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:
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.
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 What I found was a web of outdated rules—rules that constrained innovation and left a glaring gap in how alcohol brands connected with consumers in a digital-first world.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.
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.
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.
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.
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:
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.
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:
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:
Responses from the team:
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.
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:
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.
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