How The Capitalism Fund Will Create $100M In Brand Value

Three years ago, I did this experiment with my friend Sam. We decided, hey, we have all of these brands that come from capitalism.com. let's take some capital and let's invest into the ones that we think are going to break out. Because we see all of these great successes from the capitalism community of people who are starting businesses and then having $15 million exits, $20 million exits, $10 million exits, and we're like, okay, it's one thing to just teach this stuff and take people's money inside the 1% or have them as a podcast subscriber or subscribe on YouTube, but what if we could get in on the ground floor with these brands, help them grow faster and help them have really successful exits? So that's what we started doing in mid-2020. We've had some ups and downs and lefts and rights. And on this episode, Sam and I talk about what is working inside of the brands that are working and also what went wrong with the brands that didn't work out. So if you're at the early phases of your business, you're gonna hear some pitfalls to avoid. You're also gonna hear some strategies that are working right now for us based in the brands that are doing well. And of course, if you're listening to this and that, you're at the beginning of your journey and you're like, I wanna partner with the fund at some point. The best place for you to start is inside the 1%, which you can apply for@capitalism.com 1. We can get you on the road to 1 million. And then Sam and I can come if you've got something that we want to be a part of. All right, so in this episode, I'm going to share with you the results of the Capitalism fund up to this point and also share with you what's working and where we're going next. Enjoy. I've been meaning to send you a podcast. I was listening to the one with Rob Dyrdek on my first million. Have you heard this one?

I've heard the podcast. Not the specific one.

Okay. There's. There's an episode with Rob. Well, we had Rob on the podcast fairly recently. Yeah. And he was talking about the Dyrdek machine. And it's funny, Rob talks about how in the. In the last five years he's made 90% of his wealth, which is interesting because he's 48, which was like, nice, nice to hear. And he built all of it, building brands and basically going in the direction that we're talking about. Going next because it's taken us a while to figure out our thesis and now we kind of know what that is and he's. He's gone in the same direction that we want to go, which was really encouraging to hear. And with some of the pieces that we're adding into the fund and this overall vision and direction, it was just edifying that, like, that's. This is the right direction to go. I like it. I'll send you this episode. You'll enjoy it.

I look forward to it.

Yeah. So I thought it would be good for us to sort of give an update of what all has happened in the last couple of years with the fund. Because we started this thing, we raised the Money in. In 2020. Worst time ever to raise a fund. And it took one thing that I sometimes have to remind myself of is it took us a year to deploy capital.

Yeah.

Because we raised the fund on a deal that didn't go through.

Yeah. So the timeline was. I think we started. We started the fundraising sometime like mid March actually, is when we started the emails going out. So as like right in the throes of COVID didn't know exactly what was happening. It did work out pretty well. Like we were able to raise capital relatively easily in that timeframe, but the deployment did take some time because there was a lot of upheaval. Everything from the valuations of businesses were up in the air. What the world was going to do with E Comm and then supply chain especially was interrupted quite a bit in those years. So it took us about a year, year and a quarter to get deployed to where we're at right now.

Yeah. And it was bumpy because you had the big run up in 2021 and you had the supply chain crunches in 21 and 22. And so E commerce was just all over the place. And now, at least on our side, they've kind of settled a bit, consolidated around a few of our winners and we didn't really know what our thesis was. We thought we knew. I should say different. We had a thesis and that thesis turned out not to be the one that was most profitable for us.

Yeah, we.

We started the fund with a certain plan and a certain thesis. But the. But the ones that have been successful for us have not been right in alignment with that thesis. They've been slightly different and we can talk about that. But that was something that I didn't expect coming into this process. And it's given me a different lens through which to see the next wave of deals. That I didn't expect.

So here's what we thought was going to happen is with the fund, we assumed we would take brands that were, you know, earlier stage, take those, look for them and say, hey, where can we add infrastructure and capital to throw gas in the fire that's already there. What, what we ended up realizing is that some of the earlier stage businesses, the challenges we had is we're looking at five steps down the road trying to say, hey, here's what we bring to the table and we can do this, this, this, and this. But in reality, there's some basic building blocks that had to be put in place there. So we really dialed that back in and put the step 1, 2, 3 in place to make sure that when we got to step four, throwing gas in the fire, we were actually ready to handle that growth.

Yeah, that was, that was a hard lesson to learn. That was. That was a hard, expensive lesson to learn because it's one of those things where you assume that the entrepreneur, the founder, is going to build the business how you would. So you kind of see the business through your own filter, through your own lens. And part of me being somebody who, like, understands the ground floor and wants to jump in, I want to jump in and help the person. But if you overdo that, they want you to build their business for you, this is accurate. And then when it doesn't pan out or they don't do the work, they resent you for it. And it's like, oh, my goodness, you're the problem. How do you not see that you're the problem? But this is, this is a lesson we've had to learn of. You have to have somebody who has proof of concept and proof of mindset, proof of work, if you will, in order to be able to throw gas on the fire. And so that was. It seems so obvious in retrospect.

But in the. At the time, you know, E commerce is popping off the chain, we're eager to deploy some capital. And it's like it was an. It was a lesson that long term will pay a lot of dividends.

Yeah. Well, I will say the thesis and the theory we followed was to look for three things in every brand we invest in, and it's to have an entrepreneur that can run the business, to have a brand that relates well to consumers, and to have a brand that has good products. So if you have all three of those things, you're going to have a very successful brand. If you have one of those things, you can get away with it for a While. And so every brand we invested in usually scored high in one of those areas.

Yeah, that's true.

But finding a way to dial it in and say, hey, you've got to have a certain level on each of those areas. You have to have the entrepreneur to a certain state of mind. You have to have the brand's relationship to the consumer to a certain state. You have to actually have a product that's good enough that you have sticky consumers on it. Those kind of things getting really clear on that. And you can see like the brands that stuck and went the distance that are with us now, you know, those six or seven brands are doing phenomenally well and they have really high scores on each of those three areas.

And some of them took two years, some of them looking back, maybe we got into early, but we've stuck it out with them and they're starting to break out now. Oh yeah.

And I mean, I'm just honestly a big shout out to the people like the community that came and participated in this fund across the board. Everything from those that have helped on the service side, those that have brought capital, the investors have been incredibly involved as well as, you know, both capital supportive and just investment of time and resources. Like, it's such a sharing community. And then within the fund, the brands themselves, we've. We've found some very, very incredible brand operators and the community that is there, it's a very tight knit, six or seven people that are just crushing it together. And it's kind of cool to watch them grow and develop as people, but also as brands. Yeah, Seeing that development over the last couple of years has been one of the most rewarding and fun things I think I've ever done.

So let's. This is what I want to do next. I want to do a quick update of some of the brands that are doing well and an update on like the financial side of it, like those projections. And then I'm going to go into what we want to do next because we have a lot of new opportunities that we didn't foresee coming into this and we're sort of like swimming in that, like figuring out those next moves and like, we have a pretty good idea, but there's still a lot up in the air and some relationships need to be solidified. So I just want to share that.

I love it. Yeah.

So we've really had four, three or four brands that have produced the lion's share of the returns and we raised 1.6 in 2020. Are we allowed to estimate what that's worth now legally, can we do that?

We can ballpark it. Okay. I mean, when we invested the money, we invested at a 1 times revenue for the brands that we're invested in. So we always did a one times revenue multiple. So that means that they're selling $1 million a year product. We're invested in a million dollar valuation. If we follow that same metric now, we're probably about two and a half, 3x on the money.

Okay. So we've about 3x. But the kind of. The other side of that is a lot of what we deployed as debt. Correct. So like we didn't, we didn't invest all of that in equity or actually owed like half that money back or so. So the. You once ran the numbers and I feel dumb when we talk numbers sometimes, but on an ROIC basis of the actual equity that we invested, it's been, it's been a decent return for a first fund.

It is, we have, honestly, it's, it's funny because I think we tend to focus. You tend to focus. It's just like the 8020 rule, but you put 80% of your focus on the 20% of things that aren't going well as opposed to the 20% that are going well.

That's right.

Are without a doubt, absolutely crushing.

Yeah. So said differently, it's really the 20% of deals that have gone really well that have produced a 3x return on the money. You and I see the internal problems, of course, or the person who's not getting it, or I want every brand to win. Yeah, of course. And, and the truth is like 20 to 25% of the ones that we backed are gonna win. And, and it's like to your point, I want to go back and say if we knew what we know now, it would be a 10x return. But it was like, but, but I have to remember, like, it was our first fund, our first thesis, and a 3x return so far, less than three years in. Not bad.

And I think some of the, some of the momentum, it's kind of funny. It's like a hockey stick. And so some of that momentum starts picking up where it feels, it feels so slow. A year in, two years in. And then like here in the last probably six months, I think we've started to see some of these things, some of the seeds that were planted, starting to take momentum.

Totally.

So that like that liftoff has been really exciting and really fun and it's a great time to be able to like share that kind of energy because this Is this has been a lot of hard work for everybody on all fronts. But, I mean, the brand owners have stood up and we've stood up. It's been really good.

So let's go into some details about that because, like, it is exciting to think about. You're right. The momentum was really kind of flatlined for like, 12 to 18 months, and then it started to pick up, and we're like, okay, we have some winners in here. And now we're starting to see some really break out. And so the. The. The return for our investors and for ourselves hopefully will go up with that momentum. And the one that I'm thinking about right now is Sinless Snacks. And of course, it's sitting behind you over there. But the thing that has really broken out there is that was a brand that we, Nick the founder, decided to do a complete redo.

Yeah.

So we invested at the valuation of where he was, and then we're like, actually, we need to do the whole thing over again.

Started out as Keto Brownie. Was that we want to shift away from the Keto mindset.

Yep. And we scrapped the entire product line, the entire brand, and started over.

Yes.

So if you think about it, that launched the new branding and the new product probably launched 12 months ago. Or take. I don't think it's been 18 months. And that first skew went like, on a good day, is doing 60 units a day. Right. And then the. The new formulation of this product is just a category creator. I'm so excited for it. But it took 18 months of, like, proving the market, getting repeat customers, making sure we don't run out of money.

And, like, even maintaining the excitement of Nick carrying over. He has got four years at Keto Brownie. Now he's starting all over again. Of course, that's gonna feel demoralizing. So taking 18 months to really build up that momentum. And now we're starting to hit pay dirt on this in a food space. And food brands have really strong valuations. We're just starting to see a liftoff on this brand. We've been excited about it for years, but we're just starting to see liftoff on this thing.

Yeah, it's been really cool to watch that growth as well too, because it's one of those ones where we talk about the three things every brand needs, which is product, brand to consumer, relationship, and entrepreneur. And so with that, the brand to consumer relationship has always been great. It's a small list, like a relatively small list, but it's been very productive revenue Wise and that's carried over into the new like when they rebranded from Keto Brownie to Sinless. But the entrepreneur side, like Nick is really, in the last six months has really stepped up.

He really.

And it's kind of fun to watch.

You can tell he's putting in like personal development.

It changes the game from the top down when the entrepreneur is plugged in that way. And so like I think you went through that timeframe where when he is stepping through the rebrand, there's a lot, there's a lot of crap going on. And so getting to like go through the rebrand, see that everything carries through and then starting to see some of the success of those product launches, like all the seeds that were planted to really relate your brand well to the consumer, all those seeds are starting to pay off as these new launches become easier and easier and, and then the relationships that, that brings like we've actually like up the relationship game a lot. And then you know, some of the pressure, the things that you don't see pay off today are things like lining up your supply chain, going and improving your product, developing those things. All of those things are long term benefits. But he's starting to see the benefit of that because now our cogs are lower.

Right?

We're able to spend more on marketing.

We've recently boost the cog of the main SKU by like 30%.

Yeah, it was, there was a whole, a whole long story for how, how this took place. And it was, it was a very, it was a very fun little detective game that we played with what our current supplier was doing. And some things, there was actually just some, some places that were giving inaccurate lead times and numbers for whatever reason they had on their side. But we got to the end of it. And by doing all the diligence on that, really dig into the supply chain, we were able to cut cogs down on this main skew like 30, 35.

And reduce lead time 16.

Oh yeah. Lead time was cut down like it was cut down like 60%. Like significantly lower lead time and lower.

People realize how big of a difference.

That makes because go Google Cash conversion cycles and we'll, we'll come back at.

Some point in time, but just Google Cash conversion cycle.

No, go ahead, go ahead. Yes.

Well, I mean we, we would sell out and then just be sitting and sell out and be sitting and it was really hard to make projections and we would lose momentum over and over again. And so we've sold, solved that issue and so now you can have consistent growth and you can launch additional SKUs. And now he has three great products, two that are performing regularly or performing well. One that we're like, this is the best product. Why are people not picking it up? But sometimes the marketplace just has a different opinion.

And this is what I think has changed for us in the fund over this time is at first, all these things, none of this is new information. This is not rocket science. Everything we're talking about doing here, we've all known to do. But I think one thing we've done a lot better here in the last year is we have really systematized this down where the brands that we work with kind of follow the same general processes. Because, for example, we know a brand needs to be able to have inventory in stock to be able to. This is, we're not breaking, breaking new ground here. But there's a few ways to solve that. And so typically what a brand looks at this, they say, well, I need more inventory. How do I fix this problem? And they either get stuck or they go find inventory financing or whatever. But when you work your way and say, well, our goal is to reduce the cash conversion cycle, when do we send money out to, when do we get money back in? Well, there's two ways to do that. One way is to get more debt so you have a lot more cushion in that timeframe. Another way is to work with your manufacturers and try to bring that side of the cash conversion cycle closer to when cash comes back in the door. So like all these little moves, not any one thing is the right move for every business, because each business is bespoke. But being able to go in and say, hey, here's the process we follow to give the brands a greater likelihood of success. And then we multiply that likely success with capital, that's really been the sweet spot. And that's what I think has kind of shifted for us. As opposed to it being a scattered, what do you need to a, hey, here's the process that brands follow to have a really, really high likelihood for success. And it's been kind of cool watching that.

And that's the behind the scenes thing that you don't see is like, oh, we need to increase the cash conversion cycle. And.

That doesn't sound cool.

On a podcast, I could probably make it sound cool. Four hours. Four hours, a couple spreadsheets, I've got you there.

I'm just kidding. But it's the absolute difference maker for a brand like Sinless Snacks.

Oh, without a doubt. Our lead time was 127 days. I kept telling Nick to use a joke of. It's like that movie the 127 Hours. The guy falls with a rock and pins his arm. Someone's going to Google this later, you know what I mean? But he's pinned for 127hours, has to cut off his own arm. It's a whole thing. It was equally as painful to know that our product was selling 50 units a day and we couldn't run ads to it because we were set to run out of stock because of how long this lead time was. And so the good thing is that pain point, though, did cause the steps and working through saying, hey, how can we improve this cycle? Do we need to change the product? Doing the. Change the manufacturer? Do we need to. And we did a variety of those things and actually came up with a way better product for a way better price.

Yeah. So that's been. That's it. We've. We have a decent amount of capital deployed into sinless snacks because we believe in it. So it's. It's been exciting to see that grow. There were times. This is risky to admit, but there were times that we would look at each other like, if this brand fails, it looks really bad. Yeah. Like, because we, we took. We bit off a lot on that brand. And I think now we're. The brand is at least, like, sustainable.

Oh, yeah.

And now we're releasing products that you and I. I mean, if the worst thing happened, we would take the boxes and distribute them to our investors. And I would be like, we're good. These are fantastic. And it makes it much easier to refer partners or influencers when you have that amount of conviction. But again, it took years to get to this point. You sent me a text message this weekend, two days ago, where you said, does anybody know this guy? And I said, yeah, I've been dming with him for the last four months because he read my book and I've just been building. He has a great following. He lives here in Austin. Great.

Fell in right in the target space.

Exactly. And so we're going to set up a meeting and we're going to see if we can bring in a couple of influencers that would be interested in a brand like this. And that's a total game changer when you. But only when you have supply. Right. You have capital, you have a great fricking product, which we finally have, which means that this brand could be in position, just light on fire and be worth millions and millions of dollars. I want to just briefly tip Our cap to this idea of doing roll ups in the space because this is something that was introduced to me back before we had the fund, but I never really saw how it could play into what we're doing now. And now you've been talking about it and I'm starting to get it and I'm starting to communicate it to other brands and it's starting to get exciting. And it's this idea of if you have three keto brands, I shouldn't say keto, low sugar, high protein brands. And in the portfolio right now we have sinless, we have possibly ancient strength. What else? And would you put anything else in there? In the roll up?

There are about five other ones that we're in talks with that I don't.

Know.

The brand that we're excited about. Papers aren't signed yet. Right. Okay. So if you just take those three brands for example, and you were to put them into a high protein roll up now if you mature those over three to five years, instead of selling one brand with $1 million EBITDA and getting a 4x return, you can combine the three brands and those three brands have a collective EBITDA of $5 million which is going to take you from a 4x valuation to like a 6 or 7 or an 8x valuation. And so everybody wins. And what we're able to do here is bring in, we're minority partners on some of these for now, but we might become majority owners or we might just be in a position to create a holding company that brings all these pieces together so that you have a roll up. And I'm still learning the structure of how all of that works. But you've taught me a lot about this. So would you explain it in 30 to 60 seconds?

I can. And this is, this is the thesis behind this was how do you stack the deck in favor of entrepreneurs having the greatest one possible to enjoy the journey as much as you can and have the best possible destination we can get to. So here's what this looks like when you're rolling these businesses together. So having four or five like kind brands, one of the things that we did really well of systematizing, I mentioned that earlier, that was a lesson that we had to learn to make sure that all brands kind of followed a similar system by nature. What that does when you organize and systematize your operating processes and teams and those sort of things, everything from operating docs to the similar accounting to the same operating teams, these brands that we work with. So now when we go invest In a minority we have a model to plug them into and they may even use some shared resources. So four brands could share the same supply chain and logistics manager, influencers or influencers, you can get a level players for maybe smaller million dollar type brands. So that journey from going from 1 to 10, which is really I think the most fun, the best part of the apple and is one of the things that we do the best is going from that one to 10, that journey is going to be way easier because we have higher a level players to work with during that journey that we can share resources across complementary brands by making the processes systematized where each brand has the same kind of operating documents as the same accounting and all those things when we do go to potentially roll them up, nobody's required to roll up but we do go to potentially roll up. It's an absolute no brainer value add for the brand to say hey, when we bundle together, an aggregator or a purchaser down the road is going to say this is amazing. They're already on the same systems. We can bundle this together and put all those audiences they serve. Like there may be some overlap in customer avatar and some differentiation in the product lineup but we can bundle these together very easily and you know, have a roll up that works right off the bat. And so that the goal is the journey is easier as well as when you get to that roll up we might get a, we might double the value of the exit.

Right.

By having like kind brands with similar operating that we.

Yeah. So I mean the theoretically if we own 40% of a brand but we as part of a roll up are able to double the valuation at exit without a doubt then we actually were paid for. Like the entrepreneur walked away with more money than if they had never worked with us. Plus they got there faster with less stress with some mentorship and their valuation was higher. And so it was, it was cool to have that realization. Let's go through a couple of the other brands that are doing really well. Talk about optimal Carnivore. So this was a supplement brand started by Rich Moriarty and when we invested with him he was doing like 25k a month. It was pretty early. And the reason why like this was one where you really fought for it, right? I thought it was too early. I thought that he didn't have a clear vision but you were like no, I really, I really believe in this. And so, so we, we took a shot on him and he's, he's done really well. So there was again that long Curve before he started to break out but now he's doing consistent 100k months. So he's essentially forexed since we invested and.

We bought a decent chunk of the business in the early phases. And so he's now got a system now where he can roll out products faster. He's finally building an email to sign.

Up a little bit.

Yeah, his supply chain's a lot cleaner. I beat him up pretty hard on a couple of our calls for not building an email list and now he's building an email. Yeah, and it's. He's basically followed the four products times 25 sales a day process to a T. But he has higher price points and so he'll probably do 2 million this year or the next 12 months. Yeah, yeah, maybe more because he's just starting to have some of the products start to hit and, and get reordered. So that has, that's been another one that has really started to perform.

Yeah, no, it's been a great one. I will say you mentioned it was kind of funny because we did have a little bit of a back and forth on investing his deal in the first place.

Yeah.

And the primary, there was the primary motivator for me is when I look for brands to invest in is the most important factor. Take note of this all listeners is that if you live in really cool places, it ups the equity of us investing in you. So. So Rich. Rich is originally from Ireland and lives in Bali now. So I figured at some point in time. We haven't done this yet but when he crosses that five million dollar mark, we are going to have corporate meetings.

At one of his fine sold.

But additionally it was one of those ones where you know it's. And I think that this is one of the areas where we compliment each other well is like sometimes you, you get that entrepreneur and you just say hey, they have the right. Whatever it is, call it the it factor or something when you say like you know they have that piece behind it. I always felt that really strongly with him and so he, he's jumped out and he's done really, really well on his side. Crossed his first six figure month in the last couple months here. Um, and just, just really done everything, done everything right to get there. And a lot of the things, this is funny when we talk about the hockey stick. A lot of the things he did were these behind the scenes pieces that needed to be done so you could scale. Yeah. So cleaning up supply chain when you're, when you're buying a couple tons of calf Brains at a time. It's a sector, it's. It's a little bit of a logistical challenge because there's certainly, there's apparently a harvesting time. There's this, there's this whole thing that goes into play.

Sells organ meat supplements. If you haven't put that together for anyone who's listening for the, for the carnivore space.

Yeah. But that being said, like, the supply chain was always a bit of an issue, and so getting that cleaned up put them in the position to be able to scale now.

Interesting that that's how you see it, because I saw the tipping point being a little bit different, and it's probably both of these things. I saw the tipping point being he finally started doing marketing processes that could compound because he was really early in the process of, of building the brand and he was sponsoring a lot of podcasts and it was working. It was, it was doing well.

Yeah.

But he was sort of banking on the product being good enough to get reorder rates and it, again, it was working. Yeah. But then if he would ever run out of stock, it would be like dead right. And he'd have to start all over again. And so from a marketing perspective. Yeah, I was looking at it. As soon as he started turning his podcast ads into sending them to a lead capture page, he can now communicate with his customers. That's when he had more profitable launches. He could get people on reorder rates on a, on a quicker time frame. And if he were ever to run out of stock, he could do a restock promo and the buyers will come back. So I was always looking at it from a marketing perspective. You were looking at it from a supply chain perspective. And the truth is you need both.

You need to have both of those. It's exactly right. Because that was, the challenge was without the marketing shift of having a little bit of control over that audience, it was very unpredictable. And so with a. A difficult to predict supply chain, a difficult to predict customer flow, you ended up with a lot of challenges in play there. So getting those two things a little bit more predictable. All we're doing is we're taking it for the range of maybe into the range of predictable.

Yeah.

And then now it's, now it's the question of saying, okay, we've gotten this way more predictable. Now it's, what's the next product to launch? How do we grow this? And how do we go to product five, six? And you know, the roadmap is really built there. But it is funny how those two Things go together is the lack of predictability on the supply chain was leading to the challenges that were arose from a, you know, you run a podcast, you don't know if you're gonna get five sales or 500.

Right.

And that's, that's a little challenging when your lead time is six months. Right.

So we fixed both of those and now we have six figure months and.

He'S, he's growing and a really clear path to, to doubling for I think the next couple of years.

Oh yeah, I mean, I mean I'd be really surprised if that brand wasn't in the.

Yeah.

You know, 3 to 4 million dollar range in 18 months, which would be a full 10x of what? Of when we like it. When he hits two and a half million dollars, that would be a full 10x over four or five years or so. Which is, you know, that's, that's a, that's a home run. That's, that's exactly where we want to be. Now let's go on to, let's talk about Integral. So this has been, this has been a really fun one. Yeah. Because we invested in this one when it was doing 50,000amonth. And I think this is where we really started to prove our thesis because our deal that we did on this brand was more option heavy and we had had several brands not work out and we also had several offers that we felt really good about. Like there were four offers, four offers and we felt very strongly about each one of these and they fell through. Like we got to the closing table and it fell through and one of them just ghosted us just like I was. I probably sent a dozen follow up messages be like, was it something we said? Was like I just give me feedback at this point. Like we were at the closing table and you just disappeared. And we kind of went back and we had to rethink our thesis at this point. Like why are we losing the deals that we feel excited about? Why are some of the brands we're investing in not working out? And so we decided to just start testing relationships a little bit like lower barrier to entry. And so we, we came in with more debt capital rather than equity capital. We came in with some, a small amount of advisor shares to incentivize us to run these processes. But it was more option heavy, meaning we're not going to deploy any capital or a significant amount of capital until we all agree that this relationship is working. And this worked really well for this brand because everyone had sort of an easy way to test the relationship, the brand got capital in the form of debt. Very quickly we were able to come in and advise and make relationships and it wasn't as stressful like we got to make this work. And this is where our, our thesis started to shift because Jake has had so much success. He's gone from 50,000amonth to some months doing 4 or 500,000 depending on the season. And so he's not made a full 10x, but it's pretty close. And this next month looks like we might actually have a consistent 10x or so. Like we're getting there.

Yeah, that's really cool. No, it's been a really good one. And I mean he's again, tip your hat to the entrepreneur who's done really like, who's just put in the work. And so he was one like you kind of saw that early on and was one of those ones where I will say the deal structure that I think we learned is we're trying to make again stacking the deck in favor of making it easy on the entrepreneur to have the path to 10x. And so by making that barrier to entry lower, we can just kind of get in and roll up and say, hey, let's get our sleeves dirty together. Let's roll up our sleeves and get our hands dirty together. And that model of deal worked really, really well. So we jumped in, took a small amount of advisory shares, said, hey, what is the, what is the go button you need pressed? Is it influencers? Is it product? Is it this? And at the time they had all the machine running well, they just needed, you know, capital to grow. And so it's a great, like what do you need? Let's make sure that you crush Q4. What do you need to order? Let's order, you know, 30% more because we believe this brand will be able to sell through that because it's a shelf stable product. It's not have to worry about expiration dates or anything. So we, we ordered in, we crushed Q4 that gave the levers to start the next year to go in and do all these other little pieces and things. So having that easy, low barrier to entry was nice to just get in there, roll up our sleeves, get our hands dirty and start, you know, growing that brand together. And yeah, his story is awesome. There's a couple kind of highlights that have happened here even the last couple months we might want to touch on. But yeah, go for it. I think he started on, you know, whenever we started this a year and a half, two years ago, started this at like, you know, about the, you know, $50,000 a month was, was a great month. That was a good month. And, and then we have transitioned that over to now we are averaging a couple hundred thousand dollars a month. Q4 we get a large, a large boost there as well. He just in the last.

Last, what was it, a couple weeks even it's been in the last couple weeks talking about the Influencer Influencer campaign that worked out. So he had, you know, gone through here we have these videos that are going through from Amazon creator program and then someone you know, he reached out to a creator and said your video looks good, can we use it for ad content. The creator decides to post about it and It's a little 2,000, 3,000 person micro influencer. And so this is just an example when you keep doing the right things over and over again every so often one of these.

Well, finish the story. This person had 2000 followers.

2000 followers posted the video. It's not a super exciting video.

No, it's not super. It's vanilla.

Very vanilla. That's a great word for it.

It's not the one that you would think would go viral.

And it went and it, I think it had like 5 or 6 million views after this was done of just, it was an explainer video of here's.

The product, here's how the product works. But the thing that made it go bananas was arguments that broke out in the comments.

Yeah. Which is fun.

Yeah.

Parents love apparently Ryan. Parents like to tell other parents how to comment. That's a surprise. Surprising.

So and so when war broke out about like should you be using this product? Is this actually going to, is this safe for your kids? And they're like, there's crash tests and all this stuff.

It's like we have an engineer who crash tested to this. We're in good shape. Yeah.

So but the war that broke out in the comments was what made it go viral, which was a light bulb moment for me. Seeing if you can cultivate some amount of controversy or take a stand or like that actually is great for ad conversion. Right. And you don't want to be controversial just to be controversial. But if you can take a stand for something and know there's going to be pushback, you're going to have people who are pushing it forward as well. And that was certainly the case. So that converted like bananas. The influencer is thrilled. We're running out of stock on this new product that was doing 10 sales a day now is doing 100 sales a day. And then some. We're rushing to get that product back.

In stock, in stock now.

And so we're starting to hit some really cool liftoff on some pieces with this product.

Oh yeah. And that, that alone, like that product going from where it was, it was selling 10 to 15 units a day, sold 600 and 400 before it ran out of stock and now it stuck. The landing though of 50 to 60 units a day that it's averaging now that we're back in stock, which is just super cool to be at that range. That's a nice, I mean that's, that alone is another half million dollars added to a business. And that's something that just, it's, it's how cool that can be over three months time from getting a product idea to having it shipped here. It was a relatively quick timeframe to be able to add a half million dollars of enterprise value to the business. That's super cool. And then from the fund standpoint, what's great about this is that influencer relationship, that's a valuable asset that can be used because that was in the mommy space. And so we have other brands that share that customer avatar in a non competitive way with Integral where it's like, oh well, how could we utilize this relationship to deepen the relationship for Integral's sake with the influencer and then give the influencer other things to put their attention behind as well. So you just really, that, that's the beauty of this whole community aspect is you're able to get this, you're able to use the same dollar or the same resource five times.

But, but what an important point to add in there is, it's not just brands that we have, it's Jake. Being really successful allows us to go out and say what type of brand would complement this well and then have a much stronger presentation to that entrepreneur and saying we want to roll you into this brand that's doing really well, which is going to be good for both of us. So by some of our brands performing well, it gives us opportunities to go out and get additional brands. And that's where like the momentum is, is starting to, to roll. So those are three of our winners. We have a whole cornucopia of, of investments that didn't pan out and a couple that we just haven't been as actively involved in. There were smaller checks, they didn't want our involvement, they were doing a raise and we felt like it felt fit into our portfolio. Skinny Pasta was one of those. They've been, they've done an incredible job, but I just met the founder a few months ago. Right. We wrote a check and it was a good investment for us, but we're not as actively involved. We don't do those very often, but that was one that kind of fit our portfolio. Candy can was another one of those. But we also have a group of businesses that are, I don't want to say they're on the bubble, but they haven't had the big breakout yet. They've held the line, they've grown modestly, they've had their ups and downs, we've supported them through those ups and downs, but they haven't had the 4x that some of the other brands have. They're still good investments in the portfolio, but we're still working with them in order to have their breakout. And some of that is cleaning up supply chain, seeing where they need capital. In one case, it's just recognizing that it's a seasonal brand and like being okay with that and not trying to make it a 15 million dollar business. Know that it's going to be a low seven figure business and can you be okay with that? And I think what that has shown me is that sometimes an entrepreneur is just, they're like, they're trying to make the business be something that it isn't rather than just building the best business that it possibly can be and freeing up all that mental energy for something else. Yeah, you know, there's a, there's a.

Couple people said, there's a couple people.

In the fund who just so badly want to win and they want to do well by us. And so they're, they're trying to step on the accelerator more than the brand or the marketplace will let them. And it has actually hurt their growth rather than being best in the world at these few things and having a nice little profitable great brand and you free up, free up your focus to go start something else or wait for the next breakthrough. And that is a lesson that I've had to learn which is like sometimes just trying to be as big as possible is not the right move.

I've actually seen, I've seen that tension in a meeting walk in. Like you have a brand owner walks in and they want to get to that next double or whatever it is. And I've actually seen that completely dispelled. You say, hey, does this, do you need this to grow and double or do you want this to be a cash profitable business going forward? And like the second you take and dispel the energy of it has to be Something.

Yeah.

And then you focus on what is it meant to be and what would you like it to be? It, in reality, didn't change a whole lot of the actions because they still do want it to grow. But as soon as that pressure is taken away, where it's like, I have to do this. Yeah. Then you look and say, well, really, what serves my brand? What lets my brand serve my customers the way I want to serve them? And it's been really cool because I've seen the entrepreneurs have made some, I think, really big mental and personal growth shifts in that time as well. And it's. It's reflected in the business. I actually think one of the brands that we're talking about that's kind of flatlined is doing two and a half, $3 million a year now is. Is set for that breakout. But it takes the entrepreneur deciding, is this something we want to do?

You might not want to.

And it. It may not be.

I mean, he might just want to. It's a great million bucks a year.

It's a great cash flow in business. It's got a. Got a, you know, $600,000, $500,000 EBITDA. This is, you know, not a bad place to spend your life.

Right. Right. Let's talk about where we want to go next.

Yeah.

But first, let's do. Let's do a quick plug. If you need capital, if you need advice, if you want to work with us, if you want to deploy capital, We're. We're kind of exploring our next moves in terms of who we partner with on the investor side. And so we don't have an open fund right now, but if you want to be on our radar, you can go over to capitalism.com fund and fill out the intake form. We are still looking for brands to invest in and to partner with and to mentor. So if you have a brand that's at least within, you know, striking distance of a million dollars and you feel like you're sitting on something and you need some help, go to capitalism.com fund, fill out the form, and open it right on our desk. We do get some very funny submissions, some that are like, I've done $35,000 in total lifetime sales over the last five years, and. And I want to raise $400,000 at a $20 million valuation.

That's adorable. Yeah. Okay. These numbers will pan out. Okay.

Hope not. Who we work with, somewhere in the range of 1 times your gross revenue is where we should be looking at your valuation.

Yeah. So we start the conversation about 1x revenue. And then we, you know, we customize the deal from there. Let's talk about some of the opportunities we're looking at and where we want to go next. Obviously, we reacquired sheer strength, which was a piece of sort of the long term vision. It was something that I didn't expect and we made a move. It's going to be a long term play because it's kind of like sinless. It's a total turnaround. We're just starting to see early dividends on that. And now we're sort of exploring new starts, owning 80 to 90% of a business and raising capital for the other 10 to 20%. So incubating new brands from the start or buying majority shares in businesses, partnering with influencers. These are opportunities that are starting to solidify and we're running some tests. What do you think would be worth sharing from what we're doing right now?

Yeah, I think there's a couple things. So one is just to kind of take a rewind to what took place over the last three years with fun number one. And then especially in the last year is I think like we both were aware that in the space, in the E Comm space, there was a lot of upheaval. There was all these aggregators who bought and thought more revenue meant more profit. There was a lot of upheaval there. There are a lot of failed businesses. And it's like as we sit here and even like the group that bought Shear, that we bought it back for pennies in the dollar. So watching all of that happen, I think honestly for me and for you as well, I think, or maybe you can comment to it, it was very sobering where I said, hey, oh yeah, we don't want to go down that path of getting, you know, this revenue vanity. Like, let's see how big we can get on this.

Yeah, yeah, that's a really good point. Because at the same time that we're raising million to invest, which is tiny, honestly, the whole tiny. Right. Like we're raising $1.5 million to deploy into minority stakes in physical product brands and taking an active mentoring role at the same time of doing that, the Rasio is raising money at a billion dollar valuation, sprinting towards a $10 billion valuation. And so it was tempting for us to be like, oh, we got to go, like, we got to go faster. What are we doing wrong? And then the whole, you know, that you pulled the drain out of the market and you saw Thracio, I don't know what their value now, but it's not $10 billion. Right. You had a lot of brands that have gone under. It was sobering for us to go, okay, we actually, first of all, we're doing some things right and like the slow, long game works for us. Where do we want to be in 10 years, not in three years?

Yeah. And this is something just funny because like watching all that happen, it was a little rewarding to look back because one of the things we started and we've really develop since then is having our fund activities be more seller driven. So it's like you think of, you know, it's a fund that's raised by sellers for sellers, where all of the focus we've really put the last, like year and a half on getting operationally very, very sound. And that's something that I think it's kind of like brands that spend that time building out all the operations and you get to see the breakout happen a year and a half later. That's really where we sit now is we built this really cool infrastructure and so now we have a, you know, a surplus of opportunities that are flowing to us.

So let's talk about that real quick because we've met an, an operator who runs an operations company that I am like, I am so thrilled about this relationship. I hope it works out. There's been maybe three or four relationships that I've met over my career that I felt this strongly about where I was like, I know a partnership with this person is going to pan out because we compliment each other so well. Our mindsets are complimentary, but the character traits are there. Yeah. And so we're exploring, do we partner with this person, do we acquire this person? And he just wants to win, he wants to grow, he's open to all of this. But this is one of those relationships where it just makes sense for everybody to plug this operational team into our brands, help them grow. And we're sort of exploring that right now. It's, it's like midway through the discussions of it. But that's one of those opportunities that's really exciting for us.

Yeah, without a doubt. And there's so much room like where this grows and where the next, you know, batch of opportunities come in is right now we have a list of influencers that are very interested in working with us and a variety of types of brands. We have quite a few different pods, I refer to them as pods of brands where they share customer avatar or share, you know, overlap in like supply chain or something where they would bundle really nicely together in a non competitive way. So we have actually two or three of those pods that would bundle together really nicely. And so the beauty of having brands that can be in a pod is they can start sharing shared services for operations.

Right. So like for example, this influencer that you brought up to me over the weekend that I had built this relationship with, we could partner him with this operational partner that we're talking to and say, let's develop some systems for turning your million person Instagram following into an email list. Because he has no email list at all. Exactly. We know exactly how to turn a million people into a responsive email list. So you develop those systems, give them to him. We own the email list, we split the revenue and now it's a profit house for the influencer, but we get to own part of the asset that builds up Sinless Snacks or one of our other companies. And so, and we might even launch a brand to that person. But ideally we have this pool of influencers with this pool of email addresses and Instagram followers where we can put a brand in front of 5 million people at the click of a button.

Right?

Yeah, that's fun.

It is, it is super fun. And it's just one of those ones where one plus one can actually equal four. There's a lot of that talk that took place over the last three, four years. But there are areas where the one plus one does equal more than that. And so having these influencers that you can use across multiple brands, service people, we can hire a better, a level person to work with brands as opposed to, you know, if you're bootstrapping, you can only do so much. Just ways to stack the deck in favor of each of these brands succeeding. And that's what I would say, like right now we are, we are more opportunity heavy than we've probably been in the past because there, there is, there's a lot of room for growth with some of these, with some of these brands that are shifting from being product focused to being brand focused. And that's kind of right in our sweet spot.

Yeah.

And so, so yes, we've got some really amazing opportunities and a few different, you know, spaces. And then from the capital side, as I have a few of our, you know, partners who've come actually from some from your audience who've had multiple exits and they are excited to be able to buy multiple brands and be a part of this as well. Yeah.

So, and we again, like, we have the fun side where we mostly bought minority stakes and companies and advised them that's like we have mostly a bow on that. We might have room for another deal or two, but mostly we're focused on the five or six brands that are, are producing and have already 3x the total investment or so. Like that's the focus there. But moving forward we have these opportunities. We're not quite sure how it's all going to fall. And so that's, that's the exciting and uncertain part of the journey is like we have this group of opportunities. How does that parlay into the next one? But that's, that's where I'm most excited, where I think we see we've really proven the thesis and what we can do and now we're a couple relationships away from that being something special.

I agree.

It's been fun, man. Yeah. I can't imagine a better partner for it. So thank you for being in this with me again. If you want to partner with us in some way, go to capitalism.com fund. You can fill out the information as an investor or as a brand that you want to be advised or receive capital. If you listen to this whole thing and you're like, that would be a nice thing for me to do a year or two from now. And you need help on the road to 1 million, come join us in the 1%@capitalismics.com one where you will come up with your idea, have your $10,000 launch build towards 50 and then $80,000 a month and have the foundation for a business that has 100 sales a day, which is a million dollar business and then we can come in and help you go to 10. That's right. Good to see you, Sam. Thanks for being with us, everybody.

And now a quick word from Tristina.

Tim, one of our members from the capitalism.com community.

We joined the incubator because we knew the things that we didn't know. So we didn't know E commerce at all. And we needed that. We needed somebody to tell us where to go and what to do. Right now we are on track to hit the 3 million mark this year. However, I think next year is just going to double that. We have so many plans for the future and just executing the plan that the incubator brought us, it was fantastic. It was step by step, what to do, how to execute it. And then if we did fumble the ball, we had somebody there to help us through it and walk us through our plans for the future. Of course, this year we have 3 million and then next year 6. And we're hoping to get to 10 million within the next next three to four years. Freedom is everything to our family. I homeschool and I love that our family can wake up together every morning. Nobody's running off to school, nobody's running off to work. If I had to work at like a 9 to 5 job, there's no way that I could also homeschool. I get to set my own hours and they're not as many hours as a normal job would be. So that's really fantastic. But again, freedom is everything for our family and I don't. It's strange that our kids don't know any other way. Mom and dad are home every day. I would describe the capitalism community as family. You get so many tips from people. We give tips and I think that we're going to start to work with a lot of our fellow community members and everyone really is rooting for everybody else. Nobody is like in competition at all. Like everyone is everyone's biggest cheerleaders.

If you found value in this podcast and you're ready to go Deeper, here are three resources where we can help you. One, you can grab my book 12 months to 1 million on Audible or Amazon. It has over a thousand reviews and it's the playbook to building a seven figure business. Second, you can join our community of entrepreneurs who are following a plan to build a 1% net worth by building businesses and investing the profits you can get plugged in@capitalism.com 1. And third, if you're looking to go deeper and build a seven figure business that you can sell, you can work closely with us inside the Capitalism incubator and you can get on the waiting list and find out what we do. Over at capitalism.com inc. That's capitalism.com incident.