So being able to help customers as the world was changing then for an increase demand was certainly exciting. You know, you look at 2021, there was iOS, you know, new iOS software started blocking marketing, consistency, and it became a lot more expensive and a lot harder to reach in and retarget and engage your customers. Emails consistently performing worse for E commerce. So there's been a big global change in that market that put a lot of strain on our merchants to be able to reach their best customers and work with them. And now we have, you know, lower consumer sentiment, lower consumer spending. So there's just, there's been a consistent thread in these last three years that the world is definitely changing, swings up and down for merchants. And it's been challenging as a CEO, especially in the product space to like, really work with merchants, really understand their needs and to be able to be on the forefront of solving their challenges.

Susan Sly 04:54
Yeah, I love your candor, and I hope the audience can hear your voice like, Eric and I are just getting to know each other but you can tell he's so, he's so authentic. And it is a really challenging environment. I heard Eric, you know, I was talking to, I won't say who it is. It's like a household name and tech. And they have a venture fund. And they also have a dev fund. And they're great partners of us at Radius. And they said, Susan, we are getting so many ISVs who are asking us to do safes. And so for people listening, so a safe is when essentially you invest in a company and when the safe converts, it converts to shares, just for people who are learning this world. And the fact that so many ISVs are asking big companies like that company to do safes, it's a really interesting fundraising landscape. There's a, and I want to ask you about that. Because there, you know, it's like, VCs are so quick to say no. And then they have their investing ethos, but then there's like, Oh, if you're a generative AI company, and you have a PowerPoint, we'll give you $10 million. But if you you know, if you have a real substantive company, then we're going to think again. So, as you said, there's the consumer sentiment, there's the economy, you know, people don't know, and then we heard PillPack is going to reduce the amount of oil that's going to, that affects everything, because when the fuel prices go up transportation and your broccoli, milk, everything goes up. And the, there are certain factions that want a massive recession, because it will drive down inflation. And then there are people like Eric and I who are trying to run companies and going, that isn't the best thing at all, except that when more people are laid off, we can find better talent. Right? But So, Eric, I want to talk about fundraising. You have raised $60 million. And I have like five hours of questions, which I will limit to the first one, which is, when did you do your first funding round and who you know, if you can say, Who are those first institutionals that gave you money and how did you, How did you do that? How do you go about doing that?

Eric Netsch 07:13
Yeah, so it's been a long fundraising journey, been running this company for about almost seven years now. And you know, when I was running my company, Mobile First, which is the development agency, before I started Tapcart, I know how to code. I'm a builder. So Tapcart was something that I was stewing on and working on. And we can talk a little bit about that. And then and, you know, what we started to do to test the market while I was running Mobile First was, hey, can we get a little bit of traction on Tapcart? Can we talk to e commerce merchants and see if having a codeless mobile app really solves the root of their retention needs. And what we decided to do to build our own conviction that this is a space and this is a problem that can be solved with SAS. And I think it's a misconception that software as a service can solve every problem in the world. Exactly. So it's important to make sure you validate and really understand is software as a service, if that's what you're building can solve this large problem out there in the world at some capacity. So we actually started pre selling the software. So we were getting on very early demos with a cobbled together deck and a landing page that we built. And we would take a $99 deposit for the first month of service. And this was important to me, because I was also trying to wind down my company Mobile First and start really fundraising and working on Tapcart full time as as a founder,, as a builder, and to dedicate my life to this problem and this space. So long story short, we talked to merchants, they said, Oh my God, this is a problem we're having, we're seeing 80 to 90% of all of our traffic is now on a mobile device. And only 10 to 20% of my orders are actually being generated from mobile, they have no active, consistent means of retaining and reaching those mobile customers again. So we started building this wall of pre orders that we would take on this this 99 deposit, $99 deposit schedule. And we had a wall of our first 10 customers very early on, and we pre sold the product and that was super important for us to A, learn from, you know, real people, real customers, talk to merchants, and customers early. But this also gave me the conviction that hey, there's better things out there than running a consulting development business, doing things the hard way and software as a service and Tapcart was actually solving a real problem. And this is when I had my first investor conversations. We had a two person, we work office that I think we actually fit like four people in at that time. So it was cramped. And we had this wall of our first 10 pre orders that were just invoices printed out from like PayPal. And that was when I started taking introductory meetings with Angel investors. You know, some friends and family investors and some VCs. So we started, we had a really good conversation with a local accelerator. So you know, I guess like, everybody knows YC, Y Combinator like, this was the smaller LA version, they were looking to build their first class of entrepreneurs and companies. They had a really small space next to the beach in Santa Monica here. It was actually an offshoot of a movie studio called Luma pictures. So they did like the CGI for Ant Man and like a bunch of other movies in the space, and they had this VC accelerator arm. So I had a really productive conversation with with Luma Luma launch. This accelerator, we took them to our two person office, we showed them the pre orders. As a pre seed investor, it's rare to find companies that have traction and revenue at this point in time when we didn't even have a product out there in the market yet. So that was really important to them, just to show that, hey, we had conviction, we've done research, we have a tiny little bit of initial capital coming through from these pre orders. And there was a lot more out there. And we showed him the product. We pitched them the vision that this is something that can be as big as a Squarespace or Webflow or Shopify and this problem will just continue to, you know, get harder for merchants as mobile retention became more challenging. And that was, we agreed on, we agreed on some terms. They wanted us to move down to their accelerator, a couple blocks down the street. And that was how we got our first $250,000 from Luma launch and a couple other angel investors who joined the round.

Susan Sly 12:26
Well, okay, Eric, firstly, it's genius. You can't see. So I am gonna give Shouts out to my friend Mark Victor Hansen. I've had him on the show. He co authored Chicken Soup for the Soul. And he said to me years ago, he's like, Susan, always write with a purple pen. I'm like, What are you talking about? And he said, purple is the color of royalty. So one quirky thing about me I always write with purple pen. So when, if people are watching on YouTube, what they can see is I'm always taking notes with the show guests. Okay, the $99 deposit, Eric, is genius. Because one of the things the VCs want to know is, do you have diversity, customer diversity, are there people willing to pay for your idea, and so on and so forth. So that is huge. And then getting the printed invoices, this is proof that our idea has some legs, and then the you know, this whole, like, there's this perception by people about startup founders, like it's, you know, I'm gonna have my Maybach, and I'm gonna, you know, no, you're gonna have four people in a two person we work office, we were in industrious initially. And it was like, I was the only woman and it was me, and all these engineers and data scientists. And, and one of my partners was like, Susan, why don't you like working at the office? I'm like, listen, there's, I don't even have a desk at the office, right? And I'm out there, like promoting the company, and I'm on the road, and I'm doing meetings. I'm like, I do not need to, I don't even have calls or places to do calls from that office. But we look back now. And now we have two offices in the United States, one in Bellevue, and one in Phoenix where I am located. And you know that I'm looking out now, and we have like, tons of space. And it's beautiful in this complex. But we started just like you did. So with Tapcart. So you, you you know, you had your first startup and you know how to code and you're basically building code for people who don't know how to code, which is awesome. I mean, how does, how does it work? So if someone has like an e commerce Store, like, Who is it for? Is there a certain like, for your customer avatars or a certain size of business? Like how does it work?

Eric Netsch 14:37
So you are correct. And you know, what I was doing when I was running Mobile First is we were building mobile apps the hard way. So this would cost hundreds of thousands of dollars for companies that we work with. This would take, you know, six months to two years to build these mobile apps out. It's a long time to get to market for getting a great mobile experience. And you know, just other advice like, sometimes you just got to like do things the hard way for us to really kind of see the light at the end of the tunnel, and is there a better solution? And like, Can this be extended to work with 10s of 1000s, or hundreds of 1000s of customers versus you know, that 10 a year that we work with. So that was, that was part of how we decided to create a codeless solution that Tapcart is today. And really, essentially, how it works is we plug into your Shopify store. So if you're a brand, there is a fantastic ecosystem on Shopify, with over 5000 different app partners, not mobile app partners, but you know, partners that solve specific solutions that you're having challenges with. So we decided to plug in and partner with Shopify early. And it's as easy as finding Tapcart in the Shopify app store. You click on a button that says Get app. And instantly you're taken into Tapcart, all of your inventory, products, collections, everything about your store, the brand is now plugged in to Tapcart. And from there, a brand marketer, or an intern or someone that has limited technical capabilities, doesn't have to mess around with API keys or coding, they can actually use our drag and drop interface and start to craft and a really nice tailored experience for mobile. And they're also getting access to push notifications, which is a secret weapon now for marketers on the E commerce side, to be able to reach their customers in a cost effective, in a cost effective way that is lower saturation and something like SMS, email, or even ads. So that's , you know, that's really the value prop. And it's important to note that we are solving problems for marketers, not for engineers, and not for, not for the product teams. Because for ecommerce companies, they don't wake up every morning and say, I want an app. They don't wake up every morning and say I want to code something, but I can't. They wake up every morning and say, Oh my God, how can I reach my customers more effectively? How can we open up new channels for this new world that we're now living in, and like that's the problem that we're solving. And this is actually, it's something that may sound alarming. And I used to tell every salesperson the day that they join like, we're not selling mobile apps, were not in the business of selling mobile apps, we're in the business of solving the retention problems for merchants, and been helping them reach their audience more effectively. So, and that's true back then and that's also true today, just with our narrative and how we approach working with a customer.

Susan Sly 18:01
And it's so it's so smart. And I love that you're not API driven, because that's where the whole piece with technology is there's, for some people, not for everyone, there's an intimidation factor. I cantell you with AI adoption, like the you know, and you may or may not know a little bit of my story, but I was in E commerce. So I'm very familiar with Shopify, very familiar with the, you know, all the different companies that you can use on top of it, but I, my zone of genius is building sales teams in the E commerce platform. And then I was semi retired. And I end up as a co founder of an AI company and I go back to school to MIT. So the reason I sort of share that as a reference point is essentially what you've done is you've taken away very elegantly the intimidation factor, because if I have a Shopify store, and let's say, I'm just going to make this up, but let's say I'm selling really awesome Christmas pajamas on there, my zone of genius is making those awesome Christmas pajamas. It is not how do I you know, build an app that's going to work with my store and how do I do those things. And when I think about, honestly, because I know a lot of people with Shopify stores, Eric, and many of them listen to the show, or they have Etsy stores and they also have Shopify stores. You're helping so many people, and when we think, and I'm gonna go even deeper now, because I want to talk about like this concept of entrepreneurship. You know, there are a lot of challenges in the world right now. And it's not a political statement. It's, you know, whether one believes in climate change or not, or whether one believes in economic uncertainty or not. The problems we have are going to be solved by entrepreneurs. And so entrepreneurs are not necessarily people like yourself who know how to code or myself who go back to school at 47 years old to MIT. They're going to be solved by the person who says, wow, I've designed this great way to, you know, optimize water flow at homes, but I don't know how to market it. Right. So I want to ask you a question about being an entrepreneur and the grittiness of it. So what is, you know, in this journey that you've had with Tapcart, What is one of the biggest challenges you faced and how did you overcome it?

Eric Netsch 20:27
So there's, you've got to have an addiction to the highs and the lows, right. And like, that's something that you'll learn quickly, as an entrepreneur, there's a lot of roadblocks, and I want to say almost, you know, let's just say once a quarter to be conservative, there's going to be times where you want to give up, then you want to quit, and it's just consistent challenges. But grit is very important. You've got to understand that there's going to be curveballs. And you have to remain positive to inspire yourself and also inspire your team and the customers that there's better things coming. I have lots of stories of, you know, times where these curveballs have attempted to put us off course. And you know, I guess I'll share one that was very early in the journey for Tapcart, if you if you'd like to hear this. So we launched in 2017 and we were great partners with Shopify. They were our only partner. To this day, they are the platform that we draft off of and work with on a daily basis. So they have this developer conference every year. This time, they actually did it in San Francisco. It's called Shopify Unite. And we had this great idea that, hey, why don't we go to market and announce that Tapcart is officially going live, you know, out of beta, at this developer conference. So we could go there and start to spread the word and get some excitement out there, and especially get feedback. We sit down in like, the front row of this conference, enters the stage. Satish, who at the time was the VP of product, and one of their very first announcements is Shopify is going live with a mobile app builder to not necessarily compete with Tapcart, but this was a need that they also saw in the space, there was large brands, small brands, looking to solve mobile retention issues, and challenges. And that was essentially the day that we were launching Tapcart. And that was the same day that Shopify said, Hey, we're gonna basically compete head to head and we have our own solution, that's, we'll be better at solving the solution, or the challenge for merchants. So that was a major curveball that I don't think anybody expected. It was to say the least a gut punch. And these are the moments where you rethink everything, and you just have to stay focused on the problem you're solving. And try not to be reactive in those situations.

Susan Sly 23:32
What was your stress response in that moment, because I've experienced something similar. So what was your stress response? Like,

Eric Netsch 23:40
You know, weak in the knees didn't want to stand up. And it was, it's hard when when a you know, a multibillion dollar company who you're partnering with, has acknowledged the same challenge and has decided to put resources, time, capital, excitement, into the same challenge that you thought was a massive gap that was unfilled previously, so that, it's tough. And I think the stress response is, let's go, let's tell our investors, let's go find something else to do. And maybe there's something else in retention that we can work towards. But then shortly after that, we tracked down the team that was working on at the conference, they were walking around and mingling. And they were actually encouraging, they said look like we believe in our ecosystem. We think that you guys can still do good in this space. And they just told us to keep going and be focused and they were very supportive in terms of like, hey, why don't we keep in touch, if anything changes, and they told us to keep going and they said that you guys can probably do a better job than we can. So like, that was our initial response was like, hey, we need to go, we need to go talk to these people, right, like right now. So we tracked them down at the conference. And long story short, that program did not work out for Shopify, they saw us as one of the kind of Premier mobile app providers in the space. And they decided they were going to deprecate that program before going live and to and to rely on their ecosystem and partners, which is, which is a fantastic move, great end to the story. And now Satish, who was the one that was actually presenting at this conference, the death sentence for Tapcart, he's now actually a board observer in the company, Shopify is is one of our investors. And that was, that was all, you know, a great ending to the story. Now, you know, seven years later.

Susan Sly 25:57
Thank you so much for sharing that story. Because it happens, especially in tech. You're a startup, you're an ISV. People don't know what that means. It's an independent software vendor. And you suddenly go under NDA with all these large partners. And the next thing you see like, a multibillion dollar company releases something. They have a team that thinks they can do it, or have been tasked to do it, and they think they can do it or tasked to do it like, the better than you can. And then it might even have a similar name, it might, you know, and these things happen, and we do see, as hard as that is that time and again, those large companies end up acquiring companies like Tapart, or they, because they can't do it like, because then someone gets the idea that a startup can be very nimble. But in a huge, large company, someone gets the idea, oh, that team's working on this. Let's add this to their plate, and suddenly they're over diversified as a team and they don't produce it. So we see that you know, a ton in tech. And I love that you shared that story. So my last question for you. There's so many people listening who are potentially looking at, you know, AI is going to replace my job, should I start a business? They listen to this show because that's the question they ask themselves. We have founders, we have billionaires, we have new founders, we have people thinking of starting, what advice Eric would you give to someone who's listening the show, maybe they feel that their job is next on the chopping block or maybe they feel they're done but they want to start something. What advice would you give to them?

Eric Netsch 27:35
Find something you're really passionate about, that's part of it. For me ecommerce was one of those things. So that's important is you, don't enter a space that's going to have quick returns that you're not passionate about. Like for me like, building software and selling it to the government or something else. That might be even a better business idea, was just not where my passion was. I really liked ecommerce. I love working with brands. And I love working with marketers solving their challenges and you know, people even kind of poke fun at me today within Tapcart is like, I'm like a walking Shopify Tapcart mannequin because like, I just like buying things from DTC companies and really living in that space and be part of that community. That's you know, that's part number one. If you can build it, then you should so like, learn how to learn how to be creative, whether that's learning how to code, whether that is learning how to design like, find whatever path you can to getting like, that vision in your head, not just onto paper, or like a back of the napkin, but just like, out into the real world. So I mean, today, that's easier now than than ever before. It's like it's why Shopify was founded, right? It's like, how can we help entrepreneurs, like get what's in their head, like out onto an online store. So find what that is, for you. And work tirelessly to get that out there. And if you don't have those skills, don't just focus on hiring and partnering with people that have those skills, like, start to learn some of these things. These are the skills that you'll value the rest of your life. Because if you have ideas, you'll be better at communicating them and getting them out there. And, you know, just to get started, and don't, you know, don't quit because there's going to be curveballs. And you know, you can always catch all the curveballs but you can certainly get up from when you're knocked down and continue being laser focused and focusing on why you even got into the space to begin with.

Susan Sly 29:49
That is great wisdom. And I'm, I'm still back at that genius. You know, get the 10 people to deposit like do the $99 deposit. I mean, brilliant. Eric, Thank you so much for your time today. And I want to encourage, if you have a Shopify store, checkout Tapcart, you need to try it, you need to. And if you're thinking about forging into entrepreneurship, and you do have ideas of things that you can create, sell, that kind of thing. Shopify is a great way to enter into entrepreneurship without raising millions of dollars and going all in, right. So anyway, Eric, thanks again for being on Raw and Real Entrepreneurship. I so appreciate you being here.

Eric Netsch 30:32
Thank you so much, as well, it was a super fun conversation. And if anyone wants to check out Tapcart, you can hit me up directly on LinkedIn. And I hope this, this was fun for everyone.

Susan Sly 30:43
All right, well, Thanks, Eric. And we will put all of Eric's contact in the show notes. And with that, everyone go out and rock your day. God bless. And I will see you in the next episode of Raw and Real Entrepreneurship.

Susan Sly 30:57
Hey, this is Susan and thanks so much for listening to this episode on Raw and Real Enrepreneurship. If this episode or any episode has been helpful to you, you've gotten at least one solid tip from myself or my guests, I would love it if you would leave a five star review where ever you listen to podcasts. After you leave your review. Go ahead and email reviews@Susansly.com. Let us know where you left the review. And if I read your review on the air, you could get a $50 amazon gift card and we would so appreciate it because reviews do help boost the show and get this message all over the world. If you're interested in any of the resources we discussed on the show, go to Susansly.com. That's where all those Show Notes live. And with that, go out there rock your day. God bless. I will see you in the next episode.

Susan Sly 31:49
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