Verena Papik/Tik Tok CMO
+ Our First Sponsor
+ May Breakfast Club Recap
+ James Steinberg Interview
+ A Company You Should Know About

Hey welcome to the NYC Tech Breakfast Club Newsletter.

Next week (Thursday 6/8 6pm) I’m interviewing Verena Papik, Music.ly’s first western hire and head of EMEA. She took Music.ly international and grew it to a billion dollar acquisition by Tik Tok. We’ll discuss her playbook for scaling global communities and her latest venture, SHAYK.

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May Breakfast Club: Young Money Edition Recap

My cohosts, Jack Raines and Ariel Purnsrian, absolutely crushed it. Great crew - we had founders, VC’s, operators, and some newsletter homies.

Jack is the author of Young Money, a newsletter about finance and life with over 40k subscribers, and editor of Exec Sum, Litquidity’s daily newsletter. He just wrapped up his first year of business school at Columbia. It’s been fascinating to watch him find his voice and grow his business and we had a ton of fun celebrating his success last week.

Also, if you’re an early career VC and you haven’t yet come to the breakfast club pre event - shoot me a message. I’d love to host you at Balthazar. Always looking to meet new VC’s.

Breakfast Club Member Spotlight:
James Steinberg

If you’ve come to the last couple of Breakfast Club Meetups, you’ve likely seen James Steinberg. He’s tough to miss. Green hair and tall, he stands out in a crowd.

I had heard a bunch of rumors about James – like he only hung out with North Korean Defectors and that his cofounder was a 50-year-old Chinese billionaire and that before his current startup he made a fortune sourcing masks during covid – and I wasn’t sure what to believe. Were these exaggerations? Probably. But there also had to be some kernel of truth. Right?

I have no idea about your chronology. Can we start at the beginning? Did you go to college?
Yes, I went to Northeastern and graduated in 2014.

When did you go to Y Combinator for the first time?
2015. After College, I started hacking stuff together with a former classmate. We originally wanted to build a self-driving forklift but abandoned that idea in favor of an API for warehouses play. Doing logistics for kickstarters.

Kickstarters? Like the crowdfunding gadget campaigns? How did that go?Good at first. We got all the biggest Kickstarter companies as clients. And then bad when they all went out of business. We did demo day and raised money and then I left.

Then what?
A lot of random things. I made and sold a gym day pass app. I bought a bunch of film equipment and tried to make commercials. I lived out of my car and drove around the US, I tried out Portland, Seattle, etc. A guy hired me to be CEO of a statistics sharing app. That didn’t work out.

Were you thinking about trying Y Combinator again during this odyssey?
I mean, I guess. Throughout my odyssey I never bothered to tap into the Y Combinator network because I was... sort of embarrassed. I left my company and it just seemed like a pretty bad failure. Now I feel like there’s this popularity of failure now where people brag about their failure, but back then it felt like no one wanted to be near me, like failure was contagious.

But then finally I decided to start talking to people and going to events. I met my cofounder, Osman, from Y Combinator. Osman wanted to import stuff – he wanted to buy stuff online as an expat in China but no one would ship it to him.

We stumbled into this industry called freight forwarding. Our company, Trusu, would allow you to paste an amazon link into our website and we would tell you the total cost of shipping this item. It involved a US warehouse and a Hong Kong Warehouse and a lot of work.

So you’re back in Y Combinator with another logistics startup – how does it go this time?
Yeah, we get in but we fail our demo day. Everyone else raises a ton of money. We raise $10k. We’re like “All right, let’s just go back to Hong Kong and figure it out.” But we have no money. And then even worse, due to an accounting error, instead of having six months runway, we have like negative 3 months runway.

What does that mean?
We were about to default on our credit cards. I flew back to New York and started looking for a Job just to dig myself out of debt. But then this one company reached out to us and asked to exclusively license our technology. We say no, can’t do exclusive unless you buy us. They make an offer and then we shopped it around and a competitor, ZIpX, offered us an even better deal.

Luckily, the way we were doing freight forwarding was much simpler. One click, pay, you’re done. The legacy freight forwarders didn’t have a very streamlined process. So, our tech was valuable. They gave us a part cash/part equity deal and had us stay on as directors.

Incredible timing. Just in the nick of time –
I mean, actually negative time. I was already screwed. I couldn’t make the minimum payment on my credit card a couple months in a row. It wasn’t an amazing exit. Decent Exit. Mostly in equity which became a whole thing.

How so?
Well about a year after they buy us, and the company that bought us is owned by like an umbrella company and the leadership comes to me. They say the CEO of ZipX wasn’t working out and they want to promote me to CEO. I’d keep doing my current job but I’d also run ZipX.

I start selling random things. Whatever we were guessing would sell. A friend tells me to start buying face masks. This was like October 2019. We started hearing about a mysterious sickness.

The executive team, when they promoted me, they also say that the whole team is going to climb Mount Kilimanjaro. They leave. Time passes. They come back. Sales are way up. They think I know what I’m doing.

We became a mask seller before everyone figured out they needed masks. Really really good timing. At some point the University of Hong Kong reached out and said they need 1 million masks and that I was the guy to talk to. Then governments start contacting me. That was very concerning because I thought if they’re calling me then the world must be ending.

The French government and the Australian Government were calling, asking for 10’s of millions of masks.

This becomes my main job.

How does this impact your acquisition deal?
Well basically our equity wasn’t worth much when we signed the deal but at the end of our two year lockout, the equity is worth a lot.

That’s sick – you’re like the high IQ version of Forest Gump
I was thinking Lord of War but with Masks

The Nicholas Cage movie about arms dealing?
Yeah, and similarly, all these sketchy people show up when you start making money. Corrupt politicians, scary Saudis with private jets show up with masks from countries that banned exports, importers who were trying to defraud their governments, and this one guy who attempted to impersonate the chief of police for Hong Kong.

Any other weird stuff happen in China?
Yeah, a lot happened to me outside of work. The Chinese police came to my door and said I needed to leave China. They cancelled all visas. I flew to Hong Kong. In Hong Kong there were protests and chaos and someone robbed my apartment. And then at one point I lived above an art gallery and this gallerist went insane – he started burning down the building and setting other fires. I had to get the police and firemen and I had to explain he was crazy. At one point a police officer gave me his whatsapp because things seem to keep happening with me, almost in a suspicious way.

2 years go by and
Then I leave. Yeah, I get out. There are always issues with Chinese companies. But then I come to New York with a newfound freedom and appreciation for America.

How did you meet Chiu Chau, your cofounder for OpenShelf?
We both had gone through Y Combinator. He was in China after the acquisition and when he was passing through Shanghai, he reached out to get dinner. He founded OpenTrons – an automation/robotics company for labwork. And that’s been super successful. If you’ve ever been in a Laboratory, most of the time spent doing lab work is just dropping stuff into vials and waiting to see what happens. And so it was really clever what he did. They took 3D printers, which had just been invented a little before that and put a dropper on it. Then they automated the process.

In hindsight, seems like such an obvious thing to automate
Knowing about the tech and being able to reconfigure it and just, there’s a lot of clever pieces to know. Also, it wasn’t like a quick take off for him either. Covid probably sped it up because there was so much lab work needed for Covid Testing.

He's extremely good at the supply chain and prototyping robotics, getting everything made quickly and efficiently. He likes the word Open because he likes open source.

Where did the idea for OpenShelf come from?
He (Chau) had an idea for OpenShelf. It’s for optometrists, at least initially. We want to dominate this small market and then go larger. The vision is that it’s basically a general purpose inventory robot. It’s like a vending machine that can also sort the stuff inside of it. And so we pitched it to a lot of different industries – some much bigger than optometry – but the one who’s willing to buy right now and seems to need it are optometrists with contact lenses.

We only learned about this by talking to them (optometrists) around Manhattan.

How far along are you?
We started in February. So four months? We’ve got our third prototype we’re about to show off at a conference in three weeks in DC and then we’re trying to get that into the first store in probably four weeks.

You’ve been thinking about robotics for a while now – ever since you tried the self-driving forklift
I didn’t have any money then which is typically needed for robotic stuff. I didn’t have much knowledge at the time either. So, it’s better to try now.

Before we wrap up I have to ask about the North Korean defectors
I have a North Korean refugee friend who wants to start a podcast with me. There aren’t many North Koreans in NY, maybe 10. There are lots more in California.

I think there aren’t many issues that are like black and white anymore. I feel like the North Korean stuff is the most black and white you can get. I met a couple of them at this random event probably like six years ago. They were all entrepreneurial or trying to code, trying to start businesses.

If you’re going to escape North Korea, you must save up money, which is almost impossible unless you start your own business or figure out a way to trade. One guy had sold puppies. Really anything you can do to raise money to bribe someone at the border.

What do you need for OpenShelf?
We raised our round. We’re focused on customers, now. If anyone has intros to optometrists or knows how to talk to optometrists or sells to optometrists, I would be excited to talk to them.

Company Spotlight 📣

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