How Brian Lee has built 4 BILLION dollar companies...

Hi, everyone.

Welcome back to capitalism dot com. I'm Ryan Daniel Moran. I host an annual event called the Capitalism Conference. And there have been a few speakers at our conference that have personally inspired me to change something about my business. One was Gary Vaynerchuk. He was the first speaker I ever booked to keynote at Capcon. That was way back in 2015, before he was as big as he is today. And another was Brian Lee. Brian Lee is a serial billion dollar entrepreneur. He was the founder of LegalZoom. He was the founder of Art of Sport. He was the founder of Shoedazzle with Kim Kardashian. He was the founder of the Honest Company with Jessica Alba. He was the first investor behind Honey, the app, which sold to PayPal for $4 billion. The dude has multiple billion dollar companies on his resume. And he said the most interesting, interesting thing to me that changed my brain. He said that he never starts any business unless he has an audience to build it around. Now, I preached that so much today, you'd think I made it up. But it actually was inspired when I heard Brian give a talk at the Capitalism Conference. And in this talk, he talked about how every time he starts a business, he partners with a celebrity or partners with an influencer. He partners with somebody who can get PR so we can get the word out really, really f. And the first thing that you think when you hear that is, yeah, well, I don't know a celebrity. I am not an influencer. I don't have spots to get on pr and neither does Brian. Brian just figured it out and made it part of his strategy. And so I wanted to share with you a conversation that I had with Brian Lee on that topic where we talk about how he builds billion dollar businesses. And guess what? He does it without having an audience and without using his own capital. It's one of the most ingenious ways I've ever heard to build a business. And the reason I want to share this with you now, even though you've heard me talk about this stuff in the past, is because we're walking our students inside the 1% through a curriculum called the Road to 1 Million. And where we're focused right now in the curriculum is on building audiences that buy. We have this section inside the mentoring community called Six figures per month in six months. It's about building audiences that are the foundation to have a seven figure business. And whether you build the business yourself or you partner with someone who already has it, if you start with an audience, you have a strategic advantage that makes getting to the million much faster. Because if you have an audience of even 5,000 people or less, then you've got a group of people that will buy product number one and get it to 25 sales a day. And it'll buy product number two and get to 25 sales a day. And if you have four products that each sell 25 sales a day, you've got 100 sales a day. And at a $30 price point, that's a million dollar business. And Brian Lee was the person who inspired the idea that you could get there much, much faster by having an audience. So I hope you enjoy this conversation with the man who inspired this idea in me, Brian Lee. And when you're ready to do this yourself and to build an audience that supports your seven figure business, then I would encourage request an invite into the 1% and you can find out more about that and request a spot@capitalism.com 1.

Would you please join me in welcoming Brian Lee?

Thank you for being here.

Thank you for having me.

So, Brian Lee.

The serial e commerce billionaire, legal zoom, the honest company. The only way I even know how to kick things off is how the heck do you do it, man?

I don't know.

Good night.

Most of it has to do with.

I have a lot of ideas like most entrepreneurs, and I'm silly enough to act on them, right? And so, you know, I'll sit there. It's a blessing and a curse, really, right. I come up with probably two or three business ideas a day, right? Like, oh my God, someone should do.

That, or can anyone relate to that?

And some of them, you know, the next morning I'll be like, oh, that's a terrible idea, right? But some of them will just kind of stick in my head and I'll just keep thinking about it and thinking about it and I want to act on it. And so that's how I started almost every business.

And sometimes people come to you with the product idea or with the business idea. As I understand it, those are some of your most profitable businesses that you've been a part of. So when Jessica Alba comes to you in 2012, I think she comes to you and says, brian, I've got an idea. First of all, why does she call Bryan Lee? And second of all, what does your brain do when you hear the idea and you're deciding whether or not you're gonna give up everything else in your life to go do that company?

The honest company was a little different than LegalZoom and Shedazzle. The honest company. Jessica actually approached me A long time, like nine or 10 years ago. I'm friends with her husband, Cash. I've known Cash for a very long time. And Jessica came to me and said that she wanted to start a non toxic lifestyle brand. And she wanted it called Love and Honor. Honor is the name of her daughter, for those of you who don't know. And she wanted to focus on baby clothing. And I said, that's a great idea, but I'm doing legalzoom in Shoedazzle right now, so I don't have the time to help you build this. And I introduced her to some other entrepreneurs who might be able to help her. And then a few years later, she came back again and wanted to talk. And that's when I actually had my first child. Right. And after having my first child, I saw how my wife started changing her buying patterns. She started shopping at Whole Foods, great Austin company. Started buying 7th generation diapers and Earth's best products and making organic purees for the kids. I was like, maybe Jessica's onto something here when it comes to this whole healthy living, well being, non toxic living. And that's when I sat down with her again and said, well, let's start it, but let's focus on baby. And she was game for that. And that's how it started.

So you were already running two major companies at that point, and I think you were the president of both.

I was CEO of Shoedazzle at the time and I had left LegalZoom. Yeah.

Okay, so how do you manage multiple major projects at the same time?

You know, it's. I like juggling. I have a little bit of add, truthfully, and so I kind of get bored just focused on one exact thing. I could probably take on two or three projects at once, and that kind of keeps me interested.

So when you and Jessica sit down and say, let's focus on baby first, what's the process for getting proof of concept? Are you raising capital or are you bootstrapping funding it yourselves? Because the reason I ask is someone has some name recognition and an idea that's not enough to make a business out of it.

Right.

So how are you encouraging the new entrepreneur to actually bring it to proof of concept?

Well, for the honest company, we did raise capital from some venture capital folks that I know and I've worked with for a long time. But that's not always the case for every entrepreneur where you could just make some phone calls and raise some capital. So. And I get that because when we, when we started LegalZoom, we probably hit up 50 venture capital firms and everybody turned us down. There's not a single VC who gave us money. But we believed in the idea enough that we just kind of. I borrowed a little bit of money from my parents and my partner borrowed some from his and we kind of bootstrapped it all the way up. And so with LegalZoom, it was purely bootstrapped. Even the capital that went into the business from VCs and other private equity firms never went into the company because the company was always profitable. With the Honest Company, it's kind of interesting. Once you have your first hit, it's a lot easier to raise capital.

Right.

And so for the Honest Company, we raised, we raised 27 million to start, to start the company.

So when it was just a few dollars.

Yeah, it's a few dollars.

So two questions there.

I guess. First is you have somebody who's, I'm guessing the venture capitalists are betting on your track record and Jessica's name.

Right.

Is that, is that accurate?

That's accurate.

And still it's a company with no sales at that point. So.

What'S interesting to the venture capitalist to be able to put $27 million into a company with no sales.

Yeah, well that's why they're venture capitalists. They take bets. But in terms of what they were seeing is I think it's really in line with what we were seeing, which was the growth of organic, the growth of non toxic.

As a sector, but then also the growth of subscription commerce, e commerce, which was still in its infancy six years ago. And so kind of the combination of both and then also hitting a very desirable kind of segment of the population which is mommies and new mommies especially.

And how do you both at LegalZoom and at the Honest Company, how do you decide how you're going to allocate the capital that you raise or the profits that are coming in?

That's a good question. So initially the reason why we had to raise so much for the Honest Company is for the product. Right. So we had to get the product and secure the product. So we had to get diapers, we had to get baby shampoos and body washes and so forth. And that takes capital. Right. And we knew that if Jessica was going to go on to the Today show and announce the Honest Company, the website would get flooded, we'd get orders and we'd have to be able to fulfill those. So it took some capital in terms of infrastructure as well. Right. Getting the fulfillment center set up and fully operational, the backend systems The WMS systems and so forth. And so it was an infrastructure, it was a product cost, but most importantly, it was the team also. Right. So when we started the Honest Company, we had probably 10 people initially to start the business.

And at LegalZoom, how big was that team when it started to, it was.

Just me and, yeah, me, my partner, my co founder, Brian Liu, and our cto, Eddie Hartman.

Your partner's name is Brian Liu?

Yeah.

I know that had to be really.

Confusing for a long time for the two. The two Brians.

So I want to ask you about team, because you had three people at LegalZoom, you had the initial 10 at the honest Company. And I have to imagine that there was some sweet sauce in that the team had or that you were looking for when you built that team. So how are you approaching those initial hires that you bring on? What are you looking for in the.

Founding team with LegalZoom? Brian Liu was my closest friend from law school.

And so we knew that we would get along. And Eddie Hartman was probably the smartest technologist I knew. And we just kind of hit it off truthfully. And it was just a real cultural fit in terms of the Honest Company, the initial folks, it really is. When we looked for people at the Honest Company, we were looking for people who believed in our mission, right. Who believed in making the world a better place based on the products that we were going to produce. So it was really kind of like minded folks. We also use. I'm not sure if you've heard of this before, the airport test. Have you heard of that? Yes, it's, you know, when you get stuck at the airport and there are flights delayed by, you know, five hours, can you sit there and would you be happy sitting next to this person during that delay? And if the answer is no, then they're probably not the right fit initially.

And so we really look for people who believed in the mission and the right cultural fit.

When you raise $27 million for the honest Company and you have a founding team of 10 people, how long did it take to reach that point where you were profitable enough to know you had something great? Because you could, you can have Jessica go do her PR circuit and be selling a lot of baby products and still have capital and people and overhead hanging over you. So at what point do you know you've got something great?

You know, with the Honest Company, we knew pretty quick. And truthfully, we ramped up the Honest Company through Jessica's PR efforts and media efforts. We were probably hitting about.

A million dollars A month in revenue by about month three. Right. So it.

Not bad. That's an okay start.

It kind of grew quick.

Yeah.

And then by month 2012, we were doing about 3 or 4 million in revenue and still cruising along. So it was fast.

What do you attribute that to?

I think it was attributed to, number one, we had Jessica, who had a great megaphone when it came to the media, and she hit it hard. Right. So every magazine interview, every TV interview, radio, she was everywhere. But then what you do is you take that and you take it down one level to the social influencers. And so we did, I think, a really, really good job of reaching out to all the mommy bloggers and all the kind of health and wellness bloggers and seeding them with product, talking to them, having them talk about us as well. So it was kind of like this groundswell coming from below, and Jessica was hitting it from the top.

So let's talk about that a little, because not everyone here is as famous as Jessica Alba. So doing the PR circuit would be difficult for almost everyone not named Jessica Alba. So that was kind of a unique advantage in the marketplace. At LegalZoom, you didn't have that. At ShoeDazzle, you had it.

But we did a little bit at LegalZoom, because my co founder, one of our coins co founders, is Robert Shapiro, the attorney. And this is. You're too young for this, ryan. But the O.J. simpson trial was a big trial in the United States.

I'm honored to think I'm too young to remember this. Thank you.

And at the time we started LegalZoom, Robert Shapiro was probably one of the most famous lawyers in America. And so when we started LegalZoom, we knew that he could get onto any, you know, media channel and talk about LegalZoom, which was the case also.

So is this a primary foundational piece of your strategy, doing a lot of PR to spread the word for a new business?

It is. It is.

In today's world, you could work with great YouTube influencers or Viners or Instagramers and have the same type of effect. But it's just something that we kind of fell into with Robert Shapiro, because when we started LegalZoom back in 99, 2000, the number one concern for the Internet was trust. People didn't trust the Internet. They didn't want to put in a credit card number into their computer. And so at LegalZoom, we weren't just asking for your credit card number. We were asking for your Social Security number. We were asking for your bank account numbers. We were asking for everything when you were setting up, like a living trust or so we knew that we had to bring instant credibility to the site. And that's when we thought, okay, let's put a face to it, because I worked at Skad and arbs, but 99% of America has never heard of Skad and Arbs, which is a great law firm.

So we contacted Robert Shapiro and got him to be the face of it. And then once he was the face of it, we started seeing that he would go onto tv and we didn't even ask him to do this, but he would go on to CNN to talk about some trial. And then he'd also mention, oh, and I started this company called legalzoom.com and he would talk about it, and then we get more orders. And that's when we realized the power of media.

And do you look for those opportunities in every company that you start? Or I guess what I'm really asking is when you're advising or talking about a company that doesn't have the same clear path into pr, how do you advise that they ramp that up?

I don't think every company needs an influencer. That's the truth. I think.

If you are going to work with an influencer or a celebrity, you want to make sure that it comes from a place of authenticity because the consumers are smart. They're not just going to buy something because someone tells them to buy something, Especially if there's a disconnect, right? But when it came to, let's say, Robert Shapiro and Law, it made perfect sense. When it came to Kim Kardashian in high heel shoes, it made a lot of sense, right? Jessica Alba being a new mom and starting a baby company made a lot of sense. And so it has to come with that type of relatability.

How do you filter out the bad ideas when you've got two or three a day versus the good ones that celebrities bring to you? And I imagine now there's more than a few celebrities or people with name recognition coming to you and saying, I have an idea too, Brian, so how are you filtering out those ideas?

You know, most of them I just. I just don't like. Truthfully, it's like most of the ideas that I come up with or that I hear, it's like, I don't really fall in love with a lot of ideas.

But every now and then I do. And so for me, it's a lot of gut. I'll be honest with you. So it's just a lot of gut. It's like, I think the one advantage, I'm not really a boastful person, because I'm not. But the one thing I am good at is just kind of understanding what the consumer likes on a mass level. I kind of understand where trends are going.

And what people will buy. And so I think the first filter is that gut like, will this work? Is the marketplace going to accept something like this?

And then the second is data. And then I'll start to running the numbers, right? So I'll look into, you know, size of industry leading brands in the category and so forth and scale, but also distribution points and so forth. So I'll start running more data on it and see whether or not the idea is feasible.

How do you feel about debt versus partners versus venture capital versus bootstrapping? It's. It sounds like you bootstrapped LegalZoom after borrowing just a few dollars within your network and then you went the more traditional raise some money for the honest company. So you've handled and seen different sides of it and how do you feel about different ways of funding businesses now?

You know, it all depends on the idea. It really does, and the team that you can recruit.

I mean, the preference is always a bootstrap, right? It's really.

You want to build a business that's going to last for a very long time and you want to do it smartly and profitably. And if you could bootstrap your way there, then that's just golden, really. Because LegalZoom has been around almost 20 years now. Not a lot of people know this, but you know, it's the overnight success that took 20 years. It's was, it was never a sexy company, right? It just, we never grew 100% a year, 200% a year or more. We always grew like 10 to 20% year over year over year over year. And then you look back after 20 years, you're like, it's a very sizable business. And so that's the ideal way to do it, truthfully. But if you have an idea that is going to take more firepower and you want to ramp it as fast as you can, then absolutely, talk to venture capital and try to raise those funds because you're going to need it in terms of marketing, in terms of building that team and going a lot faster.

Do you have any failures in your resume?

Oh, yeah, plenty.

Let's talk about one. What's your favorite failure?

My favorite failure. Okay, so when I was at LegalZoom, I fell in love with this frozen yogurt company in LA called Pinkberry, right? Does anyone like Pinkberry here? Yeah. So it was, it was the best, right? So I remember like right across the street from, from our offices, there was a little retail building, like a little strip mall, and there's a 4 lease sign there. So I called Pinkberry. I'm like, hey, I think you guys should open a Pinkberry on Hollywood and La Brea. And like, I'm sorry, we're not thinking about Hollywood. And then so I said, fine, I'm just going to open my own, right? So I opened a frozen yogurt store called Cantaloupe Frozen Yogurt. And I opened it and I thought, this is going to be great. You know, everyone's going to come and get their frozen yogurt here. It's a great location. And it was honestly one of the worst business decisions I've ever made because I realized that even though it was right across the street from me, I wasn't there managing it. We put in the manager and it was just hard, right? Like the manager, I remember going in there and the manager one day had like 20 pounds of strawberries. I'm like, why do we have 20 pounds of strawberries? He says they're on sale. I'm like, we're not going to use 20 pounds of strawberries. And like, you know, two or three days and it was like mistake after mistake after mistake being made. And it was just, it was just crazy. And that's when I realized that if you're going to start a company, any company, it's almost just as hard starting a frozen yogurt store as it is legalzoom or the honest company. And so if you're going to start something and put the energy into something and your capital and your thoughts and your focus, start something big that has big potential, right? Because you might as well. It's just as hard to open a coin Laundromat probably as it is Facebook.

Everyone can start Facebook. It's a writer downer.

Start Facebook.

Why do you say that or why do you think that's the case? Because I think most entrepreneurs have the perception that it's easier to make a million dollars than to make $100 million. Or it's easier to have an eight figure business than a nine figure business because we see we tend to think in steps. So do you disagree with that? And why do you think that it's just as the same amount of work to start something big than to start a frozen yogurt stand?

I think, I think for me, I think I always think big. I'm a journal optimist. I think as an entrepreneur, you gotta be an optimist. And so for me, even if it was starting a pizza stand and trying to get to that million dollar range that you're talking about, I would be looking way beyond that. I would be thinking, how do I turn this pizza stand into Domino's? And that takes a lot more effort. It's just a difference of how you look at whatever you're starting and how big and how much can you scale it. So that's why I'm saying it's like if you're going to start something, even if your goal is a million dollars, can it expand beyond that? At least give yourself a shot.

And what do you think entrepreneurs need to be thinking about to give themselves that shot? You think way beyond that goal. But.

Most people would say, I know how to get here, I want to go here, but I don't know what this space looks like. So.

What are you focusing on? To be able to be competent, to take something from 1 to 100 or.

Beyond, it's really team. It's who you're surrounding yourself with.

It's like when you initially start a company, at least when I do, my first hires are people that are just kind of young. I call them young athletes, right? So boys and girls or women and men who are young, they're hungry, they're smart, and they're hard working and they could do almost anything you kind of tell them to do. They're juggling a bunch of, you know, they're generalists, right? But then as you start to scale, you got to start bringing in the experience, right? You got to start bringing in people who have led teams before, people who have seen true scale and understand what it takes to build that infrastructure to scale. Does that make sense? It does. And the hard part as a CEO is understanding when that flip happens and how you're gonna start bringing in that experience without disrupting the culture and the team that you've built.

That type of expansion requires more energy and capital. And I've experienced this a little bit where you reach a certain level and it takes kind of a new infusion of capital, ideas or energy to get to this level. And then you can kind of plateau. And it takes a new type of energy capital in order to go to the next level. And that can be really scary, that new infusion, because I think we long for the security that comes from the plateau. And then we give it up to get to that next level. And that Next level. So how do you, has that been your experience and how do you manage that risk factor of building more to grow beyond that plateau?

Yeah, it's not for everyone. True. That's the truth. Right. But for me, it's always.

I'm always reaching for that next plateau. Right. And it's always building that team and putting those processes in place. And remember I talked about when you start, you're starting with a bunch of young generalists.

A lot of them aren't going to make that transition. Right. A lot of them won't. You'll see this, you'll see folks that have been with the company from the start that wake up one day and there's like a thousand people at the company now and they just, they're just not as comfortable. Right. Or that's just not where they want to be. And so they'll move, move on and go work somewhere else or this or that. So it's bringing them along and trying to keep as many of them in this process as possible. Because as you're, as you're building a business, it's, you kind of hit on this. It's, it's all about the process that and the infrastructure that you put in place versus innovation. Right. And how do you weigh the two? Because as you start building a business, you definitely need process. Because in the early days of a startup, it's helter skelter. Right. Everyone's working on everything, putting out fires every day. But as you start moving organization forward, you need those procedures in place to make sure that you're not missing anything and that the teams are aligned. But, and you've seen this before too, where a company will implement so much procedure that it just kills innovation. So I always like to say that innovation is the job of upper level management to make sure that everyone below is still innovating and they're not scared to try new ideas and to fail. Because without that you're just going to be flat.

How are you finding those upper level managers or those people that are even the generalists at the beginning that you feel really good betting on? How are you going out and recruiting them?

Well, initially with my first company was hard. It was just networking with as many people as I could, going to a lot of events at night and meeting other kind of entrepreneurs and meeting other people in the industry.

But then as you start building more businesses, it becomes a lot easier because now it's like I've worked with so many people that I could just kind of pick and pull from a lot of different places and I know who's good and who's not.

And at a certain point, when you've got upper level managers and you've got 1,000 people in a company, you can't be part of all of those, those processes.

Right.

So how do you empower those people to go find the right people? Are you letting them go from their network and pick from there as well?

Yeah, absolutely, absolutely. It's power, numbers, it's. They're pulling from different networks that I'm pulling from. And you try to bring in the best you can.

What do you think is the job of the entrepreneur? You mentioned what the job of the upper manager is. What do you think the what is? What do you consider your job and your responsibility once a company has grown?

I think my job and responsibility.

Is really making sure that the team feels empowered.

I think it's making sure that the culture stays intact. I keep talking about culture because I think it's so important. Right. Like someone told me once, I remember when I was growing up, you know, I worked at kfc. That was my first job is at Kentucky Fried Chicken, working the drive through. And I remember that my.

Is that because Colonel Sanders came to you and said, I have an idea?

No, it was the only job I could get in high school. And so I remember the manager instilled in me that, you know, customer comes first. Right? The customer comes first. And you've all heard this before, the customer comes first. And it's like as I built companies and looked back, I totally disagree with that. I love the customer, but the team comes first, right? In my book, the team comes first because if you treat the team right, if you keep your company right, that's going to end up and the results are going to be happier customers. And so for me, I focus a lot on whether or not the team is happy, whether or not they're gelling, whether or not they're executing and how we could get them even tighter knit.

So it's your job to make sure the team is happy. Do you consider it your job to lead the team or do you expect them to be self led?

I do lead the team when they need to be led.

So I do like to empower as many executives as I can. But at the same time, every now and then you're going to have to call a shot and that's when you have to kind of step up and do that.

You were excited to start the honest company because you saw how your buying patterns changed when you became a parent. So what Trends, if any, do you think are going to be coming over the next five to 10 years?

That's a great question. And so I actually.

Run my own venture fund as well called BAM Ventures.

BAM Ventures.

Bam B A M stands for Brian and Mira. Mira's my wife. So it's BAM Ventures. And it's. We get to see a lot of great entrepreneurs and a lot of great ideas and I get really excited. I think we're all living in such an amazing time, honestly, to be an entrepreneur and to see, you know, what's coming down the road. I'm super excited about self flying drones. So we invested in a company out of Germany that is pretty amazing. Like the technology that they have with carrying people around in these drones. I'm super excited about holographic technology.

I saw this company out in Japan that has a hologram box. And I'll tell you, you would not be able to tell if it's you sitting there, Ryan, or a hologram. I mean, it was pretty amazing.

Well, surprise. Yeah.

Are you hungry there? Yeah. No. So I mean, just imagine like, you know, the implications of that. Right. Of not just for business reasons and you know, video and teleconferencing, but I look at it for entertainment. I think it'd be so exciting to see Michael Jackson perform again live via hologram. And I think we're seeing Sam Kinison or Richard Pryor doing an act in Vegas. It'd be super cool. So excited about that. I'm really excited about.

Space travel, asteroid mining. I think that's coming. The technology is already there.

Right.

So it's, you know, it's a great time. It's a great time to be looking at the future.

Are we living in a simulation?

No, we are not living in a simulation.

So you weren't here yesterday. We were sitting up here with Kimbal Musk.

Yeah.

He was talking about space travel and we went down a little bit of a rabbit hole.

So I did not know about the venture fund. So this is really interesting to me. How is running a venture fund different than running your own business where you came up with the idea? And I want to ask you about capital in the venture fund as well, but let's start there. How are the two businesses different?

They're very different. It's like being a venture capitalist is more like being a coach as opposed to being part of the company.

You definitely sleep better at night because you know someone else is worried about the company full time. Right. Whereas you're just kind of worried about it sometimes.

But yeah, Being a venture capital.

It'S really cool because you get to meet these young, inspired kind of entrepreneurs. And it keeps me young, truthfully. It keeps my ideas going and so forth.

And how do you evaluate the deals that are coming to you? We had Daymond John here yesterday talking about how he looks at the person. He's much more interested in the person than the product or the idea. You're talking a lot about. Do you like the person? But you're really excited about the ideas as well. So how are you evaluating the deals that come your way?

Actually, I do get excited about ideas, but that's not what we invest in. So I completely agree with Dave and John on this.

At bam, we invest in pre seed and seed deals. So at the earliest stages of companies, the only thing we look at is team. So the thesis that. And the number one golden rule at BAM Ventures is we have to love the entrepreneur, not hate the idea. Right? Because just too many people fall in love with the idea. But the idea is a dime a dozen. Right? It's. It's all about the execution, especially at that stage.

So I don't know the VC world very well. Where does the money come from.

That you're investing into the businesses?

So for our first fund, it was just my own capital, a little bit of money from a couple friends of mine, but it was just our own. But for our second fund, we have LPs, so friends and other kind of small institutional guys who put some money in.

And is that. Are they doing that because they see your track record and your ability to build companies, and they're betting on you to be able to evaluate the next big trends. And then they're saying, here's a piece of my portfolio, and they're putting it in like an investment. Is that how that works for them?

That's correct. So they'll invest into BAM Ventures with the hopes that we'll meet and the right entrepreneurs will invest behind.

Got it. So I am curious. Your primary focus right now is the venture fund and the honest company, correct?

Actually, no. I've left the honest company. We hired a CEO for the honest company about five months ago. And so right now I'm focused on BAM Ventures.

And then also BAM Labs. And BAM Labs is a production studio for business ideas.

Tell me about that.

It's a lot of fun, actually. It's always what I like doing is kind of starting companies and getting them off the ground, is coming up with the idea, building the team that I think can execute it, and then providing capital and then for that triangle of work, I call that production. So we're going to produce probably three companies in the next five years out of BAM Labs.

I have a delicate question to ask you, Brian, and I'm asking this for selfish reasons. Once you reach a certain level.

Do you ever stop worrying about money? Or at least, like, I know, even though, like, I'm done, I still am constantly managing. Is this company have enough, Is there enough capital here? I want to start this other thing. Where will I move funds around from here? Does that ever go away or does it just get louder.

On the business side? It gets louder on the personal side.

I actually don't worry about money. I never have. And truthfully, it's like I've always known that if you work and things go well, you'll have enough. Right. And so on the personal side, there's enough. I don't start companies with the number one reason being I want to make more money. I start companies because I think it's cool. It's like, it's cool to start something that hasn't existed before, a brand that hasn't existed, something that can have a lasting impact.

And I mean, believe me, when I started LegalZoom, it was definitely about money, right? It was. Not only was it cool because no one else was doing online legal services, but it was also, I've got student loans to pay off.

Right.

So that was like one of the driving factors.

Yeah, A good way to pay off student loans is start a billion dollar e commerce company.

That's interesting. And that has been my experience that on the personal side, I know I'm. Yeah, I can do a myriad of things, but on the business side, I feel like what has happened to me is now I have just been freed up to pursue more ideas. And each idea requires time, capital, energy. And so I have to get good at saying no and reining in my own desire to start new things. I don't have three ideas a day. I might have three ideas a week. So how are you managing the desire to start new things all the time? It sounds like you've actually started to build your life around being able to support more of those ideas with Labs and with the venture firm. Is that accurate?

That is, that is. And that's how I'm doing it. And so even with VAM Ventures, if I have an idea.

And someone just happens to come and pitch VAM Ventures on the same idea, I'll look at the team. And if the team is very strong, then we have a tendency to, to back those ones.

We've talked a lot about your wins and your home runs.

But I imagine along the way, besides just the frozen yogurt, there have been some strikeouts as well. And I'm curious how you deal with setbacks and challenges and.

How you move on to the next thing and when you know it's time to walk away from something and wait for the next idea.

These are tough questions.

So in terms of walking away, I've never walked away before.

Really?

Yeah.

You've never said, I've put enough into this business. It's time to. Sorry investors. We didn't make it. That's never happened.

No, I've never. That hasn't happened. I'll just keep working on it.

Like, even with cantaloupe yogurt, even though it was a failure, we ended up selling it at a loss, but we sold it for a loss.

Is that what you mean, though?

Yeah. So for you, there's always not a plan B, but there's never a time where you just say, we're done with this. You've got an exit plan, Even if the exit plan means that you take a loss on it.

Yeah. Yeah. I think you should always have an exit plan. You never want to just show up one day and close the doors and say, peace out, everybody. I'm out of here. You can't really do that.

I don't know about all of you, but that's actually very freeing to me.

If there's always an exit, then you're never tied to a business that you're not sure is going to pan out. You're not going to make it. We are going to reserve some time for questions, so if you want to head to the mics, feel free to do so. I have a personal question for you, Brian. Both of us have suffered similar heartbreaks in the last two years. Both of us, both of our teams have made it to the World Series and lost when they were favored to win. So how are you doing? How do you move on from setback?

You had your time.

I think the Dodgers are going to have a good, great, great season next year.

Are they going to get the.

But I'm really happy. I'm really happy for Houston. Huh?

Are they going to get the. The kid out of Korea? The two.

I hope so.

The pitcher, hitter duo?

Yeah. Yeah, they're going to get him.

I think he wants to play in the al. I think he wants to dh So I don't think so. I think. I actually think he'll be here in Texas.

Cool.

Not because I want him here in Texas. All right, let's start over here.

Hi, Brian. Over here.

It's a hologram. The hologram machine isn't working right now.

Hi, I'm Lil Gentry and I've been working on a product that many products that I've come up with, but one that I'm focusing on right now. And I've been trying to figure out the strategy of launching it in.

Focusing on women or having it for men and women or having it, you know, how to scale it into stores, whether at what point to take on funding, you know, to be able to fund inventory. So anyway, the product is called Lil Pockets, and.

I'm showing it to you. It's a belt that looks like it's part of your outfit, but it has hidden pockets in it so you can carry your things and be hands free.

Free.

So I have different styles that are for men.

So, Lil, what is the question?

And so I just wanted to find out what would be your strategy if it was you launching a product similar to this? What would you do in this situation?

Is this your first company?

No.

And just for context, like, you're growing and have received a lot of PR for this. Correct.

Done some stuff with this. Yes.

Are you focused on just female today or just male?

I mean, I was going to do it like for male and female, but I was thinking about just to begin with would be just for focusing on women. And of course it is for men also. But I'm just trying to figure out what is the best target to go with.

I mean, if for my company I would focus on just the female.

Because I mean, just your words alone that it's also for men. You know, if you're going to focus on one category, you should focus on the bigger category.

And that's my take. And I would say E commerce as long as possible and really try to build up a social following and building that kind of.

That fan base, if you will.

And start building more and more buzz online about it and doing it direct to consumer via e commerce and mobile commerce. And then that'll give you a little bit more leverage once you do want to start speaking to some of these retailers. And when you go into the retailers, I wouldn't start with, you know, Target or Walmart. I would really kind of start with a little bit more specialty retailers and work my way up until you're ready for one of the mass retailers.

Brian, I have a question for you. Does that strategy change at all when you're raising capital? The way you just described that was Very linear in order, which is how I think. But does that change at all if you, if you have a team in funding at first?

No, it just compresses the time.

Just compresses the time frame to hit each step.

Yeah.

That's interesting.

Yeah. Because we did the same with the Honest Company. So we were online only, and then once we were online only, then we started hitting specialty boutiques and then from the special boutiques, we went into Costco and Target.

Got it. All right, let's go. Thank you.

Thank you.

Good morning, Brian.

Hi. Hi.

My name is Kathleen Alai. And a lot of the speakers here talk a lot about building the right team. So how do you, what do you do? How do you go about making sure that your team is high performing and gelling and when it's not doing that, what do you, what are some of the things that you do to correct course?

You know.

I'm a big believer in spending as much time as you can with the team that you're going to start with. Especially like, hopefully, like you can have some co founders that you already know and initial team members you already know. So that kind of alleviates that risk. But I'm also, and this is going to sound kind of mean, but it's not meant to be. But you want to hire fast and fire faster, right?

So fast and fire faster.

Yeah. So you hire fast and you fire fast. So for me, it's always you hire. If they don't work, you fire. And the thing is, you meet so many people that are like, oh, this person's not working out, but I'm just keeping them along. They don't want to have the hard conversation and they avoid it. You see this time and time again and sometimes you're like, well, they're good at this, although they're terrible at this. It's like if they're not perfect for you at that time.

It'S your job as CEO to make those tough decisions, but make them quick.

So you also mentioned that one of your things as a CEO is to know when your company is in startup mode and transitioning to a mature company. What are some of the indicators you look for to know that execution lapses?

Right. So when you start with.

That younger kind of hustling base, they're executing as best as they can. But if you ever see it kind of like things not getting done in the right way, then it's time to start bringing in experience.

Thank you very much over here.

Hi, my name's Jonathan and my question is with Honest Company you had a track record of success and a connection with Jessica. How did you get a face for LegalZoom? For LegalZoom, it was hard because I didn't have a network.

And so with LegalZoom, we knew that we wanted to get someone that everyone would recognize. And so I asked all my friends, like, hey, do you know Robert Shapiro? Because he was in la, right? And no one I knew knew him. And So I called 411 information. This is before Google, right? And I asked for Robert Shapiro, attorney in Century City. And I got his phone number and I had a message. I called it at 10. I called the number at 10pm at night. Do you know the story, Ryan?

No.

I called the number at 10 o' clock at night and I had my message written out. And I didn't know at that time, but he's a workaholic, right? Like, he works around the clock. So at 10 o' clock at night, he picked up the phone, he said, hi, how can I help you? I said, hi, I'm calling for Robert Shapiro. He says, this is Robert Shapiro. And I go, Robert Shapiro, the attorney? And he says, yes, how can I help you? So I go, my name is Brian Lee and I have a business idea I'd like to. To ask you. Run by you. And the first thing he said was, I'm not interested, right? And I knew he was just about to hang up on me, and I said, wait, how do you know you're not interested if you don't hear me out?

Right?

And I think he heard, like, the desperation of my voice, because he said, you've got two minutes, right? And in those two minutes, I basically told him the whole idea for Legal Zoom. And at the end of it, he said, you know, I hear 100 ideas all the time, but I actually really like this one. Right. And I like your background. And why don't you call tomorrow at a regular time and set up a lunch meeting? And that's how we started LegalZoom.

Marry that with what Jeff Hoffman talked about yesterday of just working your way into the network. That's beautiful. I want to know.

How do you compensate someone who is the face of a company? I've always feared that if you're giving them equity, I don't think a salary is really going to incentivize them. But at the same time, I don't want to give up a piece of the company because I don't know how hard they're going to work. So how do you manage bringing on a face?

You know, for me, it was always equity. So Robert Shapiro got equity, Kim got equity, and of course, Jessica has. We started the Honest Company as partners.

And so.

I'm not scared of giving up equity to people that can make the company much bigger. Right. And I understand, like, there's so many different ways to get these things structured. Like, you could work with a celebrity or influencer and say, well, here's 20% of the company, but invests over time. And, you know, you're required to do five tweets a week, you know, and five social posts a month. I've seen all of it. Right. I don't believe in any of that, truthfully.

You don't believe in any of that? You just get the business out of the way?

No, I look them right in the eye and say, are you going to work for this? Seriously? And it's like, you just. It's like, do you believe in this as much as I believe in this? Are we on the same page? Are you going to work for this? Right. And if the answer is yes, then you got a partner.

Brian, I really like you. Jeff Woods, Vice President of the One Thing. Hey, Brian.

Hi.

A lot of my conversations with my partners recently are about once you bring talent into your world, you have to coach them to their possibilities. By definition, that means that you have to be growing yourself so that they can grow in your world. What do you do to ensure that you are constantly growing so that you can raise your people up?

That's a great question, too. So I feel like I'm learning every day still, right? I learn from the people that I work with. I learn from a lot of mentors that have always been there and available to me. And so that's what it is. It's like, I think, you know, as an entrepreneur, you got to constantly seek experience and knowledge and advice, Right? And you can bring that to the workplace. But it's really surrounding yourself with great mentors. People who have been there, done that, are ultra successful, maybe from different industries as well, because sometimes you get pigeonholed into the little industry that you're in, so you want to go outside of that, of those boundaries. What do you see being the biggest challenger people face when it comes to managing their time?

You know, I think it was a lot harder for me when I was. When I was younger. I think I'm working a lot smarter now, right? So I'm working just. I'm working just as hard, just in a smarter way. So, for example, like.

Emails, right? Like, emails could bog you down all day if you Let them. And so I learned from a friend of mine who runs a very successful company that he only does emails twice a day. Once in the morning and once before he leaves the office. Right. And if anything is that important, they'll call you.

Right.

And I really took that to heart and it changed my life. It changed my life. It's now I don't feel like, look, no one is expecting you to reply within 30 seconds. You know, like, if I email someone, it's like, if they don't respond in a couple hours, it's fine. Right. And if it was an emergency, I would call them. And so just know how you're managing your time when it comes to emails. But also, here's another trick I learned. I don't carry business cards anymore, right? Because I used to carry business cards. I used to hand out business cards to everyone. I was so happy I was handing out business cards.

Just a waste. Honestly, it's a waste to carry business cards because you start, you know, getting emails from people you don't know or you're carrying these business cards in your pocket, like, who are these people? You know, if you really want to connect with someone, really connect with them and passing a business card, isn't that right? It's sitting down with them, getting their contact number and making that concerted effort to do something about it.

Thank you. Go over here.

Hi, Brian. I'm a mom of two who traveled here with two children. So I've got cute little honest diapers in my bag.

Thank you.

But I started a company called Pure Grace, and we manufacture luxurious baby textiles. And we focus on like, pure fibers and really see design. But while speaking to everybody here at the conference, I heard varying opinions on where businesses are making most of their revenue. While online retailers are great and convenient, people are saying brick and mortar is still where a big chunk of their revenue is coming from. And in terms of honest, even having their online subscription, are you seeing that trend also or.

Yeah. So, yeah. So for honest, I'll give you the breakdown. It's mostly E commerce still. So even though we sell into Target and Whole Foods and a lot of different retailers, it's still mostly E commerce. I think a good kind of way to kind of look at the percentages is about at scale. You probably want to be north of 30% E Commerce and the rest offline. And the e commerce portion grows pretty quickly every year by probably 2 to 3% right now.

So if it was today, I'd say 30% E commerce for a business like yours would Be very, very healthy.

Okay. And do you have any tips or experience in breaking into retail stores or when that sweet spot is to. To start exploring that?

I would say once your E. Commerce starts tapping out, right. And once you start seeing your cost per acquisitions become like, you know where they're heading. Right. In terms of online marketing, your cost per acquisition, if it gets to the point where, you know, the payback on that acquisition is longer than six months, then it's time to start looking for other distribution channels.

When you say E Commerce, are you putting Amazon, your own store, other retailers, all in place, or do you mean direct?

Direct, I consider Amazon retailer.

Really?

Yeah.

So the majority of your revenue still at the Honest Company comes from Direct to consumer direct on the website?

That's correct.

That's amazing.

Yeah.

All right, one more. Ask your question in 15 seconds or less. We. We get a conflicting message all weekend, I feel like, about venture capital and raising money and things like that. And on one side we hear, you know, sales should be your first source of revenue. And yet even Daymond John, you know, has that same message. You hate to give up equity, but he's in the business of buying equity. So in your case, I'm very interested to hear more about. I'm sorry, I'm over 10 seconds. I'm very interested to hear more about, you know, when you start an Honest Company, how did you decide, you know, that's so much money? I mean, how did you know you needed that much money and what did you have to give up for it? That's an interesting question. So basically, we've heard different ways of starting successful businesses. How did you know at the Honest Company that you needed $27 million in order to build?

We actually needed more than that.

You actually say what you said again.

We needed more than that.

Why do you say that?

Because it's just the.

Growth, the ramping, Right. So when you start something like the Honest Company with the intentions that we had in terms of basically putting gas onto fire, you're going to need the capital. Can we have started Honest Company with nothing? Sure, we could have. And it would have taken 20 years to get to the point we got to in two years. That's what venture capital is good for when you're looking to grow something very, very quickly.

So you knew you had something.

And because of the market size, because watching your own buying behaviors, because you had a face that you knew could do pr, right. So that was why you said, okay, we're. We have a winning window. We're in a competitive window. So let's go get money. And attack. And attack this.

Is that correct? That's correct. That is 100% correct.

Got it. And why the number that you went after, was there a projection that you made, or were you just looking at the team you needed to hire? How did you decide on that being the number?

It was based on projections, but it was also based on how much product we had to buy and how much infrastructure we had to build.

Well, Brian, what's next for you? What drives you now? And what are the next projects or the next trends that you see coming?

I mean, I'm excited about BAM Labs and launching these three companies. One's in the religious space, one's in the CPG space, one's in the E. Learning space.

And so I'm super jazzed up about that. I think. I think I'll be coming up with ideas until I die, which kind of excites me, too, because I'll just keep coming up with these ideas and having other teams and working with teams, launching them.

Great. Well, Brian, I'm inspired by you. I'm fascinated by your story and your expertise. So thanks for hanging out with us.

Thank you. Thanks for having me.

Give it up for Brian Lee, everybody.