17. Challenge Accepted. with Christoph Gerber

Piotr Karwatka: [00:00:46] Today my guest is Christoph Gerber, founder of Talon.One. Before Talon.One, he founded the Lieferando.de, then successfully merged with Takeaway.com. I can't wait to ask Christoph about his professional career - what drives him and what did he learn along the way.
Hi, Christoph! Thank you for accepting my invitation.

Christoph Gerber: [00:01:04] Hi Piotr, thanks for having me on the call.

Piotr Karwatka: [00:01:08] First let's get back a little bit to the 2009. It's the year you founded Lieferando.de. How did it all start?

Christoph Gerber: [00:01:17] I was in Uni and my friend Kai and Joerg reached out to me and said, we’ve got this idea for a food delivery platform that works well in New York, and I was just like, whatever it gets me out of Uni, I'm all in. So at that point we had no idea about how big food delivery can become. We really weren't interested in offer, me at least, I wasn't interested in all this, how the market's going to develop, if there's a general trend to food delivery. I was just like, whatever gets me out of Uni fast, I’m all in.

 Piotr Karwatka: [00:01:54] So have you had any specific future plans back then? Did you expect Lieferando to become such a success?

Christoph Gerber: [00:02:01] Not really. I mean, if you look at the first business plan that we wrote, it actually says that we’re in Cologne four years later. I think I was always more conservative around being successful. If you ask Kai and Joerg, they're a bit more bullish on this can become big. I was always skeptical, but I'm generally a very skeptical person, I would say. In general, I think everything will turn out okay, but I'm not a person who thinks everything's going to be great. I never thought it would be a disaster, but I rather under promise and over deliver. That's also from my personal view on the world, I rather don't get too excited and then be surprised. Thinking about having all lying to myself, thinking I have a big, big successful business when it might not become that successful.

Piotr Karwatka: [00:03:07] Low expectations can only surprise you the positive way. It makes perfect sense. 

Christoph Gerber: [00:03:13] A hundred percent. 

Piotr Karwatka: [00:03:15] Okay. So you started this company, as you said, a little bit accidentally, but there must be this moment that you found out it’s just a hit? It's got the traction. When was it? What was that moment? 

Christoph Gerber: [00:03:31] The thing really became obvious when Delivery Hero started in the German market afterwards. We could see that there's more interest in the delivery market. When we started the merger talks with Delivery Hero and Takeaway, I think for me it was the point where it's like, okay, maybe there's something bigger here. Maybe there's a pathway to becoming really, really successful.

Piotr Karwatka: [00:03:58] That’s interesting. To grow the B2C company, food delivery, and a lot of logistics, people to hire. I imagine you needed to find funding, a solid partner. What were your criteria searching for an investor? 

Christoph Gerber: [00:04:16] At the beginning, just when we started raising, it was just after the financial crisis. We really had problems raising our first money. The first money we got was 15,000 euros. That was our first funding round. So if you think about 15,000 now, that's nothing. The pre-evaluation of the Talon.One that you've run ahead, the initial, like the first round. And that was what we already built a working prototype. Not good, but we already transmitted audience. The evaluation was 700,000 euros. That's the first devaluation. So nothing compared to what we have now. So we were really scrambling to get 10,000, 30,000 euros from individual investors. Going forward, we were always competing against Delivery Hero and Delivery Hero did an incredibly good job raising money and building out the story, which we didn't do very well. So we were not good fundraisers. At that point we basically took money from whoever would give it to us. Very different to how I would do it now, or how am I doing it now with Talon.One. But we didn't have the luxury to choose who we wanted to work with. All the big players rejected us. Index rejected us, Exit rejected us, Highland Capital rejected us. Everyone, every big name you see in Europe, they rejected Lieferando. And the only one who kind of believed in us was Macquarie Capital, which is an Australian investment bank. And they are, I would say key success factor too. The IPO and everything that happened afterwards.

Piotr Karwatka: [00:06:11] I remember those times. Actually, we started Divante with my brother Tom around it. And we also were working on the first product, which was for a knowledge management kind of enterprise Wiki. And it was also a failure. It was very tough to find any investors and after the crisis, everyone was cutting the cost, so I can imagine. What is the key to success in this kind of delivery business?  

Christoph Gerber: [00:06:40] I think what we did well, because we didn't have so much money was really the focus we put on product and on operations. As an example, I think when we merged with Takeaway, the German marketing team was six to seven people. The equivalent team for a Delivery Hero for the German market was around 14. And that is, I think what we excelled in was just going down into every single number. Really putting a lot of work into our business intelligence and making decisions based out of that and really looking at every single customer cohort, how to make that cohort more profitable.

And rather than saying we don't compromise. We compromise on growth for good numbers. So not taking every possible customer, but release thinking around what makes sense. And another thing that we did, which made us a bit different at that stage, (I think by now everybody's doing it) we didn't look at Germany as a market. We looked at each postcode. In Germany, postcodes are... I think in Poland, they're very, very narrow, in Germany they’re a bit bigger. So we looked at each postcode as a market and he said, how do we perform in each single market? So we had 10,000 markets or, I don't know, 3000 in Germany that we looked at and these were the markets that we wanted to win. So we took the whole thing to a very, very granular level. I think that's very common now. I think like 10 years ago, this was very new, the way we looked at things. 

Piotr Karwatka: [00:08:31] That's very interesting. So a lot of scrutiny in the process. 

Christoph Gerber: [00:08:36] Very, very detailed. One thing is if you reduce a marketing team to seven people, what we could see was that the output is actually better because if you have five people in display advertising and you give them a budget, they run to all the companies and ask for offers, while if you reduce the team they would go to the three, four companies. They would already know they would get the best offers. So the output was the same or even better because we achieved it in less time. 

Piotr Karwatka: [00:09:13] Absolutely. That's a good point. Do you think that there is one single feature of your character that let you build this company and make it successful? 

Christoph Gerber: [00:09:26] I think if I would have built it myself, it would have been a big failure. I think it's always a mix of characters. I know what I'm really good at, but I also, I would say, my weaknesses are way bigger than my strengths. And it was great that I had Joerg and Kai with me who were really complimentary. So each of us is a very different person. If you know us three, we are very, very different, all of us. And that was what made the company successful. We were not three McKinsey guys, but very, very different.

Piotr Karwatka: [00:10:13] Yeah. That's a good point. 

Christoph Gerber: [00:10:17] And it's the same for Talon.One. Now my co-founder Sebastian at Talon.One, he's a very different person than me. From character, from the way he does things and Talon.One again wouldn't be where it is right now without having such a strong co-founder who basically does all the work that I really suck at.

Piotr Karwatka: [00:10:40] That was a very humble answer. 

Christoph Gerber: [00:10:45] It's true. I think Talon.One would be a failure if I would do it myself, but Lieferando wouldn't exist if I would have done it myself. Not a chance in the word.

Piotr Karwatka: [00:10:59] So from what was already said here, you're kind of a humble pragmatist with a lot of attention to detail, which makes a pretty good profile for a successful entrepreneur, I guess.

Christoph Gerber: [00:11:22] Let's see. I have to do it twice to confirm that I'm not a one hit wonder. 

Piotr Karwatka: [00:11:32] Okay. Eventually you merged with Takeaway.com. How it all goes?

Christoph Gerber: [00:11:39] From a financial perspective, it was the best decision we could have made. For me it became clear at that point that the company was on a track to become so big that I didn't enjoy working there anymore. I actually enjoy working on product and grinding and figuring out solutions. If you look at food delivery, in the end it's a process business. And I couldn't see myself keep focusing on these products on the process level. If you look at the website now, most of the stuff is still the stuff that we did back then. Then obviously there's a lot of stuff happening in the background, which I would say I don't enjoy anymore. And it became so big that I didn't see myself being in a leadership position there. 

Piotr Karwatka: [00:12:31] Gotcha. Absolutely. So after the exit you invested into a few startups. What was your criteria?

Christoph Gerber: [00:12:39] I started investing because I think everybody who made a bit of money in any kind of startup, city or scene starts investing because he thinks that's what you should do. I actually then figured out I don't really enjoy startup investing. So in the last couple of years, I haven't invested basically at all in startups. What I do now is I have two friends who I invest with. So if they invest, I double, I do the same amount that they do, but I don't do any due diligence and any kind of detailed analysis. It's like if these two guys invest together and then I just say, okay, you have a blank, I do, whatever you guys do. And they get all the rights for my shares so they can do all the legal work and everything that I don't want to be involved in. I figured that if I look back at what were the companies that I invested in that were successful is basically the companies that I don't need to help. So the companies that are so strong and so talented that I can't help them. Those are the companies where I actually invested a lot of money. And those are the companies that are successful. I think most of the people that invest in companies do that with a criteria or I can help them. I have industry expertise. I can add a lot of value. I think if you want to add value to investment, that's already the wrong approach. You should invest in companies that don't need your help. That's my thesis. 

Piotr Karwatka: [00:14:27] Or find another company by yourself. 

Christoph Gerber: [00:14:30] I think the biggest value creation is actually yes, if you’re just looking from a financial return is building your own company. That's where you make the most money and I don't take pleasure in investing, in being involved in a lot of small companies or a lot of other startups. So I think the main criteria why you should invest in startups is if you enjoy working with a lot of different companies, a lot of different topics. It's just not something I enjoy. If I have time, I'd rather go hunting, go to the outdoors, go to the forest, work on my cars... but not worry about startups. 

Piotr Karwatka: [00:15:12] Gotcha. So this is how the idea of founding Talon.One came up?

Christoph Gerber: [00:15:19] No, Talon.One basically came out of Lieferando. We built a Lieferando version on a Talon.One, version one at Lieferando, because we had to compete on a better level with Delivery Hero in terms of promotions. And there were promotions all over the place. And what I've seen is that we actually always build promotions on a use case base. So we went to the development team and said, we want this and that. Then this feature was delivered and two weeks later we needed a different version of that feature. And then it has to go back to the dev team and it took another six weeks. And when I left, when we started thinking about Talon.One that was in 2015, that was way before the whole headless... Lieferando was already running on microservice architecture. I think we're quite early due to our brilliant CTO. Who's now the CTO of TRF, the mobility company. He was the one saying, this is the way to go. So we started with a microservice architecture actually in 2013. So I think it was quite early. My basic idea was there has to be a promotion API out there. You start doing everything with external APIs. You have an AWS, you have an Optimizely, you have a snowflake, you have a red shift, everything becomes an API first approach. So why is there no backend solution on API solution for the promotion engine? And this basically was my thesis that we have to build this ourselves and sell this to big enterprises.

Piotr Karwatka: [00:17:12] Gotcha. That makes perfect sense. Maybe you can give us a short overview of what Talon.One is? I personally know, but I guess some of our listeners may not be aware of it. So if you can give us a brief overview it would be perfect. 

Christoph Gerber: [00:17:29] Yeah. So what Talon.One basically is in a nutshell is a rules engine focused on promotions. And if we look at promotions, at Talon.One we think about referral marketing, product bundling, gift cards, wallets, loyalty programs, customer ledgers, easy discounts, product coupons, vouchers. And again, referral scheme. And we think - you can't separate those things. Maybe you have a coupon that works as a referral coupon, but ultimately it's loyalty points. And when you enter the coupon also gives you a product bundle. So we see you can’t separate all of those things if you want to make it really work and move away from very easy, 10% discount with a coupon. This is what we've been building for five years now.

[00:18:30] Piotr Karwatka: [00:18:30] Isn't it like the e-commerce platform already has promo engines? 

Christoph Gerber: [00:18:34] Yeah. I think I would say everyone has their own promotion engine already, but it's really the question. Is it good enough? And if you're just starting your business and you’re like a 10 person company, Talon.One might be way too big for you and you don't need the capabilities. If you think about an enterprise level of traffic and enterprise level of amounts of campaigns, you have to run. Where you need version control, where you need complete audit, where you need to have an audit trail around what's happening is cetera, where you need to have different departments working on different campaigns and they cannot overlap and you have to create rules around which campaign can be fired when depending on the region, different currencies... it becomes very, very complex. So I would say Magento for example, they have basic CRM solutions internally. You can send in CRM email through Magento, to all the customers. I doubt any serious businesses using both. And this is what I would say is where Talon.One comes in. You can run promotions, if you’re really serious about running promotions on a highly effective, good return base. You have to move away from your existing, let's say college shitty legacy system.

Piotr Karwatka: [00:19:58] Makes perfect sense. So in other words, what makes Talon.One special is the ability to work at enterprise scale? Meaning not only performance but also all the edge cases they have. As you said, internationalization, multi-store, very flexible rules, engine, and so on. Would you like to add something to this? What makes it special? 

Christoph Gerber: [00:20:29] Yeah, it's basically that we can... if you look at the customers that we work with, it's very, very flexible. We haven't really encountered a problem that we can solve on a promotion space and we solve with the same engine. We solve, or we run all promotions for Ticketmaster in the U.S., Burger King in the U.S. but also ZipCar, which is a car sharing company. Or Office Depot in the UK, or JD Sports in the UK. It's from fashion to office supplies, to car sharing, to food, to ticketing, it's the same system. And we solve all the questions, all the promotional issues for them with one solution. 

Piotr Karwatka: [00:21:26] I think that the API first approach you guys have is great because it's not only about headless or microservices. Also, or maybe even for mostly about inviting other parties to the product ecosystem you are building. What are the most important players in this ecosystem for Talon.One?

Christoph Gerber: [00:21:49] We are kind of agnostic, I would say. We don't really care who we work with. We see a couple of clients that we work well with. One is for example VueStorefront which comes out of your space. Then we got commercetools, which works great with Talon.One, but also the likes of a braise or a triple M and particle segment. These are all companies that we were close to in the past. And that we engaged nearly on a daily level where we are either in a commercetools example, we are replacing the internal promotion engine. For brace, we trigger communication or braces, pulling coupon codes and perform promotion campaigns out of 10 and one and insert them into their communication. And then you've got a segment and then a particle, you enriches the Talon.One database around. Customer segments in customer behavior. So they can say: “oh, this customer is part of a segment A” and therefore he gets a different set of discounts.

Piotr Karwatka: [00:23:02] So a lot of synergies. How about the adoption of the product? Do you need to educate the market? I am asking you because it's different from this typical approach. We just discussed that you have simple, but working out of the box marketing engine, inside your CRM or a platform, and here you have something you need to integrate. Maybe we just... Or maybe it's not difficult to understand for marketing guys. What does adoption look like? 

Christoph Gerber: [00:23:36] What we see is what happens mostly, is that you have a development team, product team and marketing team sit together, discussing “we need to really rework our promotion engine” and then somebody goes out and starts looking for what's in the market. And the few series about your promotion engine, the only relevant company in the market is Talon.One. And then you reach out to us and then we see how we can help you. And this is normal. I would say, 95% of our growth comes from people reaching out to us saying: “hey, can we please use your product?”.

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