SFG 07: Laura Behrens Wu on democratizing shipping for small businesses

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In this episode of the Startup Field Guide podcast, Sandhya Hegde chats with Laura Behrens Wu, co-founder and CEO of Shippo about the company’s path to product-market fit. Shippo’s platform is designed to give every merchant access to the best-in-class tools and technology reserved for retail giants. Over 100k brands trust Shippo to ensure their customers love how their products are delivered.

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Be sure to check out more Startup Field Guide Podcast episodes on Spotify, Apple, and Youtube. Hosted by Unusual Ventures General Partner Sandhya Hegde (former EVP at Amplitude), the SFG podcast uncovers how the top unicorn founders of today really found product-market fit.

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If you are interested in learning more about some of the themes and ideas in this episode, please check out the Unusual Ventures Field Guides on starting your company, key traits for early-stage startup hires, and customer validation. 

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TL;DR

• The founding insight: Laura and her co-founder wanted to create an easier way for e-commerce businesses to ship after having experienced the pain points of shipping when they were running an e-commerce business themselves. 
• Finding early customers: After creating a better API, Laura and her team began talking to customers who could integrate the API. Unfortunately what they discovered was customers who could integrate were further along in shipping and had no need for them vs. customers who couldn’t integrate. Shippo solved the latter problem by building an app on top of their API. 
• The core ICP: Shippo identified small businesses to be their customers and champions in spreading the word about their product.
• Iterating to product-market fit: There was early user feedback from larger companies that they couldn’t use a product that hadn’t experienced high volume deliveries before, so the team pivoted to smaller businesses that needed their service. When COVID hit, the volume of deliveries skyrocketed. 
• Early team: Laura and her team realized that the right pedigree, Google/Facebook experience, does not guarantee a person will excel in a startup environment. The type of people they began looking for were hungry, low ego, and willing to get in the weeds to understand what’s going on and figure it out. 
• Advice to early stage founders : CEO is a role where you have to evolve as the company evolves. Don’t be distracted by the macro environment; focus on what really matters for your business and what you need to validate.

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Episode transcript

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Sandhya Hedge

Our guest today is the CEO and co-founder of Shippo, Laura Behrens Wu. Shippo is a unicorn in E-commerce enablement and offers merchants multi-carrier shipping software, so they can compete with giants like Amazon on delivery experience. Over 100,000 brands trust Shippo to make sure their customers love how their products are delivered. Laura, I'm so excited to have you on the show. Thank you for joining us!

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Laura Behrens Wu 

Thanks for having me! I'm really looking forward to this.

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Why Laura Behrens Wu started Shippo

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Sandhya Hedge  

Yes. And, as you know, we always start with the origin story of companies like Shippo. You started way back in 2014 as a 24-year-old. I was barely tying my shoelaces when I was 24. So please, tell us more about how Shippo was born.

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Laura Behrens Wu 

Yeah so I'm originally from Germany and so is my co-founder. The two of us went to school together in Switzerland actually, and have dabbled a little bit in startups there. And at some point, I was just very curious about what it's like to work in a startup in San Francisco. So I started just thinking about working for a company in San Francisco and started looking around at how to make that dream happen. And AngelList was the most obvious way to get started. So I created my account on AngelList, and I started applying for companies. Unfortunately, I did not hear back from any company through that. So I kept trying, but it didn't really work. I started going to founder conferences or startup conferences. Then, by pure chance, at a conference in Switzerland, I ran into a Y Combinator founder. So that was a really lucky coincidence because we had a good conversation, and the person volunteered to send my resume to the YC mailing list. And overnight, I got a whole lot of good responses, mostly for internship positions. And I started interviewing with YC companies that were super early stage and got a summer internship at a FinTech company in San Francisco. So that allowed me to come over and experience working at a San Francisco startup firsthand. It was a very early-stage company right out of 

YC. Having raised our seed round and now looking to raise a Series A in the future. It was an awesome experience. I had a great time there. From there, I was talking with my now co-founder about starting our own company. I was really inspired by the San Francisco startup environment. And the two of us were brainstorming about what kinds of companies we could start where we could have a good Founder-Market Fit, and we couldn't really come up with any revolutionary ideas. So we just decided to start an E-commerce company. It's just an e-commerce store and nothing too special. Let's just start selling things on the internet and see what happens. So we built our store using Shopify, using Stripe, and started selling products on the internet, like we had a bigger vision of what that should look like, but the first iteration was really, ‘Let's just sell products on the internet and see what happens.’ That was kind of the first time we dealt with shipping. And the experience was subpar. We had to go to USPS, stand in line, and hand over our packages, which is not really the seamless experience provided by Shopify or Stripe. And then, we started looking into software tools to fix that. To our surprise, there was no good or super intuitive, easy-to-use software tool to help us figure out which shipping provider was best, how to ship our packages, or how to do it from home. We started thinking about shipping as a problem for the first time back then. And at some point, we just started talking to other online merchants, asking them how they're doing shipping and validating our idea. It seemed like it was a really big problem. Every single e-commerce store needed to ship. There was no way around that, and when we heard from other online merchants that they were having a hard time as well, we decided to just drop our online store and focus on building shipping software full-time. So that's the origin story. It's been a windy road since we decided that; it was not a straight path for us. But yeah, we started working on our MVP sometime in 2014, got some customers as early as possible, and have been scaling it since.

How Shippo found early customers for APIs

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Sandhya Hedge  

Really amazing. I really love the way that you found authenticity while just trying to build something and discovering that there are probably millions of people exactly in your position going through the same awful shipping experience. So now, obviously, the big focus of the show is the idea of finding Product-Market Fit. We are typically divided into roughly two stages. So first, what is the unique radical idea you have around solving a problem? What was the approach that you needed to validate tests to see if it actually works and delivers on its promise? And then second,  who is the desperate customer who's willing to give a less than a-year-old startup a try, and why do they represent an attractive market segment? Could you break these two down for us? What was your approach in that Product-Market Fit journey? And what were some of the early surprises or experiences you had that really informed your strategy?

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Laura Behrens Wu 

Yeah, for sure. As I said, it was a windy road. It was not a straight path. So we have a lot of good learnings from there. Our goal, our vision, is to build the shipping layer of the internet. That sounds like a pretty grand vision, but I want to bring it back to where we started. When we started building this, our thought was, ‘Okay, we're having a hard time shipping, and other e-commerce merchants are having a hard time shipping as well. How do we take this from here?’ At first, we were looking around, and we tried to look at other companies that were comparable. We thought, ‘Okay, maybe buying a shipping label could be like buying an airline ticket. Maybe we should build the Kayak for shipping. That was our first thought. And we started building something there and showed it to a few customers. And the feedback was — they're shipping hundreds of packages a day and buying one label after another is really not helping them. So that was a good feedback point or data point from our customers or potential future customers. So we went back to the drawing board. And we were like, ‘Okay, so how do we enable merchants to buy many shipping labels today in an automated way without them having to go through a dashboard every time?’ And back at that point in time, a bunch of enterprises or B2B API companies were on the rise. So you're looking at Stripe, at Twilio, etc. I thought that was a really good analogy for what we're doing here as well. So how about we build the Twilio for shipping? And that was what we started focusing on, or started iterating on, that idea of building an API that connects to different shipping providers. At the beginning, it was really just a wrapper around existing APIs and making them easier, more developer-friendly, easier to use, and better documentation. Around the pain point, it's really that for a lot of these shipping APIs, you have to be some kind of shipping expert to understand how to read the documentation. You have to write in for access to the API docs, or API keys, it's not super developer-friendly. So removing that friction we thought was going to be a good first step. The other part though is a lot of our customers want to buy shipping labels from multiple different shipping providers, not just from one. So that's the other pain point. If you integrate one API, that's pretty hard. But then you have to integrate 3,4,5, or 6 APIs; that's even more difficult. So that was, in theory, a pretty good idea. We started talking to customers with our first iteration of the API, and we learned that customers who could integrate the API are probably further along in their journey. And would not really trust an API that has zero shipping volume going through it. That was our first problem. The idea resonated, but a lot of these customers were asking, ‘How many packages are you already shipping? How scalable is it?’ Given that shipping isn't an essential part of their infrastructure, it was hard to get them to trust an API with almost zero volume going through it.

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Sandhya Hedge 

Right. It seems that they already had enough technical resources at hand so they could actually use your API, but that itself also disqualified them from being kind of desperate enough of a customer for you, right? 

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Laura Behrens Wu 

Yeah, totally! So that was, again, a really interesting realization because the idea resonated with these types of customers, but they were not willing to trust us, given that we didn't have enough credibility. Credibility in terms of just volume, and load, scale coming through the API that we're offering. At the same time, we were also talking to customers who said, ‘This is a great idea. But I have no idea what an API is. I would use this tomorrow, but I don't have any developer to integrate an API.’ That was where we found the desperate customers like, ‘Okay, this is a store or a merchant that is small enough where this is a real pain point, but we have to make it easy for them.’ Because integrating an API is a non-starter, it's not something they can do. They're not technical enough. So we decided to build an app on top of the API and just connect that to the Shopify app store. We really just started with the Shopify app store because it is a good way to validate right now. At this point, we have connections to a whole lot of different app stores. But at that point in time, we just chose one to validate this idea. Through that, we found really small customers who weren't concerned about how many packages were already going through Shippo. It was so easy to install and connect that they were able to start shipping within minutes. And that's where we started getting our first customers, getting volume through that. Then, over time, because we started shipping with those SMBs first, we were able to start telling potential API customers that there is actually volume coming through the API, that we have a good amount of customers using it, even though they were using the app, which in turn was a client of the API. So yeah, that's the journey. Right now, we have API customers, we have app customers, and we have platforms that are using our API. But in order for us to jumpstart this, we had to build an app on top of the API because no one was willing to integrate an API that was not validated or not proven.

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Sandhya Hedge 

Right, makes sense. Very interesting shift in positioning, your product roadmap, and changing all that.

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Laura Behrens Wu

Yeah, at that point in time, the team was so small. It was my co-founder, myself, and one or two other people. There was no real product roadmap. There was nothing that we were shifting super dramatically. It's like, we're talking to customers pretty early and frequently. Then through that, a lot of these things, like the first iteration of the app, was maybe built in a day or two. And we're still dealing with that, that's sort of tech debt, but it got us to market pretty fast.

How Shippo raised its seed round

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Sandhya Hedge 

Right, makes sense. And so maybe segue to team. Once you had that early set of small customers starting to use the product, how did you think about team fundraising? What was it that you needed to make sure that you could get to like the next phase? And how did you even think about the next phase metrics? What did those early days look like?

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Laura Behrens Wu

In those early days, we focused on a single metric. And I think that's where founders can go wrong. At this point in time, we're optimizing across a variety of different metrics. At that point in time, we were picking one metric, and we were gonna grow that metric week-over-week. Our metric, at that point in time, was label volume. So just top-line label volume. When we built our app and connected that to the Shopify app store, we started getting a good amount of customers giving it a try and because I was doing customer support myself, I asked people to leave reviews. We were having really authentic conversations with our customers, including telling them that we're an SMB, just like them. We're a three-person team, or we’re just trying to build this, and we'd really benefit from them helping with spreading the word, leaving customer reviews, sharing this with other people, etc. And kind of through word of mouth and positive customer reviews, we got a good amount of traction just purely through the Shopify app store. We were focused on growing shipping labels week-over-week with a growth rate that looked really nice. It looked like the perfect hockey stick growth rate. We were able to start raising a seed round from San Francisco investors. At that point in time, it was Uncork and Version One Ventures who led the seed, and I think over time we learned that you have to focus not just on label volume, but you have to focus on net revenue, you have to focus on gross margins, you have to focus on a whole lot of other sets of metrics. But it was really important at that moment that we were just focused on trying to validate one thing: people are using this to buy shipping labels.

How Shippo built its early team

Sandhya Hedge  

Makes sense. And if you had to go back to those early days of Shippo now, after everything that you have learned in the past eight years, do you think you would have done anything differently? I'm curious, maybe, maybe not. But anything that stands out to you as still paying off those debts?

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Laura Behrens Wu  

In the earliest days… no. My overall philosophy is that we didn't make a whole lot of mistakes. And I think that the majority of mistakes were probably hiring mistakes, but it got us to where we are here. I think, reflecting on hiring, it's been good learning for me to know that there are people who are good at building and people who are good at scaling and you have different profiles at different stages. Early on, we were pretty impressed with this person, who was at Facebook before, was at Google before. If they're good enough for Google, they must be good enough for Shippo. It turns out that Google is just at a very different stage. The kind of person you need there, or who would succeed in that environment, is very different compared to a person who's successful in this startup stage environment. So I think that was a good learning experience, just around hiring.

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Sandhya Hedge  

I would love to dig into that a little bit more because I think this is by far probably the most common hiring mistake I see early-stage founders make. There is some value in getting advice from people who have seen scale as well, so it's an easy mistake to make. What were some of the profiles that worked really well for you? What were the characteristics of your early hires, looking back? If you were advising another founder or starting a company again, you would say, ‘This is what you should look for in your first ten, first 20 hires.’

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Laura Behrens Wu

Yeah, so I think it's a mix between people who are just pretty hungry. There is some kind of work experience in another startup. Just people who are pretty hungry, smart and able to pick things up fast, able and willing to get their hands dirty and wear a ton of different hats, especially in this early stage environment. Someone who is not too good to make their own presentation or jump in for another co-worker even though the co-worker is on a totally different team. And that is pretty rare. It's a pretty specific profile. They might not have as much experience, but they're willing to learn. They're willing to get their hands dirty and really get in the weeds and understand what's going on and figure it out. I think that the sad truth, though, is that the majority of these people are really good at that stage and might not scale to the next stage so as the company grows into a different phase, you will need different kinds of people.

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Sandhya Hedge  

Make sense. I'd love to bring us a little bit into the future. Our recent past right now with the pandemic, was that a big tipping point for Shippo’s business or what was it like just making decisions around this complex problem of shipping with all the chaos that the pandemic brought to the logistics industry as a whole?

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Laura Behrens Wu 

The pandemic, on a high level, what happened was that everyone, because we're staying at home, we're starting to order on the internet and that just like increased e-commerce volumes. More people were buying on the internet; long-term habits might have been formed. That then leads to more people shipping things. Then the shipping providers, they only have a certain amount of capacity because these are offline businesses, work capacity is not just something you can scale up as easily, but you have to buy more trucks, hire more people to do that. These offline businesses or logistics companies were already in a crunch because with the pandemic, people might be sick, they might be out, there's not that much of a workforce available. So I think for us, we saw just all of our customers shipping more than before. That was a big one because they were selling more, shipping more, and more people were buying from them. The other one is that we saw a whole lot of new customer sign ups, which is that previously offline businesses were moving online at a rapid pace in order to still be able to reach their customers. Then we saw that on the supply side. Our shipping provider is trying to keep up with the influx of shipping volume and building up all of that capacity and having to build up that capacity. It was interesting for us. I started hearing the term ‘essential service’ for the first time in my life and it’s like, ‘shipping is an essential service.’ It's interesting to think about it that way because earlier in the show, or in this recording, we talked about something that's a real pain point and solving a real pain point. And yeah, shipping is such a big pain point that it is an essential service. That was for sure a good realization and a good rallying cry for the team as well. That even though everyone was kind of adapting to this new reality of working from home and this uncertain environment, we are providing an essential service and our customers, and in line with our value of helping our customers win, our customers need to come first here.

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Sandhya Hedge 

Makes sense. How did you think about what's happening in the larger supply chain industry? You were at this nexus and had a great view of what was going on. What were some of your observations and opportunities that Shippo can maybe take advantage of in the future?

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Laura Behrens Wu 

What we saw was that there are a lot of new shipping providers being formed. One person's problem is another person's opportunity. The problems of the shipping providers  - that they were at capacity - led to new shipping providers being able to step up and either build up capacity faster and become more significant or new shipping providers forming in the first place. There are a lot of startups that were actually built during that period of time, or that became more popular during that period of time, that were providing shipping services. So from our end, the takeaway there is: having a network of different shipping providers is super important because if one shipping provider has a crunch, then we're able to always shift volume to another one and make sure that our customers are always covered and don't have to stop shipping. It's interesting now also seeing, coming out of the pandemic, no one predicted the pandemic, no one predicted what this would be like, that we would get into a recession afterward. So it's interesting to see what kinds of consumer behaviors are sticking and right now our e-commerce growth is for sure slowing. We'll probably see a little bit of reduced e-commerce growth over the course of the next few months.

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Laura Behrens Wu’s thoughts on leadership

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Sandhya Hedge  

Makes sense. I want to talk a little bit about how we think about learning how to be a leader. Especially for those who join startups, we are often always that kind of hungry-doer persona when we first start a company or join an early-stage startup. I've always felt that the CEO is the only role where you have no excuse. You need to just evolve and become a different person every six months as you're scaling the business because the business needs you to be a different person as it grows. How do you invest in your own evolution? What have been some role models, coaches, books? How do you think about that?

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Laura Behrens Wu

I think the big upside about San Francisco, that I for sure benefited from, was that there are a whole lot of founders around here. It's really easy to meet other founders. The VCs do a pretty good job of connecting the portfolio and anywhere you go you could run into a founder and people are typically very open about sharing their experiences. For me personally, talking through what's going on with another founder who's gone through the same thing or is going through the same thing is very refreshing and therapeutic because you realize that it's not just a problem that you are facing yourself, but it's a common problem that typically all founders are facing. I think that's been a good realization of just the majority of problems that I'm facing, or Shippo was facing, are very common and every other founder is probably going through the same thing. And then I've also been able to work with an executive coach for a few years now and that's been extremely helpful as well. Just having someone there who you can talk through some of your problems in a more structured way, and kind of get a good gut check of, ‘Does this sound right? Am I totally off?’

Laura Behrens Wu’s advice for first-time founders

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Sandhya Hedge  

And what would be your advice to other first-time seed-stage founders right now? They're getting started; it's 2022; there's a recession, but there's also a lot of money in the market. What is your advice?

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Laura Behrens Wu 

I think my main advice would be to not get distracted by all the macro stuff that's going on. Good companies are, or great companies are, being built in a bear market so I think now's a great time to build a company as long as you're focused and you're not distracted. I think it's also pretty good actually for everyone to have a forcing function and just focus on what really matters. I think when there's a lot of money out there, you can get distracted building many things, over-hiring people, so it's good to maintain that focus on what really matters for your business, what you need to validate. It sounds like there is a consensus that will come out of this recession fairly fast, that this will be a quick thing. So fingers crossed that this is a quick thing. I think in a year or two the funding environment should be back to fully normal. I'd say, preserving the runway to get to the next 18 months and come out of that is top of mind for everyone, not just seed stage founders.

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Sandhya Hedge  

Awesome. Well, thank you so much for spending time with us, Laura. This was so refreshing. I really enjoyed talking with you and I think our founders will also find this super helpful. Thank you so much!

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Laura Behrens Wu 

Thanks for having me.

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