Mr Yum Update
Mr Yum is a QR-code based mobile ordering and payment platform for the hospitality and entertainment industry. Its simplicity and affordability have resulted in rapid customer adoption.
The early investment Mr Yum’s founders have made in culture has allowed them to rapidly scale their team and keep pace with the market opportunity. Additionally, the trust they have built helps them retain crucial early team members as their roles change with the growth of the business.
Mr Yum has just raised a well-supported A$89m million Series A round. Despite the impressive growth achieved to date, I believe there are still significant opportunities for growth. Becoming an industry platform and customer acquisition channel will allow them to build an enduring competitive advantage over time.
At the centre of this expansion is trust, both from their customers adopting their new features and from team members embracing the pace of change. The foundation of this trust stems from Mr Yum’s early emphasis on building a great culture.
I’m grateful for the opportunity to participate in their journey and support the organisation they represent.[1]
Index
1) Disruption
2) Culture and Scaling
3) Building a Great Culture
4) Come for the Tool, Stay for the Network
[1] The author is an investor in Mr Yum. This does not constitute financial advice.
Disruption
Segment Key Points
COVID has accelerated the maturity of the restaurant technology industry and highlighted the high costs being paid to the delivery platforms.
This allowed disruptive startups like Mr Yum to gain a foothold in the market thanks to their affordable, customer-centric solutions.
To keep pace with a fast-growing market, Mr Yum will need to grow its team rapidly. Having a great culture will help it do this sustainably.
The Harvard Business Review describes disruption as a process where a smaller, less resourced company is able to challenge established, incumbent businesses.
This often occurs when incumbents focus on full-featured, costly solutions. As the market matures, disruptive new entrants are able to gain a foothold by offering more affordable, targeted functionality.
As described in my initial blog article on Mr Yum, COVID has accelerated the maturity of the hospitality technology industry by:
Accelerating the adoption of technology by hospitality venues (e.g. facilitating delivery to customers during COVID).
Highlighted the high cost of the delivery platforms as delivery became a much larger part of a restaurant’s business.
The delivery platforms’ core offering can be thought of as a ‘bundle’ of components like:
Logistics\delivery
Marketing\customer acquisition
Ordering\operations
Technology startups like Mr Yum provided customer-centric in-venue ordering and operating solutions, allowing restaurants to ‘unbundle’ this from the other components.
This is similar to how Netflix’s on-demand entertainment content is forcing cable companies to offer bundles with fewer channels.
Mr Yum’s solution was simple, affordable and included customer-centric features like QR code contactless ordering. The result was a solution that made the economics work for restaurants. Restaurants were seeing benefits like increased average order value and operating efficiency.
The adoption of Mr Yum has therefore been rapid. The Australian Financial Review reported that Mr Yum should achieve an annualised US$500 million in Gross Transaction Value by year’s end compared to US$56m processed in 2020.
As is typical in such foothold markets, this extraordinary growth has attracted competition. An example is Sunday which was founded in April 2021. In 6 months, the business has raised $124m and grown to 170 employees.
Strategically, it is important for Mr Yum to keep pace with this fast-growing market opportunity as many restaurants adopt such technology for the first time. To do this, Mr Yum will need to scale rapidly, which requires a larger team.
How can founders scale their teams rapidly while still maintaining high levels of services and operating performance? As Mr Yum’s progress to date shows, it is by having a great culture.
Culture and Scaling
Segment Key Points
A great culture can be a source of competitive advantage and drive stronger operating performance.
Founders will rely on their organisation’s culture to guide employee decision-making as they delegate more responsibility as the business scales.
A great culture develops trust, which will help employees deal with the uncertainty that comes with the organisational changes from scaling.
There are many definitions of culture. In a Greylock Partners interview, Included Health CTO Wade Chambers described culture as a way a group of people do things shaped by shared experiences, beliefs and behaviours.
Having a great culture can produce tangible benefits. A 1992 study by 2 Harvard Business School professors found that firms with a performance-enhancing culture had 4x higher revenue growth. A more recent survey by Deloitte found that 82% of respondents believed culture to be a potential competitive advantage.
Culture is a key enabler of a startup’s growth due to the rapid hiring that typically occurs after the product-market-fit phase and fundraising.
Jan Miczaika, Partner at HV Capital, described a startup’s growth in 4 phases as shown below:
Characteristics of the 4 phases are:
The Family: Everyone works in 1 team, with communication and information sharing occurring naturally. Founders strongly influence behaviour as company culture is modelled after the founders’ own actions and behaviour.
Teams: Employees start splitting into teams, and not everyone knows everything anymore. Founders have to confine their focus to core strategic activities (i.e. working on the business rather than in the business). This means giving teams the autonomy to complete tasks without running everything by the founders.
Departments: Most employees will not interact with the founders daily. Founders will need to institute formal mechanisms to delegate decision-making. This includes systems like Objectives and Key Results (OKRs). They will also need to install middle management, such as department heads, to manage other team leads. This requires different skills and may lead to early employees leaving.
The Wide Unknowns: Employees stop knowing everyone, particularly if operating from different locations. It may be time to restructure the business as functional teams (e.g. Product, Marketing etc.) may not work for 100+ people. Reorganising by product line, geography etc., will allow employees’ perception of the organisation size to be below 100 people. Founders may need to rely on formal communication and employee survey tools to engage with staff.
The above phases illustrate:
Founders progressively need to delegate more decision-making to their team members.
Therefore, they will rely on their organisation’s culture to guide employees’ decisions as they become further removed from individual employees.
Employees will undergo numerous organisational changes as the business scales. Company culture and trust will be important attributes for employees to deal with the uncertainty and pace of change.
Building a Great Culture
Segment Key Points
Having a great culture is an investment that should be made early in the startup’s life. This includes defining the values and vision that align with the founder’s strategy that early team members will connect with.
Mr Yum’s founders not only defined their values but continually reinforced them with their actions. This includes the transparency and trust they built with early team members.
This provides Mr Yum with a solid foundation to manage the pace of change and uncertainty to come as they embark on the next stage of their rapid growth.
How does a startup build a great culture? Y Combinator Partner Tim Brady highlights a list of 6 things founders can do to build a strong and coherent culture.
He describes this list as follows:
Pride: By being proud of the problem they are solving, founders can build empathy with customers and set the tone for the culture
Vision: Creating a long-term vision that speaks to the purpose of what the business is trying to achieve rather than just describing the work. E.g. for Tesla, it is ‘To accelerate the world’s transition to sustainable energy’. This attracts a broader range of people to the business rather than an engineering-focused ‘Building the best electric vehicles.’
Values: Creating a shortlist of values will act as a filter for the right type of people in the hiring process. Founders will have to model and reinforce these values.
Externally Focused: The values list should consider the needs of the customer. This creates a customer-focused culture.
Diversity: Creating an environment where people with diametrically opposed opinions can co-exist improves the organisation’s creativity and ability to solve problems.
Hiring Plan: The hiring plan should reflect the above list. Founders should keep refining the hiring plan to ensure that the right people are being hired prior to scaling.
Mr Yum’s growth is an example of how quickly a startup can scale
March 2020 – 12 team members
March 2021 – 65 team members
November 2021 – 120 team members
CEO and Co-founder Kim Teo has spoken about their journey with Startup Daily and Airtree Ventures. I found these excellent resources on learning how to incorporate Tim Brady’s list in a fast-growing startup.
In this blog post, I’ll highlight 3 things that stood out to me on their journey.
Investing time on hiring early team members: Tim Brady describes the importance of the first 20 people in a startup. These tend to be the team in place just before the business begins to scale.
As they will be heavily involved in hiring and training the next wave, it is important to ensure they embody the organisation’s culture.
Kim Teo describes the investment made in their first hires to find the right leaders who could coach, give feedback, prioritise, and build trust.
It took them around 2 years to grow their team to 25 people compared to some competitors with over 150 people after 6 months.
Values: Mr Yum hired an experienced People and Culture leader Laura Sloane as they began to scale. Laura pushed the co-founders to come up with the values or ‘mantras’ shown below:
Laura then repeatedly reinforced them by highlighting examples where team members have lived them and instituting a quarterly award where a winner is chosen for each mantra.
In this way, team members have a growing ‘cheat sheet’ of examples of how they should behave and what it means to raise the bar.
Trust: Transparency and sincerity are key building blocks of trust. Mr Yum’s Co-founders displayed these attributes with their early staff members during the highly uncertain early days of COVID. They were transparent about Mr Yum’s financial runway and incentivised staff to salary sacrifice in exchange for options.
This gives them the goodwill to have potentially difficult conversations with early team members on where they will fit in as the business embarks on the next stage of its growth.
Transparency and sincerity are still evident here as the Co-founders look to support these early team members by finding interesting roles within the business. This includes building teams around them to support new growth initiatives or helping them double down on their current skillsets.
Steps like these result in better staff retention, particularly for these early team members who embody the culture of the business.
By making the investment to have a great culture, Mr Yum has laid the foundation for the next stage of rapid growth while retaining the high service levels crucial to the hospitality industry.
As competition ramps up in the sector, how can Mr Yum leverage its high service levels and trust to build an enduring competitive advantage?
Come for the Tool, Stay for the Network
Segment Key Points
Platforms like OpenTable provide a playbook for how SaaS tools like Mr Yum can progressively build on their initial rapid customer adoption.
Mr Yum’s expanding list of features and connectivity are important steps in becoming an industry platform. Bringing more restaurants onto the platform will allow Mr Yum to create network effects and build an enduring competitive advantage.
The high service levels and customer trust required for this ambitious build-out stem from the foundational investment in culture which the founders have made.
In 2015, A16z General Partner Chris Dixon coined the term ‘Come for the tool, stay for the network’.
This strategy involves initially attracting users with a specific tool, such as software and getting them to participate in a network over time.
The tool allows the business to build up a critical mass of customers while the network creates long-term value and builds a competitive moat for the startup.
Venture capital firm Nine Four Ventures describes how the well-known hospitality technology business OpenTable used this to transition from a SaaS business into a SaaS-enabled marketplace.
OpenTable provides tools to restaurants and connects diners to restaurants via online reservations (i.e. a customer acquisition channel).
Building a 2-sided marketplace was expensive. Like many tech companies in late 2000, OpenTable shifted its focus towards efficiency\reducing cash burn.
It pivoted by focusing 95% of its marketing spend towards restaurants rather than customers.
It found customer conversions increased significantly once there was a critical mass of restaurants on the platform in a given area. I.e. their software tools gave them the supply-side density they needed to jump-start their marketplace offering.
Nine VC’s ‘playbook’ talks about the following steps:
Initial Product Vertical: Begin with an initial product vertical that is simple and easy to adopt.
Industry Platform: Expand the product portfolio, thereby increasing customer retention (harder to ‘rip out’ multiple products) and becoming an industry platform over time.
Liquidity: Becoming an industry platform attracts more restaurants to the software, thereby creating the supply-side (restaurants) density needed to attract consumers efficiently.
Many of these steps are evident in Mr Yum’s journey to date.
Mr Yum initially began as a digital menu and ordering platform. It has since been building out its product set with more features and verticals, as shown below:
Progressive build-out of Mr Yum’s platform from the initial in-venue digital menu to multiple product features and verticals
Additionally, Mr Yum has a strong focus on connectivity via integrations with key point of sale, marketing and finance providers.
Mr Yum’s expanding list of product features and connectivity are important steps in becoming an industry platform. Kim Teo talks about their aim of becoming the ‘Shopify for restaurants’. To date, Mr Yum has 1500 venues on its platform and 13 million users.
Currently, Mr Yum’s focus is on its global roll-out. Adding more restaurants onto its platform will eventually give it the critical mass to become an efficient customer acquisition channel for its venue customers, as was seen in OpenTable’s experience.
This is a longer-term proposition though Mr Yum is already helping customers with marketing and customer acquisition tools.
Mr Yum has just raised a well-supported A$89m million Series A round. This follows the stunning progress the startup has achieved to date. At the heart of this is the intentional culture the founders put in place early on, which provides the foundation for the next stage of Mr Yum’s journey.