Zia Yusuf and Alex Macdonald on the advantages of a finance background and the importance of having a functional product
Want to go swimming with the whales? There’s an app for that.
A little under three years ago, Zia Yusuf and Alex Macdonald launched Velocity, a restaurant booking app that helped cash-rich, time-poor millennials get access to hot tables in hip restaurants. Since then, Velocity has raised around $35 million in funding from the likes of Starwood Hotels founder Barry Sternlicht and Thomson Reuters chief exec Tom Glocer.
Yusuf and Macdonald, both 30, say Velocity was inspired by their previous careers working in equities in Goldman Sachs and as a turnaround manager in private equity respectively. “We were traveling and entertaining clients frequently,” Macdonald tells Moneyish. “But it was tough to know the hot places in each city and difficult to get access to great tables.” Seeing a market for those with expansive expense accounts, they quit their jobs in 2014 and founded the company.
In the time since, several hundred thousand customers and thousands of restaurants have used the app and the London-headquartered startup counts 48 full-timers there and in New York, Miami and Los Angeles. Earlier this year, they also released Velocity Black, a concierge-style membership service that allows you to book the aforementioned swimming session or say, rent a fighter jet. Membership costs $2,400 a year— with a one-time initiation fee of $600. Velocity Black counts supermodel Gigi Hadid and pop star Joe Jonas as members.
Both Yusuf and Macdonald concede that their backgrounds in finance helped when it came to initially raising money. Indeed, they quickly drew about $1 million in funding from friends, family and a network of associates– who got stakes in the company– by floating their idea and explaining why they had seen a need for it. They then used the funds to to create an app and sign up restaurants. About half a year after they began working on Velocity, a barebones app was on the market.
Still, they insist that the most important thing is being able to show would-be funders you’re creating something of value. “With little capital, you want to get your product out early to show that you’re creating a value proposition,” says MacDonald. Indeed, Yusuf says that the majority of Velocity’s capital came from people using the app and then reaching out. Since inception, they’ve had two formal fundraising rounds, the most recent of which was led by DIG Investment, backed by the family offices of numerous wealthy European clans. “Even if they’re institutional investors, they’re still human beings who want access” to cool restaurants, he notes.
That said, while having a product to show is important, it actually has to work well. “Neither of us had a technical background so it was important to bring on someone who could build it,” says Yusuf. “We could probably have done it quicker but now we’re glad we took the time to talking to restaurants and customers.”
Still, the bigger challenge may come after you’ve received funding. When the two partners were first raising money, venture capitalists were flush and perceived as being willing to fund almost anything. This, they say, led to some of their competitors failing to charge restaurants listed in their apps for business (Velocity has since acquired competitors such as U.S.-based restaurant payment app Cover and London restaurant booker Uncover. )“They did unsustainable things to grow at any cost,” says Yusuf. “We didn’t see that as appropriate since we were giving restaurants a valuable service and charging.”
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