We tried to raise every way we could. I met all the VCs around Europe I could get my hands on. No matter how many of these meetings I took, and it was dozens, maybe even a hundred, they all told us no. We probably got to the point of doing about 25 million ARR, growing multiple 100% a year. Still, no VC wanted to invest. We went from zero to 2 million ARR in about 18 months, and then from there we went to about 10 million ARR in the next 18 months, and then we went from that to 100 million ARR in less than 2 years, and then we went from that to now we have 2 billion ARR in sort of the next few years. So it was extremely rapid, exponential growth throughout this whole business.
Markus, dude, I am so excited for this. Thank you so much for joining me today.
Excited to finally be on the show, dude. This is so good to make happen.
Now I hear that the start was a 19-year-old student in Estonia, who obviously didn't have a driver's license. I don't either, to this day, so I'm thrilled about this. But can you take me to the specific moment that you had the 'I need to found Bolt' idea?
Actually, the story started when I was 10 years old. I knew already by that moment that I'm going to be a tech entrepreneur for life. I realized that I'm really great at technology, I really cared about software, I was always looking at all the latest gadgets, and I realized I really like commerce. I liked working with people, figuring out how to make money. So in kindergarten I was selling Legos, then in school times I was selling some collectibles. Then I learned to code, started building websites for local companies. So already as a teenager it was clear that this is going to be my passion for the next couple of decades.
What did your parents say?
They said go for it. And the reason for it was very simple: they grew up in the Soviet Union. We grew up under the Russian occupation in Estonia, and at the time entrepreneurship was banned. So they couldn't pursue their ambition, they couldn't build a business. So when I was growing up in the '90s, finally in a free, democratic country of Estonia, they really told me to go for it, challenge whatever things you want to do in the world, go for it. So I grew up in that environment.
Okay, so we have this entrepreneurial streak from very early, and then we are 19 as a student and don't have a license. Where does the Bolt idea come from?
Once I had learned how to code and I was building these websites and making money on the side, I always knew that that's not going to be my long-term thing. I wanted to start a startup. So I first experimented with a bunch of different ideas. I first built a mobile app for our school's online educational system. That didn't go too far because I realized very quickly the schools don't have a lot of money and the sales cycles are horribly long, and it's the public sector. So after six months I gave up on that idea.
What it takes 10 years for a VC to learn in adtech, you learned very quickly.
Exactly. And then I took a very systematic approach. I spent a couple of months studying different industries, and I just more and more over time started to realize that transportation is the most exciting space for me in the world. There were a number of factors. First, it was very clear that we're going through this once in a generation shift: people will not need to own assets, but they can start to use assets on demand, similar to what had happened to music, to videos, increasingly to many other sectors. It was clear that's going to happen in transport. Second, electric cars were coming along, and that was just this big revolution that I thought is going to shake up the industry. Third, it was clear that you will also have micro mobility: you will go from building these large combustion engine cars to having electric motorbikes, electric cycles, electric scooters, and I thought there's another opportunity there. And fourth, there was the shift from you driving your car to potentially self-driving happening. So I was just amazed. I thought, okay, transportation is really going to go through this massive shift. I need to be in that industry. It doesn't even matter what I'm going to do, but that's the place to be.
Okay, so you have this realization. What do you do next? The majority of people fail, I always think, because they don't take the first step. What do you do post 'I want to innovate in transportation in this shared new economy of not owning assets'? What's the next step?
So I started then, as a 19-year-old kid, by literally Googling 'how do you start a startup'. I went to Y Combinator and other websites; there was great content out there. And the top advice was always that you got to validate your interest of customers and the suppliers before you build the first line of code. So I did that. I set up this survey on social media, in Google Forms, sent it to my school list, put it up everywhere I could. And hundreds of people replied, and they all said that yeah, they agree, the taxi industry in Tallinn at the time was horrible. It was so horrible that if you were to design a bad experience, that's what you would essentially design. I can walk you through how it was. You had 15 different companies, you had to call all of them. Most of the time they didn't even pick up. Then even if they did pick up, the car almost never actually made it. Even if it did make it, the car was in horrible shape, it was dirty, the driver was rude. You could forget about paying with a card; you always had to pay in cash. So it was just all around a really bad experience. And I was thinking that there must be a better way to organize this. And so did hundreds of other people. So after this survey, I was thinking, wow, this is great, this is the easiest startup ever. Everybody's so excited and waiting for me to launch, and I haven't even built anything. And then the trouble started.
So then I had to go and validate the supply side. Then after school for multiple months, every day I went to these taxi stands that you have all around the world. You go there as a kid, you open up the door, get in, start pitching the driver: 'We have this new app, you should sign up, you're going to be making extra money.' And the sales went really poorly. 90% of them immediately said 'get out of my car, I don't want to deal with you. Who are you, some random teenager?' So that was very frustrating. But I kept on doing that for months and months. I think most people would have given up, and they did. I kept at it until I had about 50 drivers who I had finally persuaded to give me their contacts.
Did the message change to make it successful with those 50, or was it just persistence?
I think that I was sort of optimizing the wording a bit as you would in face-to-face sales, because over time I saw what was getting me better conversion. But at the end of the day, the pitch was simple: 'You're currently stuck under this legacy taxi company that doesn't give you a lot of work. That's why you're sitting here in this taxi stand. You should sign up to this app. It's low risk; you're just going to be paying a small commission every time you get a trip.' So it should be a no-brainer. And even then, most of the drivers didn't want to sign up. So it was a big uphill climb to make it happen.
So then we had 50. What did we do then?
So once I had validated the consumer interest and I had got the first drivers on board, I started building the app. I was back then 19. Everybody else in my high school was starting for exams, but I had gotten lucky. I had completed one of these National Computer Science Olympiads, so I got a good grade there and it gave me a free pass to university. So I was like, I don't care about the exams, I'm going to get into uni anyway. That gives me six months to work on this product. So I spent all the other time I had, aside from being in the taxi stands, by actually coding. I was building the consumer app, the driver app, trying to build a backend. And I realized very quickly that I'm not that capable a programmer that I can build all of these systems as quickly as I need. So then I went to my older brother, who was 15 years older and had a great career in tech. He used to be one of the early employees at Skype back in 2004, so he had a great network of engineers. So I went to him and I was like, we need to get some engineers on board to help me with this. I need a co-founder. And I think we talked to it must have been at least 30 people, and every single one of them turned me down. Because why would you join? It's a 19-year-old kid, they have no experience, no money.
Was Uber known at the time?
Absolutely not. Back then, it was a limousine company in the US. So I was thinking that yeah, these guys have raised good money, but I don't think I'm ever going to compete with them. The model wasn't validated for anyone. Going absolutely not. Nobody had even heard of these apps in our part of the world. Everybody was just using the phone dispatcher to get a ride. So you have 30 conversations, none of them join. Exactly. So it was a very tough time recruiting this co-founder. And then we got more and more desperate. So we started publishing this on random forums in Estonia, whether it was programming forums or random job sites. And then one day I get this email from a candidate who writes to me that 'let's meet up, I want to hear more'. I didn't have any other candidates anyway, so I was like, sure, let's meet. I quickly Googled before I go there 'how do you interview a person?' being a 19-year-old kid who had never hired anyone. So I show up to this meeting, I pitch him for probably an hour about what we're trying to do and why this is exciting. And then the problem is that most software engineers are pretty introverted people; they don't really show you on the meeting whether they're excited or not. And I can tell you that Estonian software engineers are even worse than that. So I had no clue at the end of the meeting whether this guy is excited or not. So I go out underwhelmed. And then a few days later, he writes to me again that let's meet up. And then this magical moment happens. I get into this café with him; he pulls out the phone, he pulls out another phone, and this guy just in a couple of days at home built the rider application, driver application, all the backend. He just makes an order on the spot, and he's like, 'Hey, I got so excited about the idea that I just went home and built this to prove you that I'm a capable guy.' So I just said on the spot, 'Wow, you're hired.' I've been working on this for months, and this guy did it all in a couple of days. So that was Oliver, who turned out to be our technical co-founder, who is still with the company 11 years later. He is the most brilliant software engineer I've ever worked with. I really just found him from a random forum, and he just showed up and built the thing as basically a test assignment.
How much of success in business is luck versus skill? Respectfully, it's quite lucky that that happened.
It's amazing. I think that in our case, without Oliver the company would never be where it is. So I'd say it's even close to 100% luck.
What would you say is the biggest advice for founders looking to find another co-founder?
I'd say from that story, you can never give up. Even if the first 30 people don't work out, just keep on going. You can really try to find people from all sorts of channels. You don't need to only go through your networks; sometimes these random forums actually turn out amazing candidates. So just keep on doing it.
I didn't know that story. I love that. And so we have Oliver then, and we start building out the backend, the frontend. The product is now starting to hum. Talk to me about going live. When did we go live and how did that response go?
The tricky bit is that marketplaces are probably the toughest businesses to get going. If you build a B2B SaaS application, for example, you can fully control the consumer experience. That's not the case with marketplaces, because you need to overcome this chicken and egg problem. You need the drivers and you need the customers at the same time, and both of them are very impatient. If a driver signs up, they expect to get trips at most in a couple of hours, otherwise they're not going to bother keeping the app online, especially back then when data was more expensive as well. And on the consumer side, it's even worse. If they open the app, they need to get a ride in a couple of minutes. If you don't have a car nearby in that area, they're just going to move on. So it's a very tricky marketplace, especially in ride-hailing, to get it off the ground. There are many marketplaces that are far easier. For example, you contrast this to Airbnb: a supplier might sign up, it's completely fine if they don't get any bookings for a few days; they can wait. But that's not the case with a driver.
So how did we overcome that?
It was very tricky. First of all, we didn't have any budget because we hadn't raised any money. Back then I was a 19-year-old kid with no budget. The only thing I was able to do was I went to my parents and I was like, hey, we really need some budget to get this thing off the ground. We came from very modest means, and Estonia especially back then wasn't a rich country. So they said, 'Yeah, we put aside 5,000 bucks for your university fund, and we're fine to give it to you. We trust you, but if you spend all this money on this project, you got to cover your own rent for the next few years at uni.' So I thought about it for a couple of seconds, and I was okay, let's do it, give me the cash. And that was the initial funding we used to get the company off the ground. We spent a bit of that on product development, we spent it to get the first stickers, billboards, and business cards ordered. It was a very humble beginning of just trying to hack in every different free organic manner we could to get the first initial traffic to the platform.
Okay, so we launch and it's difficult. You're managing demand and supply. How does that go?
The odd thing about this business for us from day one was that it was very asymmetric. The consumer side was from day one actually very strong. We got a ton of free media; it was a great story. Everybody hated the taxi industry, there was this young kid who tried to fix it. So we got hundreds of initial signups coming into the app, and that was great. But the problem was almost every single one of them got a really bad experience because we barely had any drivers online. They opened the app, the cars similarly didn't show up, or the experience wasn't great. I got really into a panic mode because I was thinking that we can't just waste this first initial burst of demand that came in, because if all these people get a bad experience, we're going to get a bad rep and we're never going to get out of this problem. So I did everything I could. I went on the streets of Tallinn signing up taxi drivers one by one again. This time at least I had an app, so I could sign them up on the spot. That turned out to be a very effective sales tactic, which I recommend to more founders nowadays. You just get in the car, and then you just wouldn't go out of the car before the driver had signed up. I was like, 'Hey, give me your details, I'll just do the account for you, download the app, set it up. Give me five minutes, I'll set it up for you. Every time you come online, click this button and the app is going to open up.' So I did this really curated service to get every single driver online. And then I realized that that wasn't even enough, so I went to my older brother Martin, who worked at a different tech company at the time, and I was like, 'Hey, can you help me with this as well?' And then I went to my mom, and I was like, 'Hey, can you help me with this as well?' Because we needed even more people on board. So it was a very humble beginning of just using everybody I knew to help and sell these drivers to get them started.
Are you making money at this point? On the first day, I'm just fascinated. How many people took a ride?
I think that we started off by doing about five trips on the first day, and then it started very gradually growing from there. It took us a couple of months before we got to 100 trips a day, and then very quickly went from that to 200, 500, 1,000 trips a day. And then it was already obvious that this thing is taking off, it's going to become sustainable, and we could start to hire the first employees.
When was it most obvious to you that you had product-market fit?
Actually, the odd thing was that we saw this massive consumer demand from day one. So it was very clear that consumers really want this service. That was never the question for us. The hard part for us from 11 years ago until today has always been the supply side. Our mantra every single time we have our internal all-hands meetings for 11 years always ends with one slide, which is 'Add Supply'. So that's always been the biggest blocker for us. How do you get more drivers on board? Nowadays we can expand that to how do you get more couriers on board, more restaurants on board? That's always been the biggest focus for us.
When you look back at those very early days, what did you do that you wish you hadn't done?
I think I should have been more aggressive with initial fundraising. I think we could have sped ourselves up a couple of months if I had gotten out and raised a small angel check before I did, because we bootstrapped the company completely for about the first year. We built the product, we got to some thousands of daily trips, and we did all of that with 5,000 bucks from my parents. So I think we actually could have accelerated a bit if we had gone and raised a small angel ticket before.
Respectfully, why are these businesses so capital inefficient? When you look at your Ubers or your whatever, they are so capital inefficient, and the cost to manage and run them is extraordinary. How are you able to do a first year, thousands of trips, with $5,000, and everyone else takes $15 million in a seed round?
Still to this day, we're the only company in this whole industry that's achieved that. There have been dozens of these companies that by now have raised billions of dollars. I think it comes down to a few things. First of all, I think it was the internal culture of the people who were part of that initial team: me, Oliver, Martin my brother, the first employees. We just came from this really frugal and resourceful mindset where the only thing we're thinking of is how do we get this business to profitability without raising any money, how do we keep our costs as low as possible. And that's a completely different mentality than how all of these other businesses were built. Specifically, you look at some of our competitors who raised $30 billion. These companies started off with having so much excess cash that they got very bloated. It was never a problem for them that they had to optimize for costs, because they could always go out and raise more money. And we came from literally the opposite, which was we had no money, and we had to make everything work with very little.
Where did having no money benefit you, and where did having no money hurt you?
The biggest benefit for us was probably in terms of attracting the right people. Because we could never pay even very attractive salaries in terms of cash; we were always paying sort of mid-market or low. But what we did to compensate for that was that we gave people generous equity. So we tried to attract people who were really missionaries, not mercenaries. And that really worked out nicely. The other big benefit was that it really defined the company culture. The first couple dozen people who joined went through this brutal period the first couple of years where we couldn't raise any money while our competitors were raising literally billions of dollars. That just forced us to be so effective at how we spent every single euro we had. We had huge analytical dashboards measuring ROI, measuring every single thing we do. And that just cascaded down into what the company is today. But if we didn't have that cash crunch in the beginning, I don't think that ruthless, sort of frugal culture would have ever formed otherwise.
Why did you raise money when you did?
What we realized eventually was that yes, we could keep on bootstrapping this company forever. We built it to about 10 million annual revenues without raising any external financing effectively.
10 million annual revenues?
Yeah. So we raised about 1 million of the first seed fund, and then we built the company to 10 million ARR with that, which is unprecedented in most places, not to mention in this industry.
Who was the first investor and how did that meeting go? You were at this point 19, 20. Googling how to hire someone, I don't imagine investing is that much more natural.
So I was 20 years old. We had this good traction going on in Estonia, and then we wanted to raise the first 1 million seed round to expand. I reached out to everybody in Estonia I could think of. We raised the first round mainly from some small local VC funds who were just setting up back in the day, and some first early Skype employees.
I think it was probably a 9 million valuation. So we raised a million euros at that moment.
Would that round still happen today? With the globalization of venture startups, would you just go global from day one and just go to YC or hopefully through shows like ours come to people like us? Or do you think there are still 19-year-olds in Tallinn who would raise from locals because they've never heard of this world?
I think that for sure there's a huge population of those people who still think that it's easier to raise locally than it is to raise internationally. I don't think globalization has gotten to that point yet. Whether that is effective is another matter. I do think that it would make more sense for them at least to approach the European VCs and raise a more serious round from the get-go. And the valuations have massively spiked as well. So I think if today we had the same metrics, we would probably be raising the round at the 50 million valuation, not the 9 million valuation.
Okay, so you raise one on nine, and then you go for 10 million in revenue?
Yeah. So then it was a couple of years of grind after that. We raised this 1 million, we then tried to launch 10 countries at the same time. 10 at the same time. We were absolutely amateurs at what we were trying to do. We went from trying to launch Estonia to trying to suddenly launch in the Netherlands, in the US, in a bunch of other places around the world. We almost bankrupted the company in six months. We burned through most of that 1 million very rapidly with nothing to show for it. The lesson for us from that era was that you really got to take these expansion cities sequentially and not in parallel. So we then actually had to make the hard call of letting all those people go and shutting down effectively all of those markets. We thought, 'Okay, let's figure out how do we go from one to n. How do we figure out how to do Latvia or Lithuania or Poland?' Just take the closest geographic countries to us and figure them out one by one, figure out the launch model. And then once we've done that, then let's go and actually raise a round and replicate it. We did it the other way around; we were too optimistic.
So what did you cut down to? You expand 10 at the same time, you go 'screw this, this isn't working'. Cut back. What do you cut back to?
I think we were left with about 15 employees, most of whom were then related to the Estonian operation, which was the only piece of the business that was actually working well and growing organically. So that was a self-funding business. And then we had a couple of people that we could afford to actually work on the international expansion.
How do you respond to people who say, 'Well, when you expand in new markets, there'll always be loss-making markets, and you have to subsidize the loss-making markets with the profitable Estonian market, and that's the nature of the beast. The maturation of the market will come.' Is that right, or do you say 'No, we can have unit economically efficient markets from day one'?
It depends on the industry. For marketplaces such as ours, there is no way you can have positive unit economics from day one. The reason for it is very simple. This is a very strong network effect business, which means that you do need to overcome this initial chicken and egg problem. You need to get the drivers online, you need to get the customers online. The first unit economics are deeply negative. You actually have to subsidize both sides of the marketplace to get the liquidity up. And then once you cross a certain threshold, then it becomes self-sustaining if you hit critical mass, and then it becomes a massively profitable business.
What have been your lessons on what that threshold is?
Generally, for most of these types of urban on-demand mobility marketplaces, the ratio is about 25% market share. So that's a very high bar. So you really need to subsidize hard, often times for a couple of years, before you get to that threshold, and that's when the network effects kick in.
We talked about that kind of launch playbook. How did the development of that launch playbook go? We're back now to 15, we've got Estonia working well, but we've had 10 that didn't go so well. How did we go about that playbook creation?
It was a very process-oriented, and very humble beginning. My brother Martin, we designated him to launch the first Latvian market. He literally went there, rented a small apartment, which then also turned out to be our office after a couple of months. He just basically slept there and then hired a few young students to help him. And that's how we set it up. He was going to meet the taxi companies, meet the individual taxi drivers, organically start to figure out how do we get demand into the marketplace by giving out business cards and leafleting and all of that. So very humble beginnings.
What have been your biggest lessons on what works for driver supply and what doesn't?
At the end of the day, about 80% of volume is driven organically from word of mouth. Nothing can beat that, even today. And all the paid channels make up about 20% in a mature phase. However, once you start in a market, of course it's different, because nobody's heard of your product. So the question really is how do you get the first couple of hundred drivers and the first couple hundred customers on board. Generally, we see the most effective for both sides is a combination of PR — you always got to get some first launch media and get some exposure from that — and the other thing is just paid online ads. For us, generally the most effective turned out to be Instagram and Facebook ads. So that's how you get the first couple hundred people excited. And then after that, your product needs to be great, because if it's not, then all your cohorts will fall to zero. If you actually have a fantastic value proposition, then the other way around, your K-factor is going to be positive, you're going to be exponentially growing.
Listen, I'm an investor. We get shoved CAC to LTV ratios the whole time by founders. And the question that I always kind of oscillate on is: do CACs go down with time as you increase word of mouth and brand, or do they go up as you saturate your core ICP in the core target market? How would you advise me?
Marketplaces have this very unique dynamic, which is that in your first six months, the unit economics are always horrible because you don't have enough liquidity in the marketplace. You constantly need to subsidize the drivers, otherwise they're going to drop off. You constantly need to subsidize the customers, otherwise they're going to go away. So your first six months of unit economics will tell you effectively absolutely nothing. They always look bad. You just got to have faith in the model that as long as you keep on investing long enough, then you will hit some threshold and then it's going to flip into profitability. And that is almost impossible for any financial person normally to understand. And that was why it was very difficult for us to raise funding initially as well.
Any other lessons on driver supply that were like 'I wish we'd done this' or 'I wish we hadn't done this'?
One trick we did that really helped us get going in some of the first markets was actually to go to the market with a SaaS product and then convert it into a marketplace afterwards. There's a good saying that people might join you for the tools and stay for the network, and that's effectively the logic we used. In some of these countries we had no money, so we couldn't do the nowadays playbook of going in and then paying the drivers to stay online for a certain number of hours; we just didn't have the budget for it. So instead, what we thought is maybe let's go to these local taxi companies and give them great tools instead. We give them fleet management software, we give them dispatching software where they really have a huge productivity lift from that, because otherwise they were running on old-school radios and writing stuff down in notebooks. So they really loved it. We were able to get the first companies on board with that, and then they added all their supply into the ecosystem. So we suddenly had hundreds of drivers online. And that was sort of what sold the supply side for us. Then we took the next six months to build up the consumer platform without worrying about this chicken and egg problem, because the drivers were there anyway. And then of course what happened over the next couple of years was that these taxi companies at some point realized that they don't even need this dispatching software any longer; they can actually drop their call centers and just get all of their demand from this application. So it was a very natural go-to-market that I think a lot of these marketplace founders often miss. That's a great opportunity.
I'm so enjoying this. So your brother is running Latvia. He's got this beautiful HQ, very big, very professional. It's also his apartment, with his bed in the corner. What market was the biggest surprise, good or bad, and why?
I think the biggest surprise I've had to this day was how successful we were in Africa. The logic for us was that we raised this first million, we tried to launch in a bunch of markets that failed, then we took a step back and started doing this iterative approach of launching incrementally one country after another. I think we had about four or five countries working nicely in Europe, and we were quite happy with that.
When you say 'working nicely', what revenue are we at there?
Probably each of those was doing maybe 10 million of gross bookings in terms of how much people were spending on the fares. And then our commission on that was typically around 15%, so it was like 1.5 million ARR per country. So it was decent. We could hire a decent team to run the country, they were growing nicely. But when you then zoomed out and thought about where is this business going to go over the next couple of years, it was clear that we need more geographies. We can't just operate in these small Central Eastern European countries, and that was never the ambition for us. So what we did was we just made an Excel list of the top 200 cities in the world, we ranked them by about seven criteria. On purpose, we kept these models very simple rather than complex. It was things like population, regulation, number of drivers, what's the car ownership rate in the country, metrics like that. We then ranked the table, and we tried to take all of our bias away from it and just look at what the table says. And all the African cities were ranking top of the list. We had no clue about Africa; I had never even been there. So the top one city on the list was Johannesburg, and none of us had been there. We had no idea what's going on. We didn't want to replicate our earlier mistake of prematurely hiring people into countries before we knew whether they're going to work out, and we didn't really have the budget to do that anyway. So we thought, back then in 2015, is there a more cost-effective way to launch these markets? And then a trick I still don't understand why more companies don't do is that we just set up online ads to customers and to drivers saying that Bolt is now live in Johannesburg, without having nothing. We just put like a couple hundred euros there...
We started running ads in a bunch of these cities, in dozens of the cities that we had identified. The whole idea was to run it for a couple of weeks, see how many customers signed up, what the CAC ratios were in all those places, where we saw the best results. That was going to be immensely valuable signal to then figure out which ones were actually going to be the places we would launch. This was such an effective hack. In just a couple of weeks we identified the top seven cities with the best numbers, so we went to those and only hired people in those cities. Some of them were very unintuitive; many of the cities from the regional list dropped off.
So what were the top ones? Johannesburg was the first, and Lagos in Nigeria was the second. You were still a kid from Estonia, from Tallinn, and you had never been there. How do you launch in Johannesburg and Lagos?
That thing also really differentiated us from most companies. We always looked extremely pragmatically at everything, trying to calculate the odds of everything and going from first principles. The logic for us was: what do you really need to get this service off the ground? You effectively need hundreds of drivers in the ecosystem. For that, we just started running online ads for drivers and saw hundreds signing up because unemployment rates in some of these countries were huge, like 30%, so there were many people who wanted to make extra income. Then we thought, what's next? We put up an online ad for hiring the first employee, and some young kid from a university signed up as a part-time job. We had a Skype interview with him back in 2016, when nobody was hiring remotely, and we told him on a video call, 'We're going to figure out a way to send you a card so you can pay for utilities, then you go find an office base and start calling all these drivers and training them.' That's what we did. This young kid trusted us through a video call, found the first office base, we sent him a list of drivers, he called them, got them into the office, and trained them up. That's how we prepared for launch. That happened for a couple of months, we had enough drivers, and then one day we just clicked the switch and turned on the service for customers.
And this kid was in where? This was in Johannesburg. Is he still with the company?
I think he was with us for a couple of years, but eventually, of course, we realized the market became huge. They started doing hundreds of millions of dollars of gross bookings, tens of millions of revenue. Africa was an immediate success. The bizarre thing was that we started it as an experiment. We thought if these were going to turn out as good as a market like Latvia, we would be happy. Instead, what happened was in six months, Johannesburg went from being zero to being more than half the business, just from scratch with one local student running the whole operation.
How many other cities did you have in play at that time?
It was probably 15 cities live in Europe at the moment, and it was more than half the business. It was incredible.
So why was that? Was that frequency of trips, or number of actual customers?
How we measure success in the company has always been by one metric from day one: gross bookings. It’s how much actual monetary volume of transactions is happening on the platform. It was incredible to us. The number of trips was immense; it went very quickly from zero to millions, but the monetary value of the trips was so high. We didn't really expect that South African trips would be almost the same price as some of these trips in Eastern Europe.
But gross bookings doesn't necessarily determine user happiness. Frequency of trips would suggest that I love it and can't get enough, but they may not be very much—they could be just quickly around the corner. Why is gross bookings the focus?
My view is that it's the only thing that matters. If you ask me what our retention is, what our activation rate is, what our C is, I couldn't tell you any of those things because I don't think they're real; they're completely irrelevant. The only thing that at the end of the day matters is what's your GMV or gross bookings. It encapsulates everything that is either going good or going bad in the business. The reason is that if you have great retention, consumers will keep returning to the platform and keep doing GMV. If they like it, they will increase their frequency over time, which means even more GMV, and they will also get their friends to the platform, bringing even more GMV. That's the only North Star metric we focus on. Of course, there are some teams who look at CAC, acquisition rates, and pension rates, but that's a clear secondary priority. It has never been the North Star of the business.
So we have Johannesburg now, and we have Lagos, and we're looking at this going, maybe we underestimated the potential of this business in different parts of the world. Did you have a strategic discussion in management and say something's changed?
Absolutely. We were just monitoring these dashboards every few hours. We couldn't believe what was going on because consumers were signing up by the thousands every day, thousands of drivers signing up who wanted to get on the platform. We very quickly had to update our priors and be like, okay, this is actually going to be fantastic. This might be the entire company six months from now, and that's exactly what happened. We created a SWAT team of people in Tallinn who identified the next 15 countries in the world where we could replicate the same thing. We continued with the original exercise of taking the next cities from the list, running ads in those places, figuring out which ones had the best traction, and launching there. We went very quickly from having no presence outside Europe to suddenly being live in about 15 countries. We launched all the major African economies, we launched in places like Mexico with no presence there, not flying anybody there—full remote launches—and almost all of these launches turned out to be fantastically successful.
What did you do that made you successful with these launches?
First, it's worth mentioning that we weren't the first to market in those places, and that's what really makes Bolt unique. As I described, this is a very heavy network effect business, so the first player has a huge advantage. They have bigger density, therefore better pickup times, and can offer a much better customer value proposition. If you come in as a second player, it's generally almost impossible to ever catch up unless you have something very unique the other player isn't doing. We had a couple of differentiators. First, we localized much better. What was clear was that especially these American players in these markets completely neglected the local needs. One trivial example: they were operating in Kenya only allowing you to book a ride if you had a credit card attached. How many people in Kenya have a credit card? Less than 2%. They were just completely missing 98% of the market who couldn't even use the service. We saw a complete opening for us, an empty market we could go into. The other thing was that we optimized for being the most cost-efficient ride-hailing operator in the world. We took a very small cut, which enabled us to pass on much better rates to customers—generally they were paying 10% less—and we were also able to pay the drivers 5 to 10% better as well. Both sides of the marketplace had a very clear financial reason to switch to us, and that was enough to overcome the initial critical mass.
I spoke to Dara at Uber before the show, and he said something along the lines of, essentially, 'You are often second or third in a market. How do you feel about that, and is that an okay strategy?'
I'm a facts and numbers based guy, so let's look at that. Today we operate in about 50 countries around the world, and Bolt is the number one most popular platform in more than 20 of them. We feel pretty happy about where we are. When we look at the trend, in most of those other 30 where we operate, we are continuously taking share for the reasons I mentioned earlier. We offer a better value proposition to the customer and a better value proposition to the driver. In a lot of those places, we're confident that over time, even though we're a second mover, we've done that before and we can catch up and become the most popular platform.
Is it still a good business if you are second?
It depends on whether you're a frugal company. If I look at some of our competitors like Lyft in the US, I don't think being number two is sustainable. But it is a very profitable business if you're able to run a very lean operation.
I'm sorry for the spicy question, but what happens to Lyft from here? You mentioned them.
I think their only way out of this is to optimize their costs. I just generally don't see how they're going to be an independent company five years from now with the current cost structure.
I can't really think who would be a natural acquirer. It's not an easy company to turn around.
So we have this massive market expansion, and we are now in Africa, in Kenya, in Johannesburg. What was the first and most important thing that broke in this global expansion, because this just sounds too good to be true?
What was going on behind the scenes was mayhem, complete mayhem. We were running all of this with a tiny team of about five people from Estonia. None of us had been in these car markets before, so we had to figure out everything: how to localize the product, how to collect payment, how to issue invoices, how to hire people to keep training the drivers, how to do marketing in these places. It was a complete mess, but it was also the most fantastic and fun part of the business because we were all young kids just figuring stuff out on the go. Nothing major broke, but I think the one area we neglected for too long was how intensely we focused on the regulatory bit. We started off as a small company and didn't have to worry about it because we were the second mover into these countries, so by the time we came in, the regulation was already sorted. But there were a couple of instances where, for example in Poland, in Czech, or in the Baltics, we were the ones who defined the category, and the regulators were coming to us asking for input on how to regulate this thing because there hadn't been a platform like ours before. We neglected it for too long before we realized we should set up a public policy team and give these regulators what they needed—input on best practices for regulation. That doesn't come naturally to most tech companies, especially ones growing at that hyper speed. We probably could have done that a year or two earlier, just engaging with the public and trying to influence where this goes.
Is speed the single most important thing in startup growth and development?
Speed is absolutely the most important thing if you can execute it with high quality. I see a lot of companies that execute fast but are cutting corners and launching things they shouldn't be launching, and at the end of the day it's a lot of momentum but really no progress.
What thing did you do very fast that you should have done more slowly?
I think we could have been more deliberate about which markets we choose to expand into. As I mentioned, we had this first wave where we expanded with the wrong model. Looking back, if we hadn't done that and instead used the better model we stumbled into a couple years later, we could have accelerated the whole evolution of the company by that period.
We've now got this exploded market map of Bolt adoption and very successful markets. Where are we at in our fundraising life at this moment? Still the same as back in 2014? You've only raised a million at this point.
By that point we had raised this one million seed round. Our metrics were just going through the roof. We were probably among the top two percentile of startups in the world, for sure in Europe. At that point we were easily crossing 10 million ARR, probably growing 500% a year, and doing that with an additional budget of 1 million.
What year was this? I'm just trying to understand.
That was back in 2015, 2016. So we had just raised this million, and then we thought, we need to raise a lot more money. It was clear to us all the time that we needed to raise more because we were operating with always having a month or two of cash in the bank. It was a huge stress for me: could I even make next month's salaries? It was a complete disaster. We tried to raise every way we could. I met all the VCs around Europe I could get my hands on. I'd get to these meetings, show them the metrics, tell them the story, and they would say, 'This seems like a great team, obviously fantastic metrics, but we just don't believe in the category. We think you guys are going to get wiped out.' No matter how many meetings I took—dozens, maybe even a hundred—they all told us no.
All the big brands said no?
What was the most common reason?
They just said this category is a winner-take-all market, there's not going to be any room for number two, so no matter how great your metrics are, we're not going to invest.
What was the best meeting that you didn't get?
I think we actually didn't get a meeting with Sequoia back in those days. That's another story of how they later came back to the business four years later.
Who was that meeting with at Sequoia?
We didn't get the meeting, that was the sad part. We tried to approach them many times, but back then we weren't an interesting enough company.
We just got a response like, 'Thanks, but we're not interested in the category at the moment.'
So what was the Series A?
We took a very unconventional approach. We realized we had to raise some money, but all the sophisticated VCs didn't want to invest, so we had to swallow our pride. The company was going bust, and we needed the money to continue this fantastic expansion. I contacted anybody I knew who had any sort of money. I remember one meeting was with a local real estate company in Estonia. I went there as a 22-year-old kid, and they had never heard of a startup or a tech company. I pitched them on how our metrics were doing and the story. At the end of the meeting, they said, 'We've never invested in anything like this, never done any investment outside of real estate, but you seem like a good guy, so we're going to invest half a million dollars in the company.' Looking back, it was completely insane that they did that. They invested at a valuation of about 15 million, so by now they've made easily more than 100x return on that investment. The only reason they did it was because they had never even heard of any of our competitors, so they just looked at the merits of the business. That turned out to be much smarter than all the sophisticated VCs who turned us down.
He turned 500k into 50 million?
That is insane. So what did you raise in that kind of interim round you cobbled together?
We cobbled together half a million from this real estate company, similarly a couple hundred thousand from a local railway operator, a couple hundred thousand from a local telecoms guy. It was tiny, all together maybe one million bucks. That was enough; we had to survive with that because nobody else wanted to back the company back then.
When did big cash come in?
After that, the metrics were doing fantastic. We probably got to the point of doing about 25 million ARR, growing multiple 100% a year, and still no VC money to invest. I was just so frustrated with the VC industry; I said I'm never going to talk to any VCs ever again. Then what happened? The experience wasn't bad; they took the meetings, listened, gave some advice, but at the end of the day I didn't need advice, I needed money, and none of them were willing to invest. Then it all changed very bizarrely when one day Mercedes, or Daimler, the group, approached us out of the blue. All these OEMs at the time were trying to figure out their strategy. They realized that mobility is changing; maybe one day everybody will be ordering cars from these apps, completely killing their existing business. Mercedes had a big fund set aside and wanted to buy as many of these companies as they could. They approached us and tried to buy the business for maybe 100 million euros. As a young kid, that would have been a fantastic outcome. We discussed it with the founders, but my view was immediate: we don't want to sell. We're onto something special; this is going to be an amazing business, so we're going to turn it down.
How much of the business did you have at that stage?
Probably 45%. So you made $45 million at age 22?
Yeah. We had a big debate about it with the other founders. I was completely clear that I wanted to build a business. They got lucky that Oliver and Martin were both very supportive, so they said, 'It's your call, you started the business. If you want to go for it, go for it.' We turned it down in a day; we didn't even think about it.
Was there anyone who did want to sell?
There were some angel investors who thought, 'Wow, we're going to get a great return of 10x in a year.' But they all were of the same opinion: you started the business, it's your call. So we said no, and they then invested in the business. A year went by, and our numbers kept growing; we probably quadrupled the business in the next year. We went back to them, and they realized we were going to be the winner in this category in most of these markets. We managed to convince them to invest more than a 100 million at a billion dollar valuation. It went in a year from being an acquisition to being an investment, and that turned out to be fantastic for them.
You've gone from raising a million from a real estate company and local telecoms people—not the standard—to 100 million from Daimler. Did that mess with your mind a little bit?
It was a huge transition. In the interim, we had an interesting debate with the team internally: what are we going to do with the money? We were already doing really well and didn't really need to fundraise. But we saw that if we did this fundraise and could deploy it even nearly as efficiently as the past money, we would be able to quadruple the business very quickly. It was clear that to have long-term success in this category, we needed to raise the money. It was insane that it went from one and a half to 100 million.
When you get the 100 million, what did you spend on that you look back now and think, 'Why did I spend that?'
Honestly, I don't think we really did anything wrong with the money. I think we genuinely spent it all really well. We had this super clear moment when we raised the round—it ended up being a $170 million round with some add-ons, so $100 million from Daimler and a few other investors joined in. I told the team, 'We're not going to change the culture. We haven't raised any money before, so we're going to keep operating just as we have. Yes, we'll hire a few more people, but we're not going to bump everybody's salaries massively or give everyone huge teams. We're going to retain the same cost efficiency we've had from day one.' Given that all these people had been through that tough period for many years, it wasn't a tough sell. They all agreed, 'This is what makes it special, this is why we're winning. We're not going to mess it up just because we raised a round.'
But you now have 170 million. In terms of your execution from there, what changed?
That mainly enabled us to launch significantly more markets at the same time. It was necessary to overcome the initial chicken and egg problem because the setup costs in some of these cities can be massive. To get going in a city like London, you need to invest ballpark at least 100 million euros to reach critical mass; otherwise, it's just not going to work.
What was the cheapest city to launch and what was the most expensive?
Probably the cheapest cities to launch were the ones we first did in the Baltics. They were tiny, half a million people, very little competition back in the day. You could get going in Estonia with $5,000. Contrast that with some of the biggest cities in the world where you need to invest tens of millions, if not hundreds of millions.
