Transcript

Nolan Martin : Hello, and welcome to the NEGOTIATEx podcast. I am your co-host Nolan Martin and with me today is actually not just Aramm, but we also have Luke, who's a peer at West Point who we're going to bring onto the podcast here in a minute. I'm going to have Aram introduce him. So with that, Luke, no pressure because you are setting the bar for all future visitors that we have on the podcast. So, with that, I'll turn it over to Aram

Aram Donigian : And, and, and all, and I'm not going to assume it's just because you're getting tired, just talking to me on this, uh, or, or, or that any of our listeners would provide the feedback that can you get anybody else to talk other than Aramn, but, but yeah. Great to have you with us today, Luke. So to our listeners, we are blessed today to have a good friend, a former student, Luke Hutchinson join us. Luke's a graduate of West Point, 2013. He was one of our original fellows in the West Point Negotiation program. He was commissioned as an infantry officer, and served two deployments in Afghanistan with the fourth infantry division. Now in between those deployments, Luke found himself planning a lot of social events and after several frustrating experiences, trying to book a venue for different military social events, when Luke left the military, he founded Perfect Venue and Perfect Venue is a tech startup that helps restaurants save time and increase their sales by streamlining their event management process. Perfect Venue is backed by leading Silicon Valley investors, including the first investor in Zoom and a co-founder of door dash Luke. Welcome to the show. for sure.

Luke Hutchison : For Sure! Thanks for having me on.

AD : Well, it's great to have you, and appreciate you taking your time. Listen, we want to start a little bit maybe with your time, you know, at West Point in those early years in the military, in the army in Afghanistan, and just say, you know, as you think back kind of around that time, what were some foundational concepts that you felt like you had an opportunity to put into practice that you maybe didn't know at the time were going to be beneficial, but have been beneficial?

Looking Back At Luke’s Deployments [3:33]

LH : Yeah, absolutely. Yeah, very, very fortunate to be at West Point. I came across Aram and the West Point Negotiation Project and really, really fully embraced it. And I'm very glad I did because literally when I got to Afghanistan, I think on the second day there, I was basically put in charge of being the officer that would go with our battalion commander to all of these different meetings that he was having with our Afghan counterparts. So different Afghan generals in the area, Afghan police chiefs, Afghan governors, you know, literally every other day where we're going out on these patrols where we'll go and meet with these leaders. And it was my job to prepare him to try and think about what the other party's interests were, what our options were, what our alternatives were, you know, and really providing him the context as well, because very often, you know, what they would be telling us wasn't exactly what was fully going on.

And so, you know, showing him the relationship maps and using a lot of those tools that we learned at West Point in the negotiation class to prepare my boss for success. And then, going out as a platoon leader, pretty much every patrol we had to be partnered with the Afghan police or Afghan army and, you know, and really trying to, to go into every single one of those thinking from their perspective, what are their interests? What are their options? You know, why don't they want to go out on patrol with us today? And maybe the reasons they're saying, there is some truth to it, or maybe they are making an excuse and, you know, trying to think about it from a principled perspective, as opposed to just, you know, a very like positional approach of just black and white, which often, you know, doesn't, it doesn't work very well, especially when you need to build those long-term partnerships and very like stressful situations. Yeah.

AD : Yeah that resonates right Nolan? With things that you and I have talked about from our own personal biases and experiences. One thing I did want to kind of ask you about was, you know, the work that you did with your, your boss, uh, a number of folks always ask, you know, this is great. If I'm, if we're working with peers, it's great. If I'm working with, you know, subordinates, as you think about the way you, you, you said preparing your boss for success in those engagements, what sort of things worked well when doing that, when you had to kind of lead up word, uh, with these negotiation skills?

LH : Yeah, absolutely. So I think it was a lot of, like, I would basically prepare a sheet for him before every meeting. And so I think a lot of good negotiation is, you know, setting the stage before you even start the conversation. And so, you know, doing really thorough research and providing him with that research. And so then, you know, if the Afghan general we're meeting with kind of like throws out this like hard thing, or I, you know, I'm not going to do this, I will have hopefully prepared my boss ahead of time with trying to understand the interest in that context for why that Afghan counterpart is maybe saying that and putting up that position and really I viewed it as equipping him for those meetings and then also brainstorming potential options ahead of time. So, you know, trying to think about what that counterpart's interests are, what our interests are, let's think about a few different options, and kind of talking through that and role-playing, you know, very usually, you know, I mean, he was an Italian commander. I'm like a brand new second Lieutenant. So, you know, there's, there's always that factor. So, pretty big difference, but, you know, we wouldn't like in the trucks beforehand usually, or as we're walking up to it, you know, try and put a few ideas in his head, going into the meetings that he was better prepared for success.

AD : That's great. Well, listen, let's, let's talk a little bit about Perfect Venue. Just, kind of give us the history and how did this all kind of start beyond what I shared in your bio?

LH : Yeah, absolutely. So, yeah, like you mentioned there, I mean, I was planning a lot of social events. I was, uh, for any military listeners out there, I'm sure you're familiar with, you know, battalion balls, hails and farewells, all of that. And I was a first platoon alpha company, platoon leader. So as soon as we got back, I was first in the shoot to plan that next Halan for a while. And it was just always a really challenging process trying to find and book a venue, you know, searching all over the internet, looking at, ‘oh, well we went here last year, but then, oh, they're not available this date!’ Or maybe, ‘they closed or, you know, did you try this place?’ And you're trying to call around a lot of restaurants, you know, just don't answer their phones because they're so busy sending emails to email addresses that just bounce cause they didn't exist. Just really a nightmare of a process.

And so it was just, you know, driving home one day and kind of had that very classic, stereotypical ‘aha’ moment. Or I was just like, there's gotta be a better way. And even though I know nothing about technology, I was just like,’ let's, you know, start, start doing it’ and had some good initial success with just a very simple landing page. People thought about what they wanted for their event. And I just built a spreadsheet of all the venues in our area, and that was in Colorado and like 2018 timeframe and it really took off out there. And so then we moved to the bay area to build out the team and raise money.

AD : Yeah, that's great. Yeah. I remember talking to you at the time when you were doing this. And I thought what a great idea. I thought it was a great idea from the get go. And I remember you talking about how your thinking around even just interest in options and that's kind of kind of basic component to negotiation was even kind of just an idea for, you know, the reason or the need for, for something like this.

NM : I think I got a quick story here that I don't think I've ever shared with you Aram. So I tried out to go to the ranger regiment. I was fortunate enough to be able to get selected. I go to Fort Lewis 275 and you know, I'm super excited about being a platoon leader in the special operations community and leading soldiers and everything like that. Well, for the next year, I get stuck as the S five and my biggest project, a good solid six months was planning the 275 ranger regiment ball. So I can, 100% relate to you with this loop, that it was a pain in the butt to try and find a venue and to actually figure this all out. So, I'm glad that you came up with the solution for all the future ranger lieutenants who think they're going to go lead soldiers or Rangers right off the bat, but then get stuck planning their ranger ball. So, appreciate it.

LH : Yeah. Yup. Yeah, no, absolutely. And the needs of those yeah. Is their own negotiations. So lots of, yeah, I remember sitting down with, we went, ended up going to the Broadmore is like a five-star hotel and they had this long sheet and, thinking about all the different prices and how we can, you know, think creatively like, ‘oh, well, can we bring our own grog as opposed to having to buy their grog and trying to create, you know, many different options.’

AD : So before it, before I kind of drill in more to how you're using some of these negotiation skills today, can you tell us just a little bit more, I think, you know, your success story, because you kind of went from 2018 to the move to Silicon valley or, you know, out to the bay area, I guess. For listeners who have an idea that they want to bring to life? Tell us just a little bit about your journey there and persistence involved.

Perfect Venue’s Success Story [10:08]

LH : Yeah, yeah, no, absolutely. So yeah, when we started out in Colorado and it definitely, you know, it was not a straight path by any means. Now there's a lot of trial and error and trying to constantly improve. And one of the things too, that when we first started out, I was very all on Airbnb, you know, trying to find and book a venue really on the guest side. But when we started sending a bunch of inquiries to the venues, we realized though, everything had melted down. It was like pouring water into a leaky bucket because they didn't have good tools on their end to manage availability, send proposals, get paid. And so we've really pivoted the business towards just helping them manage their existing leads, rather than helping guests find or book a venue.

And so down the road, we plan to circle back on that and then have a marketplace again. But that was definitely a big learning, you know, just listening to your customers and understanding what they want. And, yeah, so that was around 2018. Came out here, you know, in the first few months, we had a really tough time fundraising. And I think one of the big lessons learned for me was, you know, with investors and on the surface, it seems very simple, right? It's like they just want to make money, right? And they want to get a return. Their reality is much, much more complicated and much, much more nuanced. On what timeline do they want a return? And a very simple breakdown is - they're investing their own money versus investing other people's money. People that are investing other people's money, they have a contract, right, with those investors that, ‘Hey, we're going to try and return this amount on this date.’

And so everything is very driven by that, that those quantitative and assessments, whereas if they're investing other people's money or excuse me, if they're investing their own money, they're often much - they obviously want a return - but it's not typically this very tight timeline. You know, they're just happy that, ‘Hey, I'm going to be getting more money back.’ But usually it was much more that they see similarities in me and themselves. They were in the military and they started their own business and they kind of, you know, pay it forward. And it's definitely not, you know, out of charity, like they, they want a return as well, but they think, you know, much differently than just your traditional, you know, venture capitalists. And so, yeah learnt a lot of lessons with that, raised a pre-seed round.

So it was about three quarters of a million dollars and that was right before COVID. And so we got extremely lucky in the timing because I think, had we been raising even a few months later, it would have been very, very difficult if not impossible to raise that round. And then COVID hit obviously not a great, you know, private events and restaurants and business to be in, but we really just buckled down and focused on the product and have just been seeing like explosive growth since then, because a lot of restaurants I think are really looking to automate their operations, streamline their operations. A couple of our main competitors went out of business or were acquired. And we're really the only modern solution on the market that helps restaurants do what they do. And we have a mobile app and online payments. And our main competitor is about 15 years old. They've been around for a long time. They're great for hotels and large chains, but they're much more complicated and expensive than what most of our customers need. And so, yeah, we're now in 30 states, have hit some revenue milestones lately and are growing the team very actively and even have a location in Canada. So, we're an international company, I guess.

AD : Yeah. Well, isn't it, as you laid that out, you did such a nice job of talking about interests. And that was, I remember that discussion to kind of the assumptions I had of what someone who's looking to invest, what assumptions about what they're interested in versus kind of finding that out and be in such an important part of your prep, you know, as we kind of delve into the, the role of negotiation, how much flexibility do you have around the options you're able to kind of create when it comes to raising money and then how important is the role of legitimacy and standards?

The role of legitimacy and standards in raising money [13:46]

LH : Yeah, absolutely. So when it comes to the options, I think that's absolutely critical. The way to think about it from an investor standpoint is they're basically, you're giving them traction and progress and, they're giving you money in return. And so the longer, the more data they can get, the better it is. And what that translates to is they just want to wait. And so they want to wait for the next week or the next week, because who knows, maybe you'll have landed that big, like things change so fast you'll land that big customer, or you will have got that new engineer. You know,? things that will increase the odds of success for the company. And so it's really their incentive to just sit and wait and get more information.

And so for me, one of the most important things with fundraising is like really running an aggressive process and having a ton of options. And that means it's a bunch of investors that are interested in the company that are looking to invest because without that interest, in that potential of not being able to invest. And there's a cap, obviously, so you say, ‘Hey, we're trying to raise $500,000.’ So there's a limited amount of dollars that the company is going to take. And then showing that, ‘Hey, there's a bunch of other people that are interested in this deal. And right now we only have 100k left in the round. And, you know, we have several other people that could write a check of that size that are doing due diligence. We don't know when they're going to close.’ Really making sure that you're communicating, hey, I have other options out there because at the end of the day, it's in their best interest to just wait and see and try and get more information, you know, strengthening that.

And in terms of legitimacy, I think that's also critical. I mean, when, when an investor that just invested then makes an intro to his friend, the odds that that friend is going to invest is going to be about 10 times higher than just your average investor, because they trust their friend and they know that they already have that relationship and they trust that that person has already reviewed the terms of the deal and the valuation and that everything is fair. It’s really important. And then in terms of coming up with an evaluation, for example, I look at very much like real estate where, you know, you're looking at comps. So you're trying to find similar startups that have a similar amount of traction, you know, a similar opportunity and looking at, you know, what are they raising at? And then you can use that to defend your valuation because especially at, you know, a pre-seed, we were barely had like, you know, a couple hundred bucks a month in revenue or something like that, you know, it's, it's impossible to like have a quantitative valuation like you would in the public markets.

So, and to that, to what you were just sharing, I know at one point too, you talked about, you know, weeks and months of some really, you know, hard learned lessons. And at one point you were capturing those and sharing those with others. Is that still something you're doing today? Do you still share those? I mean, I assume you're still capturing those lessons or did you, do you still kind of share those too with others?

Yeah. Yeah. Like we have our investor update that we send out once a month where we usually include lessons learned and things that we could improve. And then I did some writing on the side as well. And I think that's something with the negotiation class that, and I think the military in general, you're kind of taught the importance of writing and reflection and thinking about your process. And by basically just writing on the side as I was fundraising really as a way to reflect and think about what was working and what wasn't with all these negotiations and starting to see those patterns and realizing that like, you know, ‘Hey Luke, when you're going into this, you're only trying to go after one investor at a time, like the single shot musket approach, it isn't working because they want that FOMO that fear of missing out, you know, and generating that interest. And so yeah, doing that reflection is really critical.’

AD : So we've talked a little bit on the investment side, as you think about, come out on the sales side then with clients and customers, what are some of the negotiation things that you find that are helpful there?

Negotiating vis-a-vis sales [17:25]

LH : Oh man. So, so many things. So I think the, and so I'm the business co-founder, so the, the CEO on paper. So my main job is really sales - finding new customers. And then my technical co-founder, his job is building the product, improving the product. And so I'm basically constantly doing sales, multiple calls a day. Then obviously recruiting is really just another form of negotiation and sales, but when it comes to actually, acquiring new customers, one of the things that we tried to do is at first, we were doing a lot of negotiation, you know, really trying to, you know, each deal was a little bit different and, you know, having, you know, different pricing, different billing, whether the billing was annual or monthly, whether there is what the added processing fee was. So we make money both on a subscription and on payment processing.

So, you know, you have multiple different factors, but kind of over time, what we did the downside of negotiating, every deal is, you know, our average sale price is $1000 to $2000 to $3,000 typically, or per location. And then for hospitality groups, we can have deals north of $10,000, $20,000. So if it's 10 to 20k, it makes sense to negotiate and you have that time. But for a $1000 to $2,000 a year thing, at scale, it's just not efficient and we'd have to either increase our price or just have one option on the website that may not be a good option for our customers. And so what we did was we kind of took those learnings from the negotiations and then built packages and plans around them.

So, now we have three different plans and then two different billing options. So about six different options total, and people can just come to our website, click a button, sign up, and we don't have to do very much talking with them at all. But that was the result of doing a lot of talking and realizing, hey, like, you know, some people really value flexibility and cashflow, so they just want month to month billing. Other people really value stability, and they want a trusted partner and they want a contract and they want to, it's SLA service level agreement. Really understanding that, hey, we're perfect venue is we're, they're entrusting us with millions of dollars each year to manage their private events, businesses. And if we don't do well we're going to directly hurt their bottom line. We're not just some like backend software that, they may, kind of get along with, but not, you know, not, not critical. We're very, very important, and typically managing 30 to 40% of their revenue stream. So, it's a pretty big responsibility. So some people will be like that. Other people want the flexibility. And then on the processing rates, some people want to have low subscription, but then they're willing to pay higher per transaction and really building those plans in. So, I would say that was one big learning. And I could maybe talk about some of the active listening skills too, if you like.

AD : Yeah. Well, I do want to get to that. So, I like what you've done, right? In terms of making some intentional decisions around how you approach options. We'll often talk about the different ways to approach, right? And there's the engaging negotiating and involving them in the brainstorming. And we recognize that takes time. And it sounds like, you know, over time as you get a better understanding of their interests. Yeah you can do a little bit more of a menu choice and say, ‘Hey, you know, we've, we've created a menu that really appeals to a number of folks.’ And when the scale is of, of large enough size, and maybe there's some nuanced differences, there's some things we can do there. So I think that's great. I do want to ask you about the FBI training. So you were one of the two first students we sent down to participate in the FBI negotiation training, when you were at West Point and you got to then hang out for another couple of weeks after that, and actually can do some on the job training with the hostage negotiators and that great team.

AD : I am curious. Yeah. Where, where those sort of active listening skills, some of that stuff shows up today in your work.

Active Listening for Sales Conversions [21:05]

LH : Yeah, absolutely. So as for sales, I would say it's very, very common. And especially with our main competitor is they're a good fit for really large places. But when they try and go after independent restaurants, hospitality groups, it's really not a good fit. And so often a lot of our customers, they're in an emotional state about how bad our main competitor is to the extent that they don't want to switch to us because they're like, ‘Hey, we just switched to this thing and it's been so bad. And like, you know, we're so, so upset, but we don't want to go through another painful process.’ And so being able to just label those emotions. ‘That sounds stressful. That sounds frustrating. I would be, you know, I would feel frustrated, in those situations and if, you know, talking about how maybe I've had a bad onboarding experience before with other software and how that's, you know, negatively hurt our business and then communicating how: a. that's important to us and we recognize that, and then b. what we've done about it and providing legitimacy.

So like we survey our customers. So we say, I think the number's around 80%, but about 80% of customers that switch to us say the migration went better than expected. And so, you know, having that data to back that up. But yeah, so a lot of times people will be, you know, in those emotional states a lot of times too, when they're, I really like to summarize and paraphrase that that was another one of the active listening skills. So, you know, they'll be talking to us about how their business and their problems and all these different issues. And I just see sales as a problem solving. First part of the call, try to understand their problems. Second part of the call, you know, providing the solution.

And, and sometimes we aren't the right solution and we're happy to recommend alternatives as well, but, you know, really understanding their problems and then summarizing those problems. So they know that, hey, I understand what they're, they're saying and making sure that we have that, that clear communication, which is, I think one of those active listening skills as well. And there's, I think definitely a misconception, especially folks coming from the military where maybe your only interaction with the salesperson is when you're buying a car. And it's usually a pretty terrible experience, but especially as you get into more like B2B sales and enterprise sales, to me, the best salespeople are not pushy at all. They're really just problem solvers where they're trying to understand that problem, provide the solution. And they're honest if they're not the best solution. And that builds a lot of trust because who knows, like, you know, maybe they'll, they'll three months down the line or, you know, a year down the road, they'll add another location in that other location is a good fit for us, or they'll recommend one of their friends. So having that good reputation in the industry, um, goes a long way and is very not the standard in our industry. You know, it's a lot of kind of fly by night sales guys that are trying to just, you know, hit their quotas. But I think when you really understand your customer's interests and, you know, present yourself as an option and, but also be realistic about the alternatives, I mean, sometimes recommending those alternatives as you're not a good fit really goes a long way to building trust.

AD : Yeah, so much, so much good stuff in there, right. The building of trust, the actual, um, you know, taking the time to show that you've understood, which, you know, builds that and builds that reputation. Even the humility of saying we may not be the right choice for you and there's some other things to consider.

LH : Yeah, no, absolutely. Absolutely. And I think too, another thing I just thought of too, I think is the, um, you know, there's sometimes a tendency to just think that people want the lowest price or whatever, but often, you know, I think communicating, you know, how, how it's the importance of like having that back and forth and like, hey, we, you know, we're, if we're, if you try and negotiate so low with us, that we can't improve the product, you know, it's going to negatively impact you. Or, or if we're trying to win a deal that isn't a good fit for our product, it's going to pull engineering resources, you know, in a direction that we don't want to go and it's going to increase our costs. And I think a lot of it just comes down to thinking a little bit more broadly about just trying to win that individual deal and what those implications could be. And even when we were raising money too, you know, if we had investors that wanted to really push on the valuation, it's like, Hey, you can keep pushing down on the valuation, but then we're going to, you're going to dilute the founding team really quickly. And it's going to disincentivize us, for future rounds, other investors aren't going to want to invest. So often it's in the other party's best interest as well, I think to, you know, have that fair deal and that fair price for that long term success.

AD : Yeah. I think that's, that's such a great point. It's something that we've talked a little bit about. I think with an eye towards what this looks like - implementation. That more broader perspective.

LH : Yeah. The commitment.

AD : Well, listen, I think probably the last question I just throw out on the table to you, Luke is, and we so greatly appreciate your time today is: what's your biggest piece of advice from a negotiation perspective perhaps, or just in general, if you want to go there to, for our listener, who's kind of on the same path as you are with their own idea or concept for a business, or maybe even kind of starting some of the initial steps, what would you give to them as kind of a word of encouragement.

Luke’s Key Takeaways and Action Items [25:50]

LH : Yeah, absolutely. So I think if you are thinking about starting a business, I think now is the best point in human history to start a business. You know, I think just even looking back, you know, over the last, like we were talking about this with my CTO yesterday, if we were to start Proper Venue 20 years ago, it would require hundreds of thousands of dollars just to simply get a website up. But now you can build a website, you know, for, for literally for free, you know, for maybe 10 bucks a month then. And so many other tools and resources are out there. And so the cost of starting a business has gone down truly exponentially, even in the last 20 years. And so I think it's, you know, it's really an exciting time to be a part of building the future and building whenever, you know, we look at our phone and all the different apps on there, like those are built by people just like us that were equally clueless when they started, but they just kept, they had that vision and they just kept, you know, going forward and listening to customers and solving problems.

So I think that's, you know, I'd say definitely do it if you're thinking about it. And then, you know, in terms of just the basics, I think a lot of it is, you know, really understanding your customers. And it sounds so obvious, but it's so easy to be so married to our ideas. And like when I originally had that ‘Airbnb for private event spaces idea’, but realize that the real problem is actually with the venues and it wasn't something I knew anything about, but I just started sitting at restaurants with event sales managers and learning and watching. And just slowly over time started to build pattern match and see similar workflows that we were able to build software around and we really listened to customers and really focused on building and shipping things quickly that will help. And when it comes to negotiation, you know, really, I feel like the most common thing we keep coming back to is just understanding their interests, you know, understanding why people want what they want and really taking the time to peel that onion back and often what they say they want is not necessarily exactly what's going on there.

And I think the, you know, negotiations information that you guys have provided and the instruction I got at West Point, I mean, for me, it's really hard to imagine being here today without the negotiation class and, everything that you taught me along the way Aram, I mean, you know, closing three quarters of a million dollars in investment when you're coming right out of the army... It definitely would not have been possible had it, you know, I've really learned to go through all those deliberate processes and think about things in a purposeful way. And it really, you know, it really sets you apart, especially as an entrepreneur when there's, you know, a lot of other entrepreneurs that investors can invest in. And also when you're doing sales, a lot of other products that that companies can use and you’ve got to understand their interest and demonstrate how you meet their interests better than anyone else out on the market.

AD : Thanks for, thanks for saying that. For listeners who want to get acquainted with Perfect Venue and reach out to you, where,

LH : Where can we send them? Yeah, you can definitely go to our website - perfect venue.com or if you want to reach out to me directly, my email is luke@perfectvenue.com.

AD : Thanks Nolan. I'm going to pass it back over to you. I can't imagine a better first guest to have on our program.

NM : No, I think Luke has definitely set the bar high. So, greatly appreciate your time, Luke. I mean, I really do think that what you're doing over at Perfect Venue is pretty awesome to watch, especially from the outside. So good luck to you on your future endeavors. I think that you already left the advice for the key takeaways and the action items that we would give for anyone that's following in similar footsteps, so awesome! For the negotiateX nation, if you have any guests that you would like us to have on the NegotiateX podcast, reach out to us at team@negotiatex.com, and we will attempt to track them down and convince them like Luke to join our podcast. So yeah, with that being said, thanks Luke. Thanks, Aaron. I appreciate it. And we'll see you over in the next episode.

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