Is Your Startup a Painkiller or a Vitamin?

Sean Weisbrot: Welcome back to another episode of the We Live To Build podcast. Today we're talking about what it's like going through an accelerator, but this time from the point of view of a startup founder. If you'd like to know more about what it's like for an accelerator to pick companies, look for our episode with Earing Limb.

Sean Weisbrot: Lim, one of the directors for the Southeast Asia region for 500 startups. In this episode, you'll hear me talk with the founder and CEO of Autify, a company that uses no code and artificial intelligence to help startups manage their resources for automating testing and maintaining test scripts. Because this is a huge problem that a lot of companies have, and there's a massive market for it.

Sean Weisbrot: And you'll hear more about his story of how he pivoted and how he came to discover this, and it's something that the accelerator helped him to realize. In general, he had a great experience with the accelerator, and while I have no experience being part of an accelerator because I chose a different path for my startup, that doesn't mean that there isn't value in working with an accelerator as long as you choose the one that fits you the best.

Sean Weisbrot: So now I'm gonna turn it over to Rio in this very brief but important episode, packed with a lot of information. Why don't you tell everyone a little bit about your startup now that you launched through being a part of the accelerator?

Ryo Chikazawa: I'm Ryo. I'm the CEO and co-founder of Startup called Autify.

Ryo Chikazawa: So Autify is the, uh, AI power software testing automation startup. So we automate the software testing by ai, so we support the web application testing as well as the mobile native app testing. So that's what we are doing. We launched a service on October, 2019. Uh, then we joined the, uh, the accelerator, uh, back in 2018.

Ryo Chikazawa: August joined the Accelerator Code Alchemist Accelerator, which is based in San Francisco. They are focusing on B2B startup.

Sean Weisbrot: Thank you for introducing AutoFi and yeah, I'd love to know a little bit more about how you. Got the idea to join an accelerator and how you decided that Alchemist was the right one for you, and if you had applied for other accelerators as well, or,

Ryo Chikazawa: I had been thinking about joining the accelerator, uh, because like, although I.

Ryo Chikazawa: I founded this company in San Francisco. When I lived there, I went back to Tokyo, Japan. Then we are building the company from outside of the Bay Area, Silicon Valley ecosystem. So joining the, uh, accelerator would gain the, uh, kind of access to the community.

Ryo Chikazawa: In terms of like, you know, the network, like network of the other startup as well as their investors and so on.

Ryo Chikazawa: I thought that joining Accelerator would definitely one of the important thing to make the, a successful startup that scales globally. Like we even applied to a lot of type of accelerator, not only Alchemist Accelerator, but also Y Combinator and the 500. Techstars and so on.

Sean Weisbrot: And so you had said that you first started applying in 2016 for accelerators. It took you two years to get someone to say yes. Is that right?

Ryo Chikazawa: Yeah, that's true. I founded the company September, 2016, so it's almost like a one year and a half.

Sean Weisbrot: Were you actively applying during that whole time or did you wait until you had like a prototype before you started to apply or.

Ryo Chikazawa: I've been applying, you know, all the time, like no, even without the product and so on, so, so I actually applied the Alchemist twice and then I applied to LY Combinator, I think three times.

Ryo Chikazawa: I.

Sean Weisbrot: Wow. So I'm, I'm writing a note right now. Apply early and often.

Ryo Chikazawa: Yeah. Apply early and often. Yeah. That, that's actually the other one of the important thing. Yeah. They, they fail many, many times. I talk to a lot of like YC alumni and then they say like, you know, they, they get rejected many times. They get accepted like after three times or four times, even like seven times or something.

Ryo Chikazawa: You should apply many times.

Sean Weisbrot: Do you think they reject people on purpose in order to test their resilience? I. Or do you think there's just too many applications? Like why do you think people get rejected so often?

Ryo Chikazawa: I don't think they would test the resilience, uh, of the founder. You could be accepted without any product, uh, without any client, so on.

Ryo Chikazawa: If you don't have any traction, you would be rejected. So that will be the reason like, you know, to re,

Sean Weisbrot: so when you got the acceptance from Alchemist, were you already in the US or did you come from Japan? Just for the program.

Ryo Chikazawa: I was in Tokyo or Japan. So yeah, I went to US to join the accelerator.

Sean Weisbrot: So when they accepted you, did they. Make you pay an application fee? Did they pay for your flights? Like what did, was there any benefit to being accepted or did you have to pay for everything yourself?

Ryo Chikazawa: The accelerator invest you, which means that you can use that money for the state.

Sean Weisbrot: So when they say, Hey, we've accepted you, give us your bank details and we're gonna send you a check.

Sean Weisbrot: Like is it that? Is that It's that easy?

Ryo Chikazawa: Yeah. So like when you get accepted, okay, here's the money. So like it's already defined. How long was the program? Six months.

Sean Weisbrot: And so you were committed to staying there for six months?

Ryo Chikazawa: Uh, not really. Like I, uh, I, I, I was actually going back and forth between Tokyo and San Francisco, so you don't really need to be there for like, you know, entire six months.

Sean Weisbrot: What would you say was the hardest thing about starting the program? Was there day one bootcamp and they're like, everything you know about starting a company is shit, and you're an idiot, and we're gonna, was it like this Silicon Valley kind of brainwashing session like.

Ryo Chikazawa: The most interesting thing was like one of the advisors said too, oh D at a startup that I wouldn't get you guys on the stage if you don't have any customers the stage of the demo day.

Ryo Chikazawa: So yeah, that totally makes sense, right? Because like we are B2B startups, even in the, uh, early days. Like if we don't have any customers, like if we don't have anyone who is paying for your technology, that would kind of tell you that you know, your technology, your product is worthless. So that's what he was trying to say.

Ryo Chikazawa: I think in the six months you definitely need to get paying customers.

Sean Weisbrot: So was that a shock for you to hear that or was that just common sense?

Ryo Chikazawa: It's not really common sense, but kind of shocked you. You just have a six months or something and we didn't have any live product yet. Then like we've been struggling for like a past one and a half year, almost two years.

Ryo Chikazawa: I was pretty motivated. Okay, we, we gonna definitely make it.

Sean Weisbrot: What was the first really important lesson that you learned after that little shock you experienced?

Ryo Chikazawa: Uh, Ravi, uh, is the head of Alchemist accelerator. He mentioned the, uh, two important things. So number one is solve customers burning need. Don't create vitamin, create painkiller.

Ryo Chikazawa: The vitamin is kind of nice to have, but the painkiller is must have. In terms of selling B2B technology, a customer wouldn't purchase vitamins like a nice to help product. They want their problem to be solved, so that's why like, you know, they only purchase painkillers. They don't have any budget for like nice to help things.

Ryo Chikazawa: I. And then the second one is aim for the big market. Like usually, you know, it wouldn't be winner takes all the winner, uh, would be like a worth, like more than $10 billion. But like the second spot or third spot, they could even. Get IPO with like a few billions or like a, they can be acquired. Uh, so that's why even you couldn't, uh, win India, the top open market, you definitely have some success.

Ryo Chikazawa: Uh, so that's why like a market is the most important because like if you are not India, the large market be you, you're gonna get stuck somewhere. You definitely cannot be. Uh, the unicorn. So because like at the investors, always thinking that, okay, if, if the startup can be a unicorn or not, so like to be a unicorn, you definitely be in the, the, the big market.

Sean Weisbrot: I love how you expounded on the market side, but I didn't hear you talk about the pain point side. I mean, you, you kind of touched, uh, on it slightly. So I'd like you to go a little bit deeper into it. You said that Robbie had said you need to solve people's burning needs and, uh, offer air. You kind of shared with me more about that, so I'd love to hear you talk about it again here so that everybody else can hear it.

Ryo Chikazawa: So as I mentioned, like the customer wouldn't spend the money for nice to have product because like they need to solve the burning need. So think that if the customer's hair is on fire. So you need to do something for this to beauty successful B2B business. The first step is identify the burning need.

Ryo Chikazawa: You shouldn't build anything without identifying it. So like we, we've been failing quite many times before joining Alchemist Expert. Uh, by starting from like building something without defining what are the burning needs, the Alchemist forced us to. Sell right now, even with the product. So what they told us to do in the first week is actually like purchasing the, uh, the LinkedIn sales navigator, then sending code emails to the prospects, then get the meeting, talk to the customer, trying to get like, you know, what are their problems, what are their pain points?

Ryo Chikazawa: Then identify what makes them burn their hair. What we did is try to sell the product even without the product. Like we are doing something different on the, uh, testing automation space. So we've been like talking to, uh, 70 to 80 customers already in the, the first three months, but we couldn't sell anything.

Ryo Chikazawa: You would think like selling the other product without a product will be hard, but I think that's possible. Uh, talking to like 70 to 80 customer and then couldn't get any positive reaction, I felt like something went wrong. So that's why like after the three months we stopped there. Then we collected all the, uh, the feedback from the meeting note, created the, uh, spreadsheet, then count all the pain points that they mentioned.

Ryo Chikazawa: We found that there's a two main things that most of the company mentioned. Uh, the first one is hiring automation engineer. Would be very difficult in terms of automating the test. And the second is maintenance cost. Almost all companies mentioned that, uh, maintenance cost is very high, really difficult to maintain the automated test scripts that make us realize that, okay, if we could solve those two main things.

Ryo Chikazawa: It's gonna be definitely the big business. That's the moment that we could identify the burning needs. After that, we'll build that sales pitch deck from the scratch based on those two burning needs. Then also, like, you know, rebuild the solution based on the, the two problems. How can we solve those two main challenges then, like we come up with, okay, so no code to solve the, uh, the engineering resources problem because like, you know, anyone can automate with no code.

Ryo Chikazawa: So that's first solution. And the second is, uh, AI to maintain the test code. So came up with the two main solutions, then build up the sales deck from scratch. Then also, like at the same time we build the, uh, the kind of like a really small mockup, I mean like just a demo video. It's not like a working product actually, like we done it's one night.

Ryo Chikazawa: Then brought that to the, uh, the next customer meeting. Then the reaction was totally changed. They said, okay, so we are gonna buy this product. So like even with the product, right, the reaction is totally different. Like they, they start asking that like, you know, when can you ship the product and how much is it?

Ryo Chikazawa: So like, the question be became more kind of detailed before that, like, uh, hitting the, the, the burning knees, they would say like, oh, looks cool. Like, let me know once you build it. So like you would get this kind of reaction many times. But like that is the kind of signal that like, you haven't identified any of burning needs.

Ryo Chikazawa: So after identifying the burning is and hit the right solution, the customer reaction would be drastically different. We closed a few contracts before the demo day and we'd successfully get up on the, uh, the stage of the demo day.

Sean Weisbrot: Thanks for sharing your story. It's very interesting and least for me. I started a company and the thing I started actually ended up being something wildly different today, years later.

Sean Weisbrot: Before it even gets seen by any users. Mm. I think we all go through something like that and it, so it sounds like the accelerator was a really good, positive experience for you and your company.

Ryo Chikazawa: Yeah, definitely. It was, of course, like, you know, in terms of, yeah. Learning the, uh, the really important essence.

Ryo Chikazawa: Of building their successful startup, but also like gained a network of another startup founders as well as mentors and also investors.

Sean Weisbrot: Was there anything bad about your experience?

Ryo Chikazawa: Mm, no. I don't have any bad things about joining the Alchemist Accelerator. I.

Sean Weisbrot: So I'm, I'm glad that there was nothing negative 'cause I've heard horror stories, but mostly around other accelerators that I won't name.

Sean Weisbrot: So I'm glad that Alchemist has a good reputation. So the whole point of this exercise was to get onto the stage on demo day. How did you prepare for demo day and what was the day like? Was it different than you expected? Did your preparations actually work?

Ryo Chikazawa: Two weeks before the, uh, the demo day, I started to create the pitch deck.

Ryo Chikazawa: And then they have kind of rehearsal and feedback, uh, session, uh, looking at the classmates pitch deck and then, you know, revising it, writing down the script, practicing it with the, uh, the classmates and so on Demo day. That was actually like a bigger than. I expected the venue was so huge. There was like, you know, 300 to 400 investors, 4,000 people watch the stream.

Ryo Chikazawa: Of course I was pretty nervous 'cause like you, you would only have a four minutes. But it was very fun. I could make a good pitch after the pitch that not only the investor in the venue, but also like, uh, the joining online, they, they have the mobile web app that has kind of like a button. For each, each companies, like, you know, if you want to invest in the company, you, you kind of like press the button, okay, I wanna invest, uh, in this company, or like, I want to talk to this company.

Ryo Chikazawa: I got many emails. Then after that, like, you know, we aggressively like arranging the meetings then, you know, try to like raise capital. So yeah, that was pretty busy. After that,

Sean Weisbrot: how many meetings did you actually have? And did you actually close any fundraising from those investors who emailed you who were at demo day?

Ryo Chikazawa: Yeah, maybe like a 40 to 50. Yeah, I don't quite remember. But yeah, so after that demo day, we've been pretty busy on like scheduling a meeting and then having a pitch for fundraising for a month or something. After a month, we could see, okay, so these investor will fit and then so, you know, uh, move on to the next stage of like a due diligence or something like that.

Ryo Chikazawa: So after that, we successfully could raise the seed round financing, uh, which is the 2.5 million, but that actually took a time. So did any of those in the seed investors come from Demo Day turned out like, you know, we couldn't find any like good fit from that demo day, but uh, we could have many opportunities to talk to a lot of variety of investors.

Ryo Chikazawa: So yeah, a lot of learnings. Although we couldn't, uh, raise any money from those investors from demo day.

Sean Weisbrot: And there's nothing wrong with that. 'cause we all know that you have to talk to a lot of people in order to get money. Yep. Do you feel like even though you didn't raise any money from the investors at Demo Day, that after you finished with them and you started to raise from investors, you didn't know yet that saying you graduated from the Alchemist Accelerator, that that gave you any sort of advantage in raising funds?

Ryo Chikazawa: So like, the reason why I, uh, couldn't raise from the investors from demo day is like, you know, we decided to focus on the, uh, Japanese market first. I mean, after successfully launched a product in Japanese market, of course, like, uh, aiming for the global market, most of the investors was like, uh, US investors through the demo day, right?

Ryo Chikazawa: So that's why they would, uh, say that okay, if you focus on the Japanese market, like we couldn't help. Then I went back to Japan and then, you know, talking to the other Japanese investors, mainly everyone knows a arguments accelerator. Of course then, you know, like we were the, actually the first Japanese company graduated from the A arguments accelerator, so that helped us a lot.

Sean Weisbrot: I know from our last conversation you had mentioned thinking about expanding into the US probably in 2022, I guess, have you kept in touch with those investors who liked you but said no, because you were focused on the, the Japanese side?

Ryo Chikazawa: Yeah, I keep in touch with those investors.

Sean Weisbrot: How did you keep in touch with them? Did you create like a spreadsheet to manage every time you contacted every one of them, or do you have a newsletter that you do or you just blasted out information? How do you do that?

Ryo Chikazawa: We manage all the investors I contacted. Uh, on the, uh, spreadsheet, then frequently like, reach out to them and then say, Hey, we hit this, uh, milestone, or something like that.

Sean Weisbrot: So did you have any investors that are like, when you wanna expand to the us, contact me. And that's basically it. They're like, we like you, but we need to see you come to the us

Ryo Chikazawa: basically, like the US investors are, you know, actively looking at the testing automation space. Almost everyone says, yeah, let me know when you expand the business.