#092: He Built a $200m Portfolio Of Brands In 10 Years From $20k

Being early is more important than being smart. Category is more important than team. I've seen founders with a fraction of my experience have way more success than me in less time because they picked the right category. First-time founders fall in love with product. Second-time founders fall in love with acquire.

You've been doing this for almost 15 years. To go through the amount of reps, the upturns and downturns, and continue to where you are, there's an element of numbness that you get to just stay consistent with it. Roman Khan is the founder of Peak 21, a $200 million portfolio of direct-to-consumer brands. From nearly going bankrupt to buying 8-figure e-commerce businesses, Roman's journey is a masterclass in patience, category selection, and knowing when to quit.

My life changed when my personal bank account had $2.5 million US, and there was a source of strength that's founded in numbers.

Do you think founders are spending enough time thinking about what the end of the story looks like before they're starting a business?

I think I fell into that mousetrap myself. You start your first DTC brand out of passion, not because you're thinking about an exit. The best, most seasoned founders often start a business with a clear path to an exit. Tenacity is our biggest strength, but it's also our biggest weakness. So if you find yourself being obsessed with other people's success and being resentful of it, it's often because you're holding yourself back with this false narrative.

Welcome back to Season 4, Episode 15 of the Turning Pro Podcast. Today we have Roman Khan, who's the founder and president of Peak21. Thanks for joining me today, Roman.

Thank you for having me, Ben.

I'm excited about this. I know you traveled across the globe, so I figured we could fit you in.

It's been a long time in the making. Yeah, it's a rainy day here in New York. Just looking out the window. But, you know, Ben and I have been trying to schedule this in at least 4 or 5 times, I feel like. So here we are again.

Yeah, I did my research. I'm ready to rip this one.

Perfect.

Maybe just start. Give a quick 2 seconds on what you're building.

Yeah, perfect. So Peak21 buys and operates direct-to-consumer brands. Usually we buy brands that have been around for 7 to 10 years. Founders is ready to tap out, founder fatigue, or, you know, they're sending off their kids to college and they just want the next phase in their lives. So on average, the businesses we've been buying so far the last 3 years would be in the size range of $20 to $30 million. So let's say $25 million of revenue. We're going upmarket now, but that's what we've been doing. And it all started with my own personal journey. I started my first D2C brand, man, I've lost track of time, probably 12 years ago or something like that.

2013?

2013, yeah. Q3, Q4, 2013. And it's called Linear. We sell jewelry online. We started with bags, but anyways, I started with $20,000 in savings. Scaled it up, got to 7 figures of EBITDA in our 3rd year of business, used those earnings to buy other small businesses, 40 to 60% stakes, and eventually just became institutional over a period of a decade and started buying larger brands under the premise that there is no home for a Shopify brand today or a DTC brand today. And it started with our personal journey because in 2021 I tried to sell one of our brands. Uh, did the roadshow with an investment banker and clearly understood that there was a gap in the market because these private equity shops did not understand, you know, customer acquisition cost, how to run a D2C brand. They were really wary of buying one because if you look at the public markets, no D2C brand has really done well. Um, it's been a straight shoot down, 90% depreciation in terms of stock price. So we just see a gap in the market where we're a qualified buyer and we don't have a time horizon for an exit. We run these things for cash flow and we specialize in brands that are doing more than 50% of sales on their.com. So that's what we do today. Actually, I'm going to do my plug right now. I feel like most founders do it at the end, but we pay out an affiliate fee of $100,000 to any founder who just makes an intro to a founder looking to make an exit and facilitates that introduction as long as we've not talked to them already. So if you're watching and you want to make an introduction, just drop me an email at roman@peak21.io. And we paid out more than $400,000 the last 3 or 4 years. So great, great part of our program. So please send some intros.

You said something that I think is interesting, which is about how there's not really like a landing spot for a lot of these Shopify brands or D2C brands. Which brings me to one of my questions, which is, do you think founders are spending enough time thinking about what the end of the story looks like before they're starting a business?

Yeah, great question. I think like there are a lot of exits for CPG and beauty, and then for everything that's not CPG and beauty, exits are far and in between, right? Like they're very sporadic. And I think the reason for that is because first of all, a lot of these brands don't have long enough of a longevity to prove to a traditional conservative buyer that they merit buying. So if you're doing something that's a hard durable good that doesn't have inherent high repeat, a private equity buyer or a non-strategic buyer would be a little bit pensive of buying that brand just because you've been around for less than 5 years. To answer your question directly, I think I fell into that mousetrap myself. You start your first DTC brand out of passion, not because you're thinking about an exit. The best, most seasoned founders often start a business with a clear path to an exit. And those are second-time founders. So I think Justin Kan at Twitch said it the best. He said like, first-time founders fall in love with product, second-time founders fall in love with distribution. Also, like, I would rephrase his quote to saying second-time founders fall in love with the acquirer. And like, think about the acquirer before building their business. And that's the pattern I see with, you know, founders who've had like 2, 3, 4 exits. Like we were having drinks with Zach yesterday or 2 days ago, I can't remember, time is lapsing, but you know, he sold companies 3 times over, but I think he has a clear idea of who he's selling the business to before he even starts it. So I think that's the characteristics of a second, third time founder. The important remark I would make here is that D2C is quite new, like it's less than 15 years old as an industry. So we're still going through the cohort of first time founders. And those are the ones that I'm talking to, not necessarily the second-time founders, because the second-time founders are launching like David, like the protein bar, and I can't afford those kind of valuations, right? So I think I'm still catering to the first-time founders who maybe picked the category for the wrong premise, don't have a clear exit because they're too small. They're producing less than $5 million per EBITDA, but maybe more than $3 million. And that's a spot where a private equity is not going to be interested. And I'll swoop in and buy them and kind of grow them to a size where probably they would potentially be interested.

I think it's so interesting because being in this ecosystem, you know, there's a lot of the shiny object syndrome. I would say the number one thing that founders lack from my perspective, and I'm right in that camp, is patience. Yeah, right. Like you're, you're sitting here talking about your journey, but I don't think people fully internalize the fact that you've been doing this for almost 15 years.

Yeah.

And like to go through the amount of reps that you went through to make it through the upturns and downturns and to withstand that and to continue to where you are, there's like an element of like numbness that you get to just like stay consistent with it.

Yeah.

I'm curious how you think about like the future of your business and if there was a point in your journey where you realize like you weren't doing this to race to an exit, like you were in this thing for like you're playing the game in decades.

Yeah. It's a great question. I think for me, the, like, I think everyone has an inherent bias from their personal experiences, right? So for us, my wife and I, Jen, we started Linear with $20,000 in savings and we got product channel fit. We were able to get to $1 million of EBITDA while taking turns working a job. We'd never worked on it both at the same time. Because Facebook was so cheap. Like we just got in early and like being early is more important than being smart, especially in e-com. Like, you know, category is more important than team. I've seen founders with a fraction of my experience have way more success than me in less time because they picked the right category, obviously. And I think what happened with us is that hubris and ego got in the way. So by— we launched our brand 2013 Q3, Q4, and then by 2017 we were making $1 million of EBITDA per year. And I think I was— it's actually on me. I was like, let's grow, grow, grow, grow, grow. And we're selling bags and watches, fucking horrendous categories, horrendous. Like lead times were 6 months, cash flow was terrible. So I took this large bet where I depleted our free cash flow completely buying a lot of inventory for a one-leg business, right? Like in China, you have a proverb where you talk about a table needs to have 4 legs to be stable. We had one leg. It was like a wobbly table. It was like Meta ads, right? And Instagram was not even a thing. Like, it was like it wasn't absorbing like 90% of inventory, right? Like this is the early days of social media. We're just ramping up customer acquisition costs. Go figure, goes up, competition increases. And suddenly we were in this downward spiral where I had to take on personal debt to get us out of the hole.

What year was this?

2018. So we were at the verge of bankruptcy. I was waking up every day, like super anxious. Like, you know, I don't know, like I think some founders can relate to it, but I was like waking up. That's where I lost all my hair. I feel like, like it's like crazy stressful waking up with like super anxiety, but like, how the hell do we meet our bills at the end of the month? We didn't have a lot of employees. Like we had like maybe 2 employees at that time. But we were just, we had this, it was like Titanic. We had ordered this mountain of inventory and the ship was just like, we were, no, we were going to crater and crash. And luckily, you know, having worked in finance and having incredible friends, shout out to Andrew and Uncle Ben, like you, like a mentor of Jen, like they lent us money. And that's the only way. And Michael, like the 3 people who lent us money. To crawl our way out of that like dead hole, right? Like, so they lent us money. I had some personal liability. I remember signing the debt agreements. I know that these people would never come after me for the money, but signing that thing was just so anxiety-driven. So my personal journey has been very much formed from my crisis in 2018, and it was very formative. And I was just like, you know, I can't control an exit, but I can control free cash flow. And that's when I completely pivoted from like growth, growth, growth at all cost to think about, okay, I have EBITDA, but more importantly, I have X amount of free cash flow and how much of that free cash flow can I take out as dividends? And my whole path since then has been formed on the basis of like wanting to produce dividends every single month, not even quarter. Like I'm obsessed about taking out money on the 30th or 31st of each month. There needs to be money hitting my account, my personal account. So a lot of what I've been building has been on the premise of that. And I'm so grateful for that near-death experience in 2018 because 2019 we were humming. Like I was renegotiating supplier contracts. I was like, you know, I'm never going to put myself in this hole again. Never, ever. And by 2020, this viral thread I had on Twitter was about how we buy $30 million worth of goods from China every year. Now we buy $50 million worth of goods globally, right? Like, given the trade war, less and less China, but we buy $50 million worth of goods every year. On an average, we have 90+ day net terms. And that came out of that crisis, that negotiation tactic, that playbook came from that crisis. And by 2020, we were rolling and we knew what to do, not what not to do, sorry. Like, so we were able to avoid another debt crisis. And that was the year when we jumped from like $50 million a year to 9 figures a year in revenue, very profitably, but more importantly, with insane amount of free cash flow. And we just decided to go big and like start buying other brands. But you know, I would never have gotten there if we didn't have 2018, to be honest.

That's fascinating. And so you're— it's just like, to make sure I'm understanding it correctly, it's fully like the personal experience that you had of basically like taking on personal loans and waking up every day not knowing how you're going to pay bills to then shift to like, no, no, I'm building a business to fucking make money.

Yeah, exactly.

Like, I'm not here. Sure, if you fill other people's pockets along the way, that's awesome. It's a byproduct of it. But like, first and foremost, like, you're here to make money.

I want to make sure, like, I think the first principle, like, so What I find with D2C founders, it's a really obscure industry, to be honest, because everyone runs at like 1%, like average runs at like no margin, like single-digit margins at best. There are, of course, there's a bell curve, right? And the bell curve is really like this. It's really like concentrated, like I'd say 80, 90% of businesses run at single-digit EBITDA margins or breakeven. Then you have the extremities, 5% bottom that are running at losses, not so much anymore because the fundraising market has gone to shit. And then there's the top 5% that runs at like 20, 25, 30% EBITDA margins, right? Like, but a majority of us run at like single-digit EBITDA margins. And I think what B2C founders kind of forget is this fiduciary responsibility you have to shareholders. Like you are supposed to create returns for your shareholders and the primary shareholder is yourself. So I think like having this like profit-first mentality, dividend-first mentality, I call it dividend-first mentality, like, okay, we are here to get dividends for our friends and families and to take care of ourselves will help you run a more efficient, better business. And to be honest, you'll grow more with that mentality, in my opinion.

Yeah, I think learning how to make money is— it seems— yeah, it seems like an obvious thing, but when you start, it's not.

It's not.

I wouldn't even say just D2C though. I just think in the world of startups. Yeah, it's not. And I think a lot of that is perpetuated by investors.

Yeah.

Who are— they see a good founder or a good idea and they're willing to throw money at it. And then you forget first principles because you're just like chasing this growth curve and you're not even thinking about when's the first day that I'm actually going to see like a meaningful amount of money that goes into your own pocket.

Yeah. I think it's also like, you know, what's important to think about with e-commerce and DTC is that I think we had this like delusional self-thought, especially in 2013, 2014. I remember when we launched, I think it was on, what's that thing called again? Product Hunt. And I remember we were describing ourselves as the Warby Parker of leather goods, right? And you were like looking up to the Warby Parker founders and photo posts and they were raising a ton of money. And thank God we didn't raise money, by the way, for Linear. That would have been a nightmare. But, you know, we look, we look towards these things and we think running at a loss or not running profitable is a way to do it. But we're in retail. Our job is to sell product, buy them for one and sell them for more than one, right? Like that's the essence of what we're doing. And D2C is just a channel and Meta is just a channel. And if you look at the greatest retail businesses, which make up like a top 20 20 companies by market cap or net worth or whatever, a large share of those are retail, right? Like you think about IKEA, Walmart, all these things. We just think fundamentally, first principles, you should be having, you know, a positive bottom line. There's no reason not to run with a positive bottom line as a DTC brand.

What would you say going off of that, what are the biggest mistakes you're seeing a lot of brand founders make today? I guess specifically ones that are maybe taking in a decent amount of money and then thinking they can just throw money at problems?

Yeah, pushing growth at all cost. That's number 1, and I would say 70% is at that, like having a delusional business plan and being like, okay, pushing growth when it's not there. Okay, customer acquisition cost is insanely high this month. Let's just turn off the taps, which leads to number 2, which is like not leaning into seasonality. Like for example, take Linear, for example, or we sell 99.99% of our sales is jewelry now. It would be counterintuitive to spend as much in March as we do in February on the back of Valentine's Day sale. It would be counterintuitive to do the same after Mother's Day sale. It would be counterintuitive to spend a ton over the summer and just spending more in the summer than in Q4, right? Like obviously the summer is not gonna be as good as Mother's Day and just acknowledging that fact and having a down month the following month after Mother's Day is completely fine. And I think a lot of founders have a tendency to just not listen to the natural seasonality of the brand. Demand is going to spike. Like if you're selling swimwear, summer is going to be big, right? Like, and non-summer is not going to be that big. And being okay with that is really key. Those are the two main fallacies I see. Number three, I would say, is just not questioning the deliverables from your service providers, so, or vendors. So number one is like on your cost of goods sold, drilling down in deep and truly understanding your cost of goods sold. I feel like most founders don't understand. So when I sit down with a founder and I'm thinking about buying a business, I encourage anyone like watching this probably to read my thread about China and how we buy, do vendor management. We can probably pin it in the description or something. But, you know, we ask for something called a BOM, like a bill of materials. And 9 out of 10, actually 19 out of 20 businesses that we do due diligence on don't have a bill of materials for their products. So a bill of materials is very simply, take our jewelry, for example. If you take any piece of jewelry, you will know the price of gold, how much gold is being used in the jewelry. What is the cost of that lab-grown diamond, what is the cost of the gemstone, what is the cost of labor, what is the cost of overhead for the factory, and what is the factory margin. So if we buy something for $100 from our jewelry factory, we make sure that our factory has enough to eat. So they're running at 8% to 20% margin depending on the factory and the volume we have with them. But it's completely transparent and we have price breaks at different procurement volumes. And as a result, as you grow as a business, the beauty is with D2C is that your gross margins should improve. Most D2C businesses we look at don't have an improvement in gross margins as revenue scales.

And do you think that's a lack of knowledge?

Uh, two reasons. One, the founder is not spending nearly enough time on the ground with the factories. Uh, they go out once every other year. I live in Hong Kong, like we have 40 people in our supply chain team. If you take on an opco level and you aggregate everyone, like of the 40 people, I would say 20 to 30 people are doing quality control or production management, 10 people, like, you know, there's only really 4 people are like brains, like really thinking through the bill of material, renegotiation, creating redundancy and doing these things. But like I even I personally spend at least 30 to 40% of my time on supply chain because it's like at the end of the day, being good at acquisition is great. Product is way more important. The only way to be great at product is talking to factory owners because they understand trends better than we do. They understand what's coming around the corner, right? Like what's new, what are customers excited about? Because they're selling to multiple customers and more importantly, they're innovating on the tech that goes into whatever product you have. So I think number one fallacy of a founder is not spending enough time with the factory. Number two is a function of not having a redundancy. So they start off the relationship being clueless, obviously, because you're new to the, to see. And then they get into this fallacy of putting all their eggs in one basket, which is great. You should have concentration until you get to like $20 million plus in run rate. But then they don't ask the tough questions because they're too shy. Culturally, they don't understand how to talk to Chinese vendors or Asian vendors because most of us are sourcing from Asia and they don't even know what a bill of materials is. So they don't spend enough time doing expert calls with someone who's ahead of them in the journey and asking a very fundamental question like, how do you negotiate with your vendor? What is a bill of materials? Like, what would you do if you're in my shoes? So I have mentors like for me, with, for example, Linear, when we were scaling up jewelry, I got someone from— I can't mention the brand name, but like they do billions a year— to be my mentor. Someone who led procurement there. And I just pay him like a ton of money per year to mentor me and guide me through this. We don't need them anymore because we've now gotten up to speed. But the last 2 years I had a mentor helping me think through procurement, right? Like, so he gave me one insight that was game-changing. For example, for jewelry, what they do at scale is that they buy future contracts for gold. So we start buying future contracts for gold a long time ago just to make sure that we have predictable gross margins. And that's paid off enormously, right? We didn't think gold prices would go like it has now, but like, we're like, okay, let's just lock it in so we can run our merchandising calendar at a certain gross margin. That was irrational. And that's been like asymmetric returns this year, right? So simple stuff like that you wouldn't know, which are really industry specific. And I would encourage anyone to just kind of get a mentor for these things.

How is your like channels or vehicles to learn evolved as your business has grown?

Yeah, surprisingly, I was never on X until 2 years ago or whenever I started my— whenever I started posting, maybe a year and a half. I don't know when it was, but, you know, whenever I started started posting on X. So today X is my biggest source of learning for marketing. Like I follow a bunch of people on X and that's where I kind of stay ahead of the game in terms of paid acquisition. But it was not the source of information 2, 3 years ago, surprisingly, even though I have a lot of friends who are on X. My biggest source of learning is talking to operators. And when I say operators, it's like the VP of production at like these other incumbent brands, that's where I learned the most. So I'll go on LinkedIn, I'll cold email them, be like, hey, I'll pay $1,000 for an hour of your time. Can you, you know, just get on and help me think through my business? This is what I'm doing in revenue. This is what I'm spending in COGS and jewelry. Can you just guide me through it? So I'll spend as much as $60,000 or $70,000 a year on like these expert calls. And then often I'll convert them into board members, right? Like, or advisors of the company. So we're really lucky. Like at Raycon, we have the former CFO of Beats as our board member, Paul. He's amazing. He's really seasoned. He's been through the ups and downs of it. So I think what we try to do is like do these expert calls, see who we can, you know, really incentivize with equity and then try to get them on the board.

What would you say for people who maybe don't have that amount of money in their business to be able to pay mentors? Like if you think about podcasts or books or coaching calls or events, like where if I were to strip your bank account down and was like, okay, you need to like stay ahead of the curve with from an education perspective, like how are you thinking about that?

Yeah, great question. I think like if you're running $10 million a year, like let's say you're starting out, I wouldn't spend a lot on expert calls because you haven't proven demand, right? So you've proven demand and you're doing $10 million a year in revenue or more. There is no excuse. You should be spending $10,000 a year on expert calls because one of these things will change your life. So I think like if you're at $10 million a year, spending $10,000 is not a crazy amount to invest in yourself and in the business. So that's my answer to that. If you're sub-$10 million, I think it's hard. Like you haven't proven out demand and like you shouldn't be spending time talking to experts. You should just trust your own instinct and gut. Until you've proven out demand. But as soon as you start seeing like flywheels going and you're, you're seeing demand being consistent, you should be investing quite a bit of your time talking to people who are experts. And the way I would start about it is like I would look at my two biggest cost centers. So usually that's paid acquisition and cost of goods sold, right? Like in that order for most businesses I look at that are starting out. So paid acquisition, obviously what I do is like whenever I acquire a new business, I'll have agencies audit my accounts and agents that work with similar brands in the past, right? So I bought a baby and kids business last June last year. I had like 5 different agencies look through the business and I gave one of them like my Google account, right? Because they just knew how to run Google for this specific niche. So that's a great way to just have your paid acquisition kind of audited by third party. And you might find a great agency partner in the process. But finding someone who's run something in the same niche but don't have a contract with the same brand anymore would be a great starting point. Number 2 is just going on Mentor Pass or Intro or any of these platforms and finding someone who's run paid acquisition in that niche. Third would be cold DMing people on LinkedIn and paying for their time. So if I'm running Raycon, it might be fruitful to talk somewhat, to talk to some of my competitors who's run paid acquisition. On cost of goods sold, exact same framework. Probably you'll have to resort to LinkedIn just because they're not on X, they're not on Mentropass, and find the person who runs supply chain for one of these incumbents. And these incumbents are so large, it's going to be fairly easy to find them and you're going to find out a lot. The second thing I would do, which is I think a little bit of a hack, is using Pangeva or Import Genius, finding the factories of the incumbents, and then talking to all of them because you can see the import records of all your competitors. So let's say I wanted to, yeah, you could just find the import records and then contact the factories.

And then what about my other question for you is when you think about getting to different rungs on the ladder as a brand in terms of size, like what are the different things you're thinking about? So you know, go back to your early days of like, what were the top priorities to get from 0 to 1 million, 1 to 10, 10 to 25, 25 to 100? I think it's like you're playing a different game every time you get to that next level. How would you kind of break down those different stages?

Yeah, I would say 0 to 25 million is what not to do. So for example, take Raycon, for example, which is our biggest success story, I would say, of my personal track record. We went from $0 to $7 million in the first 6 months. I took over Chew in 2018. We're doing like $200K a year when I took over and then we went to $7 million. Second year we jumped from $7 million to $32 million and then $32 million to $72 million or $73 million. It's on my Twitter, you can read it. But the reason for success there were twofold. Number one was I said no to everything. So we only had one earbud and we only had 4 colors and the team wanted to launch new colors. They wanted to launch new versions, upgraded models, etc. And I just kept saying no. I was saying we're going to be known for one thing and one thing only and be excellent at this one thing. So that was a reason for success at Raycon was being very deliberate on what not to do. So picking your battles and being— keeping it really simplistic and keeping the team focused. The second thing is something I learned from Paul, our board member at from Beats at Raycon is not to outsource your fate, like not to outsource your destiny, sorry, like your destiny. So we decided to completely verticalize paid acquisition and owning that end to end. So like I was in the ad manager myself. Obviously I'm good at paid, I would say, and that's where I started my background, but you know, we just really were in the weeds. And what I find with a lot of founders who start getting product-market fit is that they start outsourcing paid. I think it's okay to outsource the second leg of the business, let's say Google or whatever, that you're not good at, but you need to keep the growth engine yourself and just take on the burden of cracking that channel yourself until you hit $25 million run rate. And I think that's gonna ensure that the car doesn't derail and you can police an agency or your, if you're hiring like a CMO or a VP of growth, you know exactly what moves the needle and don't outsource that as a founder. I often get like founders reaching out to me when they have product market fit and they're like, oh, I need to hire a growth person. And I'm like, to be honest, you're doing such a great job already. You've gotten it to $25 million revenue. It's not your deputy. It's you. Hire for everything else. Get yourself out of ops, get yourself out of finance, get yourself out of product. Just focus on this one thing until we get to like that 9-figure run rate. I feel like that's where founders make the biggest mistake is that they start outsourcing product and paid until they get to that escape velocity, which I would say is 9 figures. And that's when things start getting, that's when they get into trouble. To be honest.

I'm so fascinated, like even just thinking about you before we started this podcast of like, like you walk me through a day. It's like you wake up in the morning, like how are you spending your time? Because I imagine one of the biggest challenges for you, at least at some point in your journey, was prioritization when there are quite literally a million and one things that you could be doing at all times. Like what is your mental model to figure out like what is the highest impact use of my time on this day?

Yeah, I didn't do a good job of it in the beginning and I think that's why we almost went into bankruptcy. And it's evolved over time. I think I'm much better at it now. So now I only focus on paid and supply chain. But we have a huge team. We have 350 colleagues, 150 of them are virtual assistants, hundreds of them work in my kitchen. We have something like something called Nutrition Kitchen, which is the factor of Asia. So we have a ton of employees in the front office. We have maybe 70 people. So it's a big team, right? It's a very, very big team. So it's different now. So trying to, if I could go back in time and do things again, what I would do is split my day, split my week into the 5 working days, right? So 2 days on paid, 2 days on supply chain, 1 day on the moonshots. There was one podcast I listened to, I can't remember where I heard it, but there was someone saying the 70-20-10 rule. I really liked it. 70% of your energy and time and capital goes towards ensuring that this quarter you hit, hit it out of the park. Like 70% of your energy, time, and money goes towards just knocking it out of the park this quarter.

From a growth perspective?

From a growth— from growth, whether revenue or EBITDA, whatever it is, like 70% of your time and energy goes towards that. 20% goes towards the next quarter and 10% towards the moonshots or whatever is going to give you escape velocity. And that kind of translates that into my week now. So if you look at my calendar now, not while I'm in New York because it's really focused on Raycon when I'm here and P2W on the M&A. Like that's how I spend my time when I come out here. But when I'm in Hong Kong in my office there, 9 to 11 AM is blocked out for firefighting and ad hoc stuff. 11 to like I would say 2 PM is deep work into paid acquisition. And that's very, synergistic because you're looking at the whole portfolio.

And when you say deep work, what's your ability to like really block out the noise of people bothering you or trying to like—

That's the beauty with Hong Kong. So, you know, people in the US are sleeping and, you know, I had one of my business partners, Ramon, like come out to Hong Kong and stayed at my house and he was like, this is amazing. Like no one bothers me because everyone is sleeping. On the flip side, you feel a little bit out of the loop. So But, you know, we're able— I'm able to do really deep work. And then by 3 p.m., my London office wakes up. So my London office is the bridge to the US office. I don't have to stay up late nights. So my head of growth sits in London. A bunch of people sit in London. So I'll talk to them at 3, 4 p.m. But like from, I'd say, 1 p.m. to 5 p.m., I'm doing these meetings and internal meetings, almost no external meetings. And that's how I structure my day. But I would say like the biggest value I drive is in paid and in supply chain. And supply chain is very, very ad hoc. I'll go out to my factories once a quarter, but that's like, that will cost me a week a quarter, right? Like the same way coming out here costs me a week. I'll go out to like Bangkok or to Malaysia or wherever we were producing. But that's how I structure my day. So I think if I were an early stage founder doing 0 to 10, or let's say 0 to 25. It's a wide range, but I think like that's applicable to most of the people listening to this podcast. If I could go back in time, I would section out my calendar accordingly. Like 9 to 10 AM is like email hub, like killing all the fires. 10 to 11 AM is firefighting whatever issues coming up because there are so many issues until you have a team. And then from 11 to 2 PM would be how do I get my customer acquisition costs by 10%? Or 20%, like what are the things I can do this quarter to drive it down and spend 50% more, whatever that is, right? Like whatever your north star is for that quarter. And in 9 out of 10 cases, I'm generalizing, it's gonna be producing more creatives. It's not like doing some ad ops thing. It's gonna be like, okay, how do I just produce more creatives? And so many founders, like the best founders I know that are doing 9 figures, like Sean at like Ridge or, like Jason or Mike or any of these guys will go out and shoot their own fucking UGC, right? Like there's no excuse. Like, you know, Sean is like shooting his own UGC, right? Like it's not like, you know, that's what successful founders do. So I think like your 11 to 2 PM, to be honest, is probably just going to be shooting UGC because the sunlight is good usually.

Which is just so funny to like listen to you say, but I think it's, That's like, I think the beauty in like being a business builder is being able to blend that line between, okay, you need to like level up because you're trying to build something bigger, but also you're not too big for any job. And like, how do you strike the balance between?

But 11 to 2 PM is just getting shit done. Like that's like, okay, 9 to 11 AM is like, okay, putting out the fires and making sure that the train doesn't derail. But from like 11 to 2 PM, you should be producing creatives and do nothing else. You should just be producing creatives or convincing influencers to promote your product. That's, that's it. Like, that's how I would spend my time. And anything outside of those two things is noise. Unless you're like a query-based brand where you live off search volume or something, it's not applicable. But I think like 9 out of 10 cases, you're just producing creatives or converting influencers into brand ambassadors. I think like from 2 PM to like 5 PM or 6 PM, and you shouldn't be doing midnight oil, to be honest, if you're running a brand. Like I think like people have a tendency, I mean, maybe it comes from a perspective of experience now, but you don't have to in e-com, you don't have to put in midnight oil to get amazing results. I know a bunch of founders who are doing like crazy numbers, early stage founders, without that, that are not killing themselves because they're just so structured.

So I think like, is there a moment in your life where you were doing that?

For sure, in the early days, but it's, I wasn't smart about it because I picked the wrong category. So when you pick the wrong category, you have to put in the hours, you know, and like, I think like the most relaxed, best balanced founders I have picked the right category and are able to cap their work hours. Like it's crazy. You know, like it's insane. So I think if you're working like crazy and you're not getting results, you most likely, there's nothing wrong with you. It's something, there's something wrong with your product, to be honest.

What categories are you most bullish on today?

Oh, that's a tough question. I just came from the Meta Performance Marketing Summit and you know, I'm turning 40 this year and you just meet these like mid-20-year-olds who are crushing it doing $50 million a year. I don't think I want to mention the brand names because I don't want them to get competitors and they're friends of mine, but they're in CPG, they're recurring revenue, um, and they have a special novelty. So I think like if you can take something old and bring a new spin to it, like, you know, um, you're gonna do really well.

What about from like a characteristic perspective? You know, I have a, I have a friend who sold a brand for $50 million at like 27.

Wow.

And he's like, after doing that the first time, like now when I look at the space, he's like, I want high AOV products that have element of like repurchase, right? And naturally his brother launched a cold plunge on of this.

Yeah. Yeah. I think like the problem you have as a second time founder, what I said in the beginning, right? First time founders fall in love with product, second time founders falls in love with acquire, not distribution. I think you become really cynical. That's a problem I have. I've become so cynical that I almost buy the wrong businesses now because I just want a guaranteed win with a guaranteed cash IRR. And I'm trying to break that mold now and give myself a little bit more leeway. You know, at the Meta Performance Marketing Summit, I met this like 25-year-old who broke my whole mental model. He has an AOV of like $40, doing $30 million a year, very profitable. And like, it's not a recurring revenue product, right? So there are always exceptions to the norm. And I would encourage people to think from that lens. So to answer your question, I think I would add a caveat to it. Like, let's say you're starting a new brand today. You want to start something new. You want to launch something in the DTC space. Do not spend— in the world of AI, do not spend a crazy amount of time product developing. Rather, just put up a fake website with fake products, start running acquisition and see if it works before you start anything. Like that's what we're doing now with incubation, like meaning incubating new products for our existing brands. We'll launch like fake websites, see if it converts, and then refund customers rather than go out and like spend so much time on supply chain and falling in love with the product. Let the marketing dictate it. I think that's my word of advice when it comes to picking a product. And don't be too cynical. Like, I mean, I think like having this crazy scorecard, like, okay, recurring revenue, this AOV, this yada yada yada. Might eliminate really obvious demand curves. Like a great example we were just talking about before we started recording is Lesser Evil. If you told me a healthy popcorn brand would get to $100 million revenue and exit for $750 million in enterprise value, I would laugh you out of the room, right? So I think going in and being like, okay, going back to the original proverb, of the Chinese pro guard, like the leg needs to have 4 legs to be stable. Maybe it's not Meta. Maybe you see an empty shelf space in Whole Foods or something and you see a gap in the market. Don't be so cynical where you exclude a bunch of opportunities just because you have this paid marketing muscle with Meta.

You referenced something that we've yet to talk about that I think you can't really record a podcast in 2025 without discussing, which is AI.

Yeah.

What is your prediction on how AI disrupts or just impacts the D2C world more broadly over the next 5 to 10 years?

Yeah, my overarching thesis, and it's reflected in my stock portfolio, a very concentrated stock portfolio, is that all these D2C brands are going to get material OpEx savings. Like, so overheads is going to come down and they're going to directly spend this in paid acquisition, which is being powered by AI. So if you look at Meta, the reason we're all getting better results with Meta this year is because of their AI investments, right? Like, so I was at the Meta Performance Marketing Summit. Obviously they're showing fancy numbers on the screen. You see it in the stock price, you see it in the earnings. People are spending more, but then you're on the ground talking to operators that are in their mid-20s spending a ton. And it's all powered by their AI investments. So my overarching thesis is that we're all going to save money by using AI. Creative cost is going to come down. Customer service cost is going to come down. We're going to take all of those savings and spend it more, spend more on paid. Like that's the overarching theme. So for us, if I were to transpose that into how that materializes at Peak21 is we're not hiring for customer service anymore. You know, we're using AI. I believe that 95% of our customer service tickets a year from now are going to be answered by AI. Number 2 is I think 1 to 2% of our production is with AI now for creatives. It's not far-fetched that 90% is produced by AI a year from now or 2 years from now. At one point, I think we're going to be at 90, 95% produced by AI because these mature brands have so much footage, right? The barrier from that being 90% like content, even product pages and everything, is because they can't get the details right. Like Raycon, the earbuds are too small to look good in an ear on an AI model. Same as with jewelry. Same as with for our baby clothing. Like the patterns don't come out accurately. Do I think that's gonna be solved a year from now? I think so. I think you would agree, right? So I think— that's how you're implementing AI. So I think revenue per FT is going to go up dramatically, but I don't think it's actually going to eliminate jobs in D2C because as revenue grows, OpEx might go down as a percentage of revenue, but, you know, revenues are just going to go up.

How does— how do you think that will affect like competition and just vying for people's attention more broadly when the amount of output that you can potentially put out will just be like 100-fold or more? Of what you're doing, it's like there's got to be a consumer on the other side of that piece of content that's being consumed. And I just feel like now in this world where like a brand's piece of creative is now competing with like a creator's piece of creative, which is competing with like YouTube and Netflix or whatever, it's like content as a category with just the sheer volume of that going up. Like, how do you think competition impacts that just on a sheer volume basis? And then like, what does differentiation become in a world of like— I think AI to me becomes interchangeable with commodity.

Yeah, I think what's going to like— I think it goes back to the first principles of D2C. We're in the— we are in the business of providing our consumers with value. It starts with product and supply chain. I think the best product and supply chain will win. So if you have an incredible product, you're going to win the race, right? Like a great example is like I advise this company called IM8, like they sell It's with David Beckham. I'm sure people have seen the ads. It's basically a red version of AG1. It's a better product than AG1. First of all, transparent on all the ingredients. The ingredients are better. And David Beckham is a trustworthy person and he uses it himself. He's like an authentic influencer. Like that's the vector of success in my opinion. So I think people want to buy from humans. So you want to buy from a trusted person. You see it with Roald Beauty, you see it with Kim Kardashian, you see it with all these brands. People have an affinity to their influencers and their spokespeople. So I think that's going to become more and more important. Like the Ryan Reynolds of the world are going to crush it in the world of AI. And number 2 is like the best product is going to win. So I think it goes back to my focus area. So we've had a lot of success the last 12 years. What's going to get us through the next 10 years? Like, that's a big question we're asking ourselves. Number one is we're probably going to sell off most of our smaller brands and double down on our winners. We have 3 really big winners. Those are the ones I'm going to double down on. And then we're going to move upmarket, which I saw— talked about earlier. We're going to probably go after companies that are doing $100, $200, $300 million in revenue instead of buying these small things, because now we have the balance sheet to do so. So, so that's number one. Like, you want to buy something with size and velocity. Number 2 is, I think, is I don't, you know, obviously Raycon was an influencer brand. We're probably the largest spender on YouTube influencers in the world for a physical brand. Like I think over the last 5 years, I don't wanna be quoted on this, but I think we spent $100 million on YouTube influencers, right? Like the first 3 years we definitely spent more than $50. So it's pretty crazy. So we've been in the influencer game for so long and we know it really well. And I really, I truly believe in like influencer-led brands. I haven't formed a thesis yet on how that's going to pan out. Like I'm not convinced Rhode Beauty is a good acquisition for what's the company name again? Eli or Eli? Wasn't it Elf? Elf, yes, or Elf. Yeah. Elf, like the stock pumped after it, but like I'm not sure if that's going to pan out well for them. Like, I remember Kardashians sold the brand to a public company too. It didn't work out that well. I'm not 100% sold that like building your brand solo around one persona makes sense.

So dependency risk.

Yeah, but I think in the world of AI, authenticity is going to matter a lot more and the best product is going to matter a lot more. But I'm still forming a thesis, to be honest.

What's your— what's the goal with Peak 21? Like, do you see yourself running this thing for the next 50 years?

Yeah, I think I'm going to be in consumer until I retire or die, basically. And, you know, we spit out, you know, our top 2 companies between the 2 of them spit out more than $25 million of free cash flow a year. Right. Like, and it's growing at a dramatic rate, 50% a year. So our free cash flow is growing quite dramatically. I would love to get to $100 million of EBITDA that I own. Right. Like, I have business partners in every single business. You have 5 years to get there. Exactly.

Your words.

I was like, oh yeah, exactly.

How'd you get to $1 million by 45?

I think the trade war took the wind out of me. So at the beginning, at Christmas last year, I was like, fuck yeah, let's go. Like we had an incredible last year and I was really enthusiastic. And I think the Trump-induced trade war kind of beat the shit out of me because we're diversified. But suddenly we had 5 problems with 20 factories, right? Like you had 20 factories kind of blowing up and we were— I was like, in Shenzhen 5, 6 times a month, right? I was just, because I live in Hong Kong, it's just a car ride away, but it's like, it's an exhausting thing to do. And you're in there with your partners trying to figure it out, right? So that made me, that was very different than 2018 because it was not existential where I was almost going back, where I was going bankrupt. And we had a huge balance sheet. So for us, it's like, oh, we're going to make 50% less money this year. It's not like we're going bankrupt. But that, that really kind of broke me a little bit. I was like, oh my God, this is so much stress for someone who is like turning 40 and have two young kids and have a third one on the way where I feel really privileged. I was like, is this the right priority right now? And does it matter if I get there in the next 5 years or 10 years or 15 years? It doesn't really matter, right? So I think the takeaway from that was number one, I need more concentration. I don't like, originally I was like, let me buy 10 companies with 5 million EBITDA each and be diversified. Now I'm more in the camp of like, do I buy 2, 3 winners? Like 2, 3 big ones that are doing like 20 million EBITDA each. But I think the end game is the same. Like I want to get to $100 million of free cash flow that I own. And I think there's a lot of fun with that. And I just want to build something that spits out dividends and create shareholder value.

Yeah, I want to, I want to touch on the family side of this for a second because I think it's, it's so easy to get lost in all the success of like building a massive business. But I'm always fascinated by the human element of people who are playing at this level. Like you have a wife, you have a couple of kids, you have a third one on the way. Like, talk to me about what like guardrails you put in place to make sure that you don't miss that part of their life. Because I think there's a lot of big entrepreneurs who make that big mistake. And then the second piece, yeah, the second part of my question is what it was like starting a business with your significant other.

Yeah, great question. Okay, let's do number 1 first. So simple rules that I think everyone can implement. If you have an iPhone, you can have an auto turn off and turn on of your phone actually on turn off on your phone as a setting. So I have it set to turn off at 8:30 PM. I use WhatsApp on my desktop. And usually when I get home, I'll put my phone in the home office and like not look at it and have dinner with the kids. I had a very important mentor of mine, Michael. He was incredibly influential in my life really early on before I became an entrepreneur. And he got divorced. He had two daughters that didn't like him for the longest time, spent all his time at work, insanely successful guy. Like financially insanely successful, but deeply unhappy as a result of his success. And he said like, you wear 6 hats in life or 5 hats or whatever. First, you're a father, 2, you're a husband, 3, you're a son, 4, you're a brother, 5, you're a friend, and lastly, you're an operator, business owner, entrepreneur, whatever the hell you are, right? And he said, you have to wear the hats in that order. And that was game-changing for me. So from day one, I've been obsessed about what hats I wear throughout the hours, throughout the day. So my word of advice to any founder is like, from if you're a father or a mother, from, you know, 8 a.m. to 10 a.m., you can actually hold off being on your phone. Like that moment of having breakfast or walking your kid to school, you can afford that. There's no excuse. I think the same goes for dinner. And then by the time you go to bed, you just put in the midnight oil if you have to, right? Like from that perspective. And I've seen the sad part is like half of my business leads are distressed companies. And too often do I see a bunch of fathers, founders walk away with nothing and having neglected their, neglected their family completely. And their marriage over the last 5 years. It's crazy. So if you're like 25 or something, look at this, like just have that in mind. It can quickly go to zero and don't let your other hats go to zero along the way. Working with your significant other, I think I have a lot of tips on what not to do. Don't talk about work after 6. This is a rule we kind of instituted 4 years ago and it's improved our marriage and happiness by dramatic amounts. We're just like, unless the house is on fire, which happens, like as a founder, you'll have 10, 12 crisis moments a year. I have it still where I have to get involved. Unless it's a moment of crisis, it can wait till tomorrow. So it goes back to the first principles of thinking about your growth. Like the metaphor my mentor Michael used was like, which was very valuable. It's like, Driving a car 300 miles an hour, the likelihood of crash is very high. Driving it at 80 miles an hour, much lower likelihood of crash, right? So instead of going for a doubling this year, maybe you say like 70%, but the workload decreases by, you know, 90%. Just strike that balance, especially if you're starting a business with your significant other. And if something comes up after 6 or 7, just let it slide to the day after and just wake up earlier. Like wake up at 6 AM. Like if you, any founder who comes to me is like, oh shit, like I can't have mornings off. I'm like, okay, just wake up earlier, go to bed at 9 and wake up at 5 AM. I did that for the longest time. Like when I was working on Raycon during the boom years, I was waking up at 5 AM and, you know, I would go to bed at 11 PM and I was just like to take naps during the day when I had downtime, right? Like, so just find a balance in that sense.

Do you find as time has gone on with you in this business that you've done a better job of being able to like not constantly look around at other people? Yeah, because I think what I've noticed is a lot of my first-time founder friends, the ones who are like, oh, I have to work till 11, oh, I can't do this, I can't do that. And they're like, you know, getting— not doing all the basic things we just talked about. A piece of it is always like their own perception of everything else happening around them. You're always going to find someone who has more money than you. You're going to find someone who's more successful than you. Same on the flip side, someone who's less successful. And I think being in New York City specifically, it's like the easiest place to just get overwhelmed, to feel like you're insufficient, you're not doing enough, you're not pushing hard enough. And it sounds like with you, you're like very at peace with the way you operate because you trust yourself and trust the business that you're building, that you don't get as distracted by like what you see other people doing.

Yeah, I think that comes from a source of strength because I think for me the magical number was when my personal bank account had $2.5 million US. And this is maybe like, I can't remember when it was, but like it was before I had kids. My life changed and there was a source of strength that's founded in numbers because, you know, my parents were refugees and I didn't grow up very privileged. So I think for me it was that gave me a source of confidence. But I think the reason we almost went bankrupt in 2018, I said it was hubris and ego that was rooted in envy. I've actually written a thread about envy, like on, on Twitter about how to manage envy. Envy is a human emotion and we have a tendency to brush it aside. And I think managing your envy, I don't have much of it anymore because I've like, thank God, been so successful financially that it's not an emotion that flares up anymore. And I don't think of myself as an envious person. I've always cherished other people's success, but it is hard to not play the comparison game, right? Like, I think recognizing that emotion first is the most important, most important. Number 2 is also not being stuck in some cost principle. Like if I could go back in time, I would have shut down Linear. I wouldn't have even pivoted into jewelry because we were stuck at like $10 million for the longest time, barely making ends meet. And it was a slog and it was taking up— there are three components of life. There's time, energy, and capital in that order, right? Time is finite. Energy is finite throughout the day and it diminishes as you get older. I have less energy now than when I started with Raycon. And then there is capital, which is a commodity, frankly speaking. I think if you find yourself being stuck in envy and being like, why am I not doing better than the other guys? It goes back to the first principle of having picked the wrong category, frankly speaking, often. So often you're better off just being like selling this at a loss or just like wrapping it up on Quiet Light Brokerage, selling it for inventory value and moving on. Often. But the thing that prevents you from doing that is sunk cost principle and being like, hey, I put so much time and effort into this, I'm not ready to move on. So if you find yourself being, you know, obsessed with other people's success and being resentful of it, it's often because you're holding yourself back with this false narrative. And I did that for the longest time, from 2013 to 2018. And there's a delicate balance. Like as a founder, you're just like, I'm not going to give up. Tenacity is our biggest strength, but it's also our biggest weakness. And kind of, I stopped working on Linear and the business shrunk and I focused all my effort on Raycon and the Kitchen Kitchen and all these other businesses. And that was probably the best decision I ever made. Right. So I think often, often in majority of the cases, I find that to be the case. Of people not being able to move on.

Last question for you, Roman, in the spirit of the podcast being called Turning Pro.

Turning Pro. Yeah.

Over the last 15 years, what would you say was the biggest turning pro moment in your journey?

Good question. Maybe be like 2, 2, 2, maybe 3 points. One was almost going bankrupt. 2 was like really getting product market fit with Raycon, like seeing the value of picking the right category at the right time. We launched when AirPods launched. Impeccable timing, impeccable category, impeccable timing, right? So that was from cynicism. Now with the third is like becoming a father. Like I think those are like when you're like, you really have to shuffle your time. Those are 3 points. Vectors, I would say. The most important thing I think is if you're a founder, sub $25 million in revenue per year, number 2 is the most important.

Roman, I appreciate you coming.

Thank you. Thanks for having me.

Awesome.

Glad we made that happen. Awesome.