Founder and CEO at Diagon
Will is the Founder and CEO of Diagon, a startup leveraging AI to enhance a procurement platform. He previously served as an executive at Tesla.
We're building procurement software for manufacturing equipment. Our goal is to help the manufacturers of companies that make things like automotive products, aerospace products, and energy products, things like batteries and semiconductors. We help those companies source the equipment they need to make their products.
I was an equipment buyer for nearly 20 years, much of that time working for Tesla. I was the first equipment buyer that was hired when Tesla just bought its first mass production factory in Fremont, California. They were installing new equipment to build their new age electric vehicles, and it became my job to source all the machinery and equipment that we needed to make the vehicles.
I had the coolest job at Tesla. I got to learn about a new manufacturing process and help things get made. There were, at that time, no directories of the suppliers that made the equipment that I needed. So, building up a database of all the companies, their contact information, who was actually responsive at the company, were just kind of new to me.e're building procurement software for manufacturing equipment. Our goal is to help the manufacturers of companies that make things like automotive products, aerospace products, and energy products, things like batteries and semiconductors. We help those companies source the equipment they need to make their products.
I built a team of about 30 people and together we managed about three and a half billion dollars worth of capital expansion projects. Tesla was building factories faster and at a higher rate than any other company on the planet. So we built tools that helped us do this job better.
Insight number one was that most companies did not have a dedicated specialized team that knew that category of procurement. And insight number two was that once these companies started poaching all the people from my old team to go and build their teams up, those companies were still lacking the tools to do the work.
It took a few other experiences for me before I knew that it was time to start something. It wasn't until I started getting calls from lots of people to ask me for help with certain aspects of sourcing equipment. I did this for free for about six years, the six years until I realized that there was just a lot more there to unpack and that there was maybe a business that I could build here. That wasn't just me advising and charging money, but also building a technology solution that would enable my customers to do a lot of this work for themselves.
So at the pre seed stage, I think the thing that most investors are looking for is the founder market fit. Most investors at this stage of company are investing in the founder's ability to win that market more than they are investing in the company. I think the thing that helped to set me apart in this industry Is that one, I was an operator and an insider from the industry where I served for several years in that role doing exactly this thing and that brings some credibility. Having a network and an ability to tap into that network is another one of those things. It's helpful to know who are the suppliers, who are the buyers, how do different players within this ecosystem work together with each other.
There is a lot of value as a founder in differentiating your product and your strategy and doing something different. I work in a much less sexy part of this function called indirect sourcing. And when it comes specifically to manufacturing equipment, it's considered to be this niche until you realize that that's a 300 billion niche. Because there are fewer people that are familiar with this space, there are fewer competitors that are going after it and building products that serve this category. I stand a much better chance at winning this market that odds for me are much better and they work much, much more in my favor. That's really what helped us raise our first round of capital. And what we had to do from that point is to figure out what's the right product that we're going to build? And then how can we demonstrate signs that there's going to be radical customer adoption of this solution that we're building?
The advice that I give to early stage founders is don't get into the valuation trap. The most important thing is that if you're looking to raise capital or you need it in order to build, you're just able to raise something. We had this decision of whether we would dilute 20 percent of our company to raise 1. 5 million. It would have been a lot of money to get started. We could go out, hire, build quickly and all of that. But to be really honest, it was more money than we needed. At that point in time, we were only three people. I also knew that we wanted to participate in an accelerator program. And if you want to take on that equity, you've already diluted 20 percent of your company, now you're at like 27 percent diluted. So the way that we thought about this was let's half the round size and just raise 750, 000. It will save some space for us to do an accelerator program. And then based on that equity plus any traction that we got, we could raise our seed round at a better valuation. We just knew that it was going to be a lot better than our terms at us as a pre seed company. So that was the strategy behind only raising 10 percent in our pre seed round rather than going for a bigger round and diluting more of a company.
We thought about it in terms of like, what was the return on investment that we would get out of that accelerator program? What kind of network does the accelerator program have? Can they help you during demo day or leading up to it with raising capital? Techstars introduced me to my lead investor, which was also great. The network of people that you build with the other founders and with the partners is also really important. Having a tight knit group of other CEOs and founders that I could talk to and share my problems with, cry on each other's shoulders because there will be lots of tears in building a company.
You haven't lived until you've made a major pivot in your strategy or your product. Our initial go to market for what we were building was to build a marketplace. We were essentially just trying to get inventory and pricing from the equipment suppliers that sold the equipment, and our goal was to be a matchmaker and to take some percentage of that sale. Well, it turns out that was much easier said than done. We had a really hard time building the relationships with the suppliers and they didn't want to talk to us unless they knew that there was a paying buyer on the other side of the transaction. There was an aversion to paying some percentage for the matchmaking fee. We launched the product, we tested it with a few customers and they were telling us like, you know, this is pretty cool, but I wish you had other types of equipment on here. After getting feedback like that from two or three customers, I called this customer back and just said like, let's forget about the software that we built. If you gave us the specifications, would you pay us to go out and find the right mixing tank for you? We'll negotiate pricing. We'll do all this stuff to make it worth your time. And she was like, yeah, absolutely. So that was our first customer. We had a Kumbaya moment with the team and we all were like, Hey, let's all agree that like nobody wants what we've built so far. But we have customers that are willing to pay for this. Can we pivot to making this something more like a procurement platform where a customer provides us with specifications, we go and develop the market or find the right suppliers, and then help to match them with the right supplier. That was our pivot. And that pivot was one of the best things that we did as a company, because we were able to get high conviction customers that were really happy with the results. We've saved them anywhere from 40, 000 to 100, 000 on per transaction. The analogy that I will use is, it's almost like standing at the top of a mountain and pouring water on water down to see what's the path of least resistance to get you to the destination that you want to be in.
I would advise myself to be a lot less insecure about what I chose to do and following my instincts more and just worrying less about what people are going to think. I wasted a lot of time thinking about "okay, well, if I do this, what are these investors going to think? If I start this thing or if I leave this company to go and start an entrepreneurial venture, what are my parents going to think? And I just kind of obsessed over it for too much of my life, if I'm honest. When you find your calling and you're doing the thing that you're meant to be doing, things start to feel a lot more natural. And that's the part that I wish I'd discovered earlier in my life.
A former colleague that's worked with both of us said, "Hey, I think you guys would work really well together. Shri is a software engineer that's looking for a problem to solve. Will, you've got a problem to solve and you have no idea how to build it." I went through a month or two month process of co founder dating before I found the right co founder. And I would say that Shri is really good because he's someone that checks me on my assumptions about things. He asked a lot of questions about the market and the solution before jumping into it. And I feel like that was a good foundation for our relationship. Those are some of the markers that I would advise people to look for is someone that complements you well, they're hardworking. It helped for me that he was also at a similar stage of his career. Shri has also been working for two decades as a software engineering executive. And that helped a lot because neither of us are fresh out of college. We both have families and neither of us are doing this as a game. We're taking this very seriously. It is our full time job. This is the way we feed our families and we treat it that we treat our business that way.
It helps to have just clear, clear boundaries. Shri and I have a very classic division of technical co founder. He codes and builds the product. He's a software guy and I am very much the commercial person. I know who the customers are. I decide on the market strategy and help influence the product design. That division of responsibilities worked really well and as a founder, the CEO founder, I really just see it as my primary responsibility to make sure that the company's well capitalized, like don't run out of money.
Anything is possible. You can totally be a solo founder that does this. You find the market, you maybe hire contractors that can help develop the product. It's possible. I've seen people do it. I've seen it work well. But it's not common and it's certainly not an easy thing to do. The consideration that I would make is that this is already a lonely journey. It helps to have someone to share the load with. It was important for me to have someone that matched my energy to and risk appetite. If you're a solo founder and you're outsourcing the technical development and product development, it can be really easy to lose control over things and to not really have the level of quality and buy in that you need from the development team. So for me, that was another one of those things that helped to make it a much easier process to build alongside with my co founder.
Don't miss a single AMA. We'll send weekly digest to your inbox. No spam. Unsubscribe at any time.