Stage: MVP Launched
Domain: Retail and E-commerce
When: March 2022-February 2025
Team Skill Set: The CEO was a second-time founder with a robust background in manufacturing, international trade, procurement, and business development. The CTO possessed a strong background in backend and frontend development. The core team initially consisted of approximately 10 ambitious and dedicated backend and frontend developers, data science and NLP engineers, QAs and product marketing, who contributed 16-20 hours per week on an equity basis.
Thesis
The idea emerged in early 2022 from my experience with disruptions in international trade caused by sanctions on Russia and the resulting struggles I observed in e-commerce. This experience sparked a vision to create a product that could uncover hidden manufacturing potential in Russia and the surrounding region, enabling local businesses to replace foreign suppliers.
After relocating to Israel in November 2022 and conducting extensive research I landed on a bold hypothesis: Trump’s return to office could spark a new tariff clash with China, which would push online retailers to seek alternative manufacturing hubs – and pivoted. My refined thesis was to create a platform leveraging AI agents to automate the entire sourcing process for small and medium-sized marketplace sellers (e.g., on Amazon or Shopify). This platform aimed to help SMBs find the most suitable manufacturers outside traditional markets, such as in Peru, Mexico, Vietnam or Indonesia instead of China. The system was designed to automate supplier search, communication, agreement, quality checks, risk identification, and product delivery to target markets.
Throughout the ideation process I discovered that the vast majority of SMBs in marketplaces fail in their first year. This high failure rate is attributed to several factors:
• Long and risky procurement cycles: Finding the right supplier could take around five months, and product sourcing from places like China could add another two months. Shortening this timeframe can speed up the sales cycle and prevent capital from being tied up, which has a positive impact on both business performance and cash flow.
• Limited supplier options: Most SMBs were reliant on a restricted list of suppliers, predominantly from China, which presented geopolitical risks and vulnerabilities, meaning a product’s success couldn’t be dependent on such risks.
• Lack of expertise and personnel: Most SMBs lacked the specialized expertise and dedicated personnel for crucial functions like procurement, quality control, and marketing, often leading to a fragmented “everyone does everything” approach.
These observations led me to develop the idea.
Unlike a traditional marketplace listing hundreds of manufacturers, our technology was meant to suggest 3-5 optimal options to customers after they completed a detailed questionnaire on product type, budget, lead time, and other preferences. My target market was B2B, specifically SMBs with annual revenues between $100,000 and $10 million. Based on a detailed analysis of Amazon’s top-selling categories, I initially focused on four categories (fashion, toys, personal-care products, and electronics) but quickly narrowed it down to fashion, given its relative simplicity compared to electronics.
Validation
Validation involved broadly sharing my idea and conducting extensive customer interviews. I engaged with VCs, mentors, and potential customers. I conducted over 100 hours of interviews, including approximately 80 SMBs (sellers) from Israel, the USA, the UK, and other European countries, as well as about 50 manufacturers from target countries like Mexico, Indonesia, and Peru.
Feedback from SMBs was overwhelmingly positive, with many even bringing potential customers. In fact, from a certain stage, I used these introductory meetings (with VCs and customers) as a Go-to-Market (GTM) strategy. A significant validation came from the head of a large Amazon sellers’ community (over 10,000 members), who stated that if implemented correctly, my product could “beat Alibaba” by leveraging manufacturers in new regions like Mexico. The primary target market for sales was the USA, which I identified as Amazon’s largest market, where sellers actively seek and are willing to pay for new tools. Although I initially started operating in Israel and my first customers were from Israel, the U.S. remained my primary target market. I received fairly good feedback from U.S. VCs mainly, as they understood the e-commerce and marketplace dynamics and pains better. Ultimately, we onboarded 10,000 manufacturers and successfully secured 30 initial test users who completed commercial deals with our suppliers, including recurring orders.
Why it didn’t progress
1. Fundraising Challenges & Timing: I began reaching out to VCs early, around May 2024, after launching a prototype but before achieving significant customer traction or revenue. This was a mistake; the ideal time would have been once customer traction and an MVP were firmly established. I conducted extensive cold outreach, contacting nearly 500 VCs and angels across Israel, Europe, the USA, and Canada, but received very few warm introductions since I had just moved to a new country. Approximately 300 VCs had never replied, 100 replied with a valid negative reason, and I met with 75 VCs and angels in person.
2. External Economic & Geopolitical Factors: The war in Israel, which began around the time development started in October 2023, significantly reduced investment interest from Europe and North America, with VCs shifting their focus. Israeli angels also became hesitant to invest due to the unstable environment. I felt there was a significant stagnation in the broader VC ecosystem.
3. Personal & Team Financial Pressure: I quit my job in March 2024 to dedicate myself full-time, relying on personal savings, which I planned would support me for about a year and a half. The inability to secure funding meant the team worked unpaid for an extended period (October 2023 to February 2025). This led to retention challenges, as some team members departed for better-paying opportunities at larger tech companies.
4. Emergence of Competitors: By September 2024, two significant competitors emerged in Silicon Valley. One was founded by an ex-CTO of Alibaba, and the other by former employees of Google, Amazon, and Stripe. Both raised substantial capital, with one securing $2 million based solely on a presentation. This underscored the critical need for significant capital to effectively compete.
Insights
1. Fundraising Timing is Crucial: It is, in my opinion, a significant mistake to approach VCs without clear customer traction and at least an MVP. Customer attraction should precede fundraising efforts.
2. Understanding VCs: I would admit that even though many VCs mention they invest very early on or favor first-check, I realized it is not always true. It took me some time to understand that not everything written on a VC’s website reflects reality, and so it took a longer while for me to be able to attain this crucial context (like the required traction and metrics they expect to see, or how they define what is an “early stage”) through connections.
3.Team Commitment and Sustainability: While a dedicated, unpaid team can provide an initial boost, the lack of financial compensation makes it challenging to sustain such a pace, creating additional pressure both from family expectations and on a personal, mental level. Long-term sustainability therefore requires proper funding. My co-founder’s (CTO’s) commitment to training and mentoring junior developers was invaluable for building the product. Additionally, for my next venture, I will aim to hire employees with superb English speaking skills, as this is a critical factor when working internationally.
4. Market Dynamics & External Events: Geopolitical events (like war) can drastically alter investor sentiment and market focus, severely impacting fundraising prospects for certain domains.
5. Networking and Mentorship: Actively engaging at conferences and building a network, even through “cold” interactions, can lead to valuable mentorship and connections that are crucial for refining the pitch and navigating the fundraising landscape. As someone who is an outsider to the Israeli networking scene, which is in many cases based upon connections from the army, that was a big barrier for me.
6. Focus Beyond Technology: While a strong technological solution is important, understanding and investing in operations and business aspects is critical for a startup’s success and ability to compete (in or niche).
7. Realism vs. Ambition: Founders must be honest about their financial runway and the time required to achieve significant milestones, balancing the ambition of the idea with the practicalities of building a company. Being a founder is a lot about passion and “internal fire,” but it is necessary to have a backup plan.
