https://drewknight.com/bybe.html

My startup journey with BYBE

by Drew Knight, 2/20/2025

Every startup has a story. Regardless of the outcome, there's always
something to be learned, something to be shared. Because here's the
thing: the startup journey isn't linear. It's a roller coaster. You
enter with an idea, only to hit dead ends, take wrong turns, and
double back. It's messy, frustrating, and often humbling. But when
you finally reach the other side, you see how every twist and turn
shaped your company and your perspective.

BYBE didn't scale to become a unicorn, go public, or--to be
honest--change the world. But it did revolutionize a specific, narrow
use case in the alcohol industry. We exited and returned money to our
investors. And along the way, we experienced the kind of challenges,
breakthroughs, and lessons that only a startup can offer.

With this article, my goal is simple: take the startup truisms we've
all heard--the ones in books, blogs, or Youtube--and apply them to my
journey as a founder and CEO, from ideation to exit and everything in
between.

When I first started BYBE, the two most common questions I got were:

  * How did you come up with this idea?
  * Why don't you apply to Shark Tank?

And while the second question usually came with a good laugh or eye
roll, the first one deserves a deeper answer. Because the story of
BYBE starts not with a lightbulb moment, but with a series of
insights that fit together like puzzle pieces.

How I Came Up With the Idea for BYBE

Before BYBE, I worked for a beer and wine distributor, calling on
Kroger. It was a role that gave me a front-row seat to the
complexities of the alcohol industry--particularly the maze of
regulations that governed how products were marketed and sold.

One day, a regulatory issue caught me by surprise. Why couldn't
retailers offer their own discounts on alcohol products? Why did
alcohol brands seem entirely absent from the coupon sections of
retail loyalty programs and mobile apps? My curiosity took over, and
I dove headfirst into the legal frameworks that shaped the industry.
What I found was a web of outdated rules--rules that constrained
innovation and left a glaring gap in how alcohol brands connected
with consumers in a digital-first world.

Then, I took a trip to California. What struck me immediately was how
the rules there were completely different. Discounts and promotions
that were impossible in one state were routine in another. The
realization was eye-opening: the alcohol industry wasn't just
regulated--it was fragmented, with each state operating independently.

That trip crystallized the problem I wanted to solve. It wasn't just
about navigating regulations--it was about creating a scalable
solution in an industry that was anything but scalable by design.
BYBE's foundation was taking shape: I wanted to build a platform that
bridged the regulatory divide while empowering brands and retailers
to collaborate within the confines of the law, no matter the state.

Validating the Idea: Navigating the Fragmented Industry

The insight was clear: there was an opportunity to build something
meaningful at the intersection of technology, marketing, and
regulation in the alcohol industry. But an idea is just that--an
idea--until you create a solution that provides value.

The first challenge was navigating the fragmented legal landscape.
What worked in California might be illegal in Texas. What brands were
allowed to do with retailers in one state could be entirely
off-limits in another. I knew that to create something scalable, we'd
need to understand and respect the nuances of each state's laws while
finding common ground for brands and retailers to collaborate.

I started by speaking to the large alcohol brands I worked with
regularly. I asked them how they allocated their marketing budgets
and what their thought processes were when choosing promotion
opportunities. Most of them were eager to invest, but there was one
major caveat: they wanted to see their content featured in retail
apps. However, retail apps were in a bind--they didn't want to partner
with just any technology provider; they wanted the best content to
drive engagement.

This was where my experience working with Kroger paid off. I knew
that alcohol brands were often limited in how they could spend their
money, but I also knew they were willing to support
retailers--especially ones that would feature or display their
products in physical retail stores.

At this point, I was staring right at the Cold Start Problem that
Andrew Chen talks about in his book. How do you get this flywheel
spinning when both sides of the marketplace are waiting for the other
to make the first move?

I realized that the first part of the flywheel would be securing
large retail partners with the buying power to induce action from
alcohol brands. Once we had retail partners on board, we could then
leverage their scale to acquire and monetize through alcohol brands.
This would create a dynamic where alcohol brands were incentivized to
allocate their budgets, knowing their content would be featured
prominently in retail apps, resulting in more sales in-store.

I began to see how this model could break the cold start deadlock.
With the right retail partners, we could drive the flywheel forward,
building trust with both brands and retailers in a way that wouldn't
be possible if we tried to build everything from scratch.

Building a Regulatory Moat: Leveraging Constraints as a Competitive
Advantage

One of the more strategic moves I made early on was focusing on
building a regulatory moat. Coming from the alcohol space, I had a
deep understanding of the regulatory limitations that existed--and
instead of viewing those limitations as a roadblock, I saw them as a
competitive advantage.

Alcohol marketing was unique. Retailers are prohibited from managing
alcohol brands' marketing and rebate funds directly. This regulatory
constraint effectively removed one of the biggest threats to our
business: the possibility of retailers building similar solutions
in-house. In many cases, if a technology provider gains traction,
retailers often look to replicate that solution themselves. But in
the alcohol space, the laws prevented them from doing so, which gave
BYBE a distinct, protected position.

I also considered legacy coupon companies as potential competitors.
However, their focus was primarily on traditional coupons, not
cash-back rebates, which presented a larger geographical footprint
and more complex regulatory barriers. The cashback model also had
more potential for scale, especially when considering national
campaigns, where rebates could be applied seamlessly across more
states due to regulations. This made the competitive landscape much
clearer. BYBE's unique positioning allowed us to scale rebates
without running afoul of the law.

By focusing on the regulatory side of the alcohol industry and
leveraging the very constraints that seemed like obstacles, I was
able to build a competitive moat that protected BYBE from potential
in-house development by retailers. It became clear that this
regulatory moat was an essential part of our strategy, helping to
ensure we were building something with a unique market perspective.

Breaking Through the Cold Start: Techstars and Our First Corporate
Partner

As we continued refining our approach and validating our hypothesis,
luck struck. My former colleagues at Kroger, recommended us to
Techstars, which was launching an accelerator in collaboration with
Target.

When we went to interview for the program, we quickly learned that
alcohol was a priority category for Target. This was a game-changer.
Through Techstars, Target became our first corporate retailer, and by
securing them, we'd be able to unlock the flywheel we'd been working
toward. We were no longer just another startup in a crowded space--we
had a major retailer on board, and that gave us the credibility and
leverage to bring in alcohol brands. Our team dove headfirst and
quickly finished our MVP--a solution that embeds alcohol brands'
cashback offers inside retail apps.

As predicted, once we had Target on board, the alcohol brands quickly
followed. The brands were eager to allocate budgets and feature their
products in Target's app, knowing the potential for reach and
consumer engagement. It was a classic case of the cold start problem
being solved by a single, strategic partnership. The business model
was simple: give the technology to retailers for free and monetize
usage through alcohol brands.

This moment felt like we were gearing up for our rocketship to
launch. The years researching regulations, the countless
conversations with alcohol brands--it led to this. With Target as our
first corporate partner, we had the leverage to drive the flywheel
and scale BYBE to the next level.

Product Stagnation and Intellectual Honesty

This should be the part of the story where I talk about the constant
evolution of our product--how we leveraged our relationships and large
customers to build new products and unlock additional revenue
opportunities. (Sigh) Well...

I told you startups were a roller coaster. After you gain a little
initial traction, leadership and vision become the differentiators.

This is where I made my largest missteps:

  * Long-term product vision (or lack thereof)
  * Investor and employee expectation alignment
  * Initial market size and product market fit

Let's walk through the issues that prevented BYBE from reaching a
massive scale. I'll also reflect on strategies I intend to use in the
future.

Long-Term Product Vision (or Lack Thereof)

One of the first things I did when starting BYBE was read Zero to One
by Peter Thiel. He describes starting narrow and expanding over time.
I thought to myself--alcohol rebates inside retail apps--that's about
as specific as one can get. He also describes expanding vertically
and horizontally, and I imagined all the ways we could sell
incremental technology products to alcohol brands and retailers.

But I never articulated anything beyond alcohol rebates inside retail
apps. This is like pitching Amazon to early employees as just an
online book retailer. Imagine if Jeff Bezos had only hired book
lovers who spent their careers in the book industry. They probably
wouldn't have been excited about selling CDs, clothing, or
electronics. But "A to Z" was in the company's DNA from the
beginning.

Now consider the "WTF" moment in my team's head when I suggested
doing something other than alcohol rebates. We launched with Target,
onboarded a handful of additional retailers and alcohol brands were
happy with our capabilities. From an outside perspective, evolving
beyond the initial niche seems natural. But when you're laser-focused
on a specific problem after years of research, expanding into
adjacent areas doesn't feel appropriate when there's still market
share left to capture.

I failed to convey a coherent vision of using the regulatory moat as
a beachhead to do more for retailers. I failed to demonstrate
incremental services we could provide to alcohol brands once we
established ourselves as a technology partner. We pigeonholed
ourselves as the alcohol rebate guys.

The result was mixed. Our limited scope made us the best in the world
at one thing, but it also tethered us to a narrow product with
limited long-term revenue opportunities. After the initial MVP, we
added incremental features that were valuable to existing alcohol
brands and retailers, but those features didn't unlock new revenue
streams.

Moving forward, I'm more focused on defining a long-term vision. A
narrow, focused launch is only the first step toward a broader goal.
During Techstars, Brett Brohl from Bread & Butter Ventures always
asked me two questions:

 1. How are you going to take over the world?
 2. If I gave you 10x the amount of money you asked for, what would
    you do with it?

Investor and Employee Expectation Alignment

I could never answer those two questions.

If you don't have answers to them at your startup, that's fine. But
you probably shouldn't be raising money from VCs. Venture capital
comes with an expectation of rapid growth (2-3x revenue annually).
There's an unspoken (but often explicit) understanding that you are
building a massive company.

Our team, myself included, were all first-time founders. Our goal of
creating the best alcohol rebate technology never aligned with the VC
expectation of building a billion-dollar company--the market is not
big enough. After a few years, most of the product was built. Our
business was focused on sales and execution.

My inability to define a clear, long-term vision and introduce new
products left us in the small but profitable category. We built a
niche business, but after five years and a dozen retail clients,
tensions rose as liquidity expectations loomed.

Logical investor questions:

  * What's next?
  * How are you going to double revenue next year?
  * Who buys this? What alternative liquidity options exist?

Responses from the team:

  * "We are continuing to grow as we add retailers."
  * "We are growing at a pace we feel comfortable with."
  * "The product is working. We don't need to hire more people."
  * "We want to stay profitable."
  * "Why would we sell? Our customers love us."

Retailers, however, are notoriously slow technology adopters. Our
sales cycles could take years, making the pace of implementation
incompatible with VC-backed growth expectations. Even
post-acquisition, these slow cycles persisted. It's an industry-wide
problem.

My team didn't understand the unwritten expectation from VCs--that the
goal is to grow fast and build a big company. I recruited people who
wanted to work at a startup, not build a billion-dollar enterprise.
The product stagnation and misaligned expectations with employees and
investors ultimately led to our decision to sell the company. I
didn't want to abandon the team that was in the trenches with me
since day one. I also had a fiduciary responsibility to return money
back to investors. We hired a new CTO that was brilliant, but our
time was already running out.

With my next startup, I'm setting the initial expectation from day
one: we are building a big company or going down swinging. If you're
raising from VCs, ensure your vision aligns with that reality too.
Your first product launch is just the initial step. Recruit people
who want to build something massive. Investors expect home run
swings, even if they come with a higher chance of striking out.

The vision drives goals, which serve as benchmarks. Goals are broken
down into OKRs (Objectives and Key Results), creating a scorecard to
track progress. Execution on OKRs positions you to raise VC funding.
There are tons of resources on OKRs. I suggest implementation from
the inception of your startup journey.

If you don't want to build a big company, bootstrap. If you need
external funding for a small company, raise from friends, family, or
angel investors, but be transparent about your goals.

Initial Market Size and Product-Market Fit

At BYBE, we nailed the "start narrow" concept. We solved a specific
problem--alcohol promotions and regulatory hurdles--with massive
adjacent markets in retail tech, marketing tech, and digital ads. We
solved the "cold start" problem by securing retailers first, knowing
alcohol brands would follow. And they did.

But we never achieved true product-market fit due to integration
costs and timing. Each retailer integration was a unique, one-off
project due to different loyalty programs, app technologies, and POS
systems. The result was a consulting company with recurring revenue
post-integration, rather than a scalable tech company.

Retailers operate off a large backlog of different priorities,
meaning even if BYBE added $30K in retail sales in year two, few
would spend $80K on an integration when other opportunities existed.
This left integrations in internal development queues for years.

Potential solutions:

  * Create an integration team/partners to offload work from product/
    dev teams
  * Focus on a specific retail tech stack to ease integrations
  * Expand capabilities to increase the value proposition

Ultimately, we sold to Swiftly, a larger retail platform with
additional capabilities.

I used to think product-market fit was purely a CAC vs. LTV equation.
But some constraints can't be solved by adding more sales people. I
underestimated the opportunity cost of internal development teams and
the relative value of our product compared to other priorities.

Now, I more intentionally factor integration timelines in the sales
cycle. The time from first pitch to implementation adds years to the
payback period. Understanding the path and timing from sales funnel
to revenue, and the cost to implement is critical.

Final Thoughts

This was the cliff notes version of 7 years building BYBE. It was an
incredible journey filled with lessons, challenges, and personal
growth. I made mistakes, but I also learned invaluable insights that
will shape my next venture.

Did I miss anything? Happy to dive deeper into any specific subjects.
If you're a founder navigating similar challenges, I'd love to
connect and swap stories. If you're an investor, operator, or just
someone interested in startups--let's talk. drew@khaki.email

Until my next startup story, take care!

Cheers,

Drew Knight