Building Your Startup Team - How The Drip Club Used Personality Tests to Make Millions (EP 7.1)

Okay, so today we have a special interview. It's actually 3 parts. It's with 2 of my childhood friends, and we're at a company called Drip Club. Andrew, how's it going?

Good, man. Thanks for having me.

What is Drip Club exactly? What do you guys do?

We evolved over time, but today we do product development. So we, you know, develop and distribute our own brands of e-liquids, you know, in the United States and all over the world.

So if I'm like a vape shop or something like that, I'd probably go to you guys for different flavors. Is that how it works?

In the beginning, we used to sell a lot directly to vape shops, but Now we're kind of changing our model a bit where we're focusing more on the product branding side, and then we're working with distribution partners to get the product out to the shops.

We all have our own entrepreneurial journey, like you have yours, Jonathan, which we'll be on in a little bit. We all have our different ones, but how did you get to where you are now? You had a— basically you had a company before this.

The very first company that I started was called Stoom Room. It was an online rental service for costumes. You know, college students, they do a lot of theme parties. We wanted to create a service where they didn't have to buy the costumes, so that was the first business I started. I started that with my girlfriend at the time.

What'd you learn from that?

I think you should think very carefully about going to business with your significant other because I think there's a lot of challenges and stress and anxiety, and that can put a lot of strain on a relationship. Now, a lot of people do it and they make it work, but I think, I think it's challenging.

So it's a very small percentage that can make it work.

Yeah, very small.

Because I think like you, you go, you're working all day, you're thinking about work, but then when you go home, you're thinking about it again, right?

Exactly. And you know, when you're— when that happens, you're seeing them every day. That's tough, you know, and you kind of have to— when you have disagreements in business, it's really tough to separate that from your personal life, especially if you guys are, you know, boyfriend-girlfriend, husband and wife, you know.

I think it was Bill Campbell, the guy that mentored Steve Jobs and these other people in Silicon Valley, said, uh, don't ever work with your friends. So talk about this business now.

Oh man, that's tough. I mean, I feel like—

You're working with one of your best friends.

Yeah, we were— I'm working with one of my best friends. No matter what, when you're looking for a business partner, the process is the same whether they're a friend or not. And I think it's Identifying the values. Work ethic is important. You want somebody that is in the trenches with you who's willing to roll up their sleeves. I think looking back, one thing that we probably should have done too is, and I think is really useful, is taking a personality test. There's different services that can do it and they're free. You can go online. It was interesting too because we took that personality test and all 3 of our personalities completely complement each other. We're all different in different ways. I think communication is really important.

What I'm hearing is, A, set up boundaries initially.

Definitely.

Then you also have to have criteria. Then the third thing is taking like a Myers-Briggs or even like a Tony Robbins DISC assessment.

Yeah, personality test to see what our strengths and weaknesses are. Also, I think in the beginning you should clearly, as best as you can, lay out the roles and responsibilities, right? And that way everybody has a clear idea of their value add because I feel like that's important, right? Sometimes it feels bad if you don't— if personally you don't feel like you're adding value to the company. And I think Getting all that out in the beginning and recognizing each other for each other's value-add is important. So communication is a huge piece of it. When it gets tough, you'll see people's true character come out, right?

Yeah, I think it's establishing those rules and those criteria and then being able to move forward from that, right?

It's almost like you have to overcommunicate in the beginning. It's no different than a relationship outside of work, like with your significant other. Communication is key, and that's no different than Right.

So you and Jonathan started this thing. Where did the idea come from?

We started peripherally seeing a lot of activity, right? So his old company actually entered the space in the hardware side of things. The big aha moment was we went to YouTube and we found a video of the very first e-cig convention. So it was like the very first big e-cig convention in SoCal. And it was an hour long, and then we watched it. And as we were watching, we saw that it was very fragmented. There's a lot of— even at the time, there's a lot of different brands. And for people kind of new to the, you know, new to this industry and new to the product category, we just asked ourselves, you know, if, you know, for us, it's actually really confusing to get into this, right? There's a lot of moving parts. It's really— it might be intimidating for people who are interested in getting off smoking, you know, using e-cigarettes to get into it. And so The first idea that we had, our first entry point was creating a subscription service for e-liquids, you know, for beginners who are looking, you know, who have questions about, you know, what's the best brand, right? You want to be the curator for these people. So we adopted the Birchbox model and just applied it to our industry. And that's where we first got the idea. And that's how we first started. Got it. Yeah.

Okay. So that sounds like it was the first phase. And so where are you now? It sounds like you've gone through different phases. What kind of business is it now?

Now we're totally different. We actually exited the subscription business.

Why did you guys exit?

Because, you know, I think you have to kind of, as an entrepreneur, I feel like, you know, you have to follow the opportunity. And even though the subscription was kind of our, the way that we entered the market and made our name, you know, you have to keep an eye out in terms of where the value is in the industry, right? So, you know, and we kind of stumbled upon it because in this In the subscription service, you know, we had to onboard brands, right? And we were actually having a challenging time finding brands that we would want to add in. So there was actually a shortage of brands that we thought that were, you know, good enough to work with. And so we said, hey, why don't we just create our own, right? And so—

So what I'm hearing is you have to be willing to, you know, make adjustments on the fly and be adaptable.

Yeah, I mean, I think in the early days you have to be open-minded and realize that there's going to be constant and, you know, there's going to be constant change. And you can never, you know, when you're small, when you don't have a big brand yet, you know, that's when you kind of have to, you know, see where, where's the biggest, where's the bluest ocean, you know, in all, in where you're operating now.

Yeah.

There's a really good book that talks about this, actually. It's called The Founder's Mentality. And so it talks about the challenges or the different crises that companies face at different stages. In the beginning, you have— everybody's thinking like an owner. Your team is really small, you know, and you're at the front line. Like, you're taking the sales calls, you're going out, you're understanding the customers, you're closing all the deals. But then when you get bigger, you know, the people at the top, they kind of lose that connection, right? Like, now that you have sales managers, you have middle management, you almost lose touch a little bit. And I think that's what happens because when, when you're At a point where you feel like, oh, a lot of people are copying you and what's happening? You know, they're eating— everybody's taking your market share. It's because you lost that, you know, frontline exposure. And if you stay, you know, if you kind of retain that entrepreneurial spirit when you grow big, that's when you will see— you won't get surprised by new entrants coming in, right? You'll always be ahead. And that's the big— that's the hardest thing, I feel like.

So how do you guys do that right now? How do you stay in front of things? How do you keep that entrepreneurial spirit?

That's a lesson that we learned, right? Like, I feel like there was huge growth for our company in the first 2 years, I would say. We were a bit blindsided by a new bottle format that came out. We had a lot of success selling a 30ml bottle, right? And what happened was another company came out with a 60ml at a cheaper per ml price. And that really disrupted the industry because a lot of our supply chain was focused on that 30ml.

Mm-hmm.

You know, he became a big brand, right? And, you know, if we had adapted to that reality sooner and realized the need to adapt to that reality sooner, that's more sales, right?

Right.

So having your pulse on the customer and trends and things happening in the industry, that can get lost. And that's actually really hard, easier said than done. And so I think for us, we've kind of developed internal processes, workflows, and devoted human resources to that area alone. So we have George, who used to be our VP of Ops, but now he's our VP of Market Intelligence Strategy. And You know, doing that, it'll reduce the chances of you ever getting surprised by like another competitor coming in with some innovation, or like you want to make sure you stay ahead of all that, right?

So it sounds like you created that role out of necessity because of a pain point you had to deal with. And it's— that's actually a role I've never heard of before. So how do you even— is that just a title you gave him, or is that something you look for specifically? Well, you decided he's just the one.

It worked out that he was the one because his background, he'd spent 5 years at Goldman Sachs as an iBanker, right? So market research, he was really good at that already.

I don't think we're naturally trained salespeople. So how did you get into sales? We'll start with that first.

In college and in high school, I never thought that I would go into sales and I didn't think I would enjoy it. And I think sales gets a bad rap a little bit just because, you know, sometimes you kind of think of Or the imagery you kind of think of when you say sales is like call center, you know, super, you know, it's like a grind or, or it's very sleazy, like a used car kind of vibe, right? But I think I want to get into startups and I want to start my own company. So I joined a startup, a tech company in Marina del Rey. The biggest downside is I'm going to learn a lot. I might fall on my face, but I'll learn a lot anyways. When I went in, it was— it totally changed my perspective.

How's your team structured right now and how are you scaling?

Yeah, in the beginning it was literally an avalanche. of orders. So for us, it was really throwing bodies at the problem, and we needed, we needed a bucket to catch all the orders.

How did you get those bodies?

Went on Craigslist. I wouldn't advise going on Craigslist, to be honest. You know, we do recruiting a different way now, but back then we were desperate for people to bring on because we actually needed people to sell now. And the mistake that we made actually was When those changes happened, we needed a different type of salesperson, but then we kept the people on the beginning a lot longer than we should have. And so I think one lesson is when you reckon— when your business changes, and, you know, more often than not, your needs will change and you will outgrow the people that you initially started with. And so when you have that gut feeling and when you have those feelings, act on it quick.

So did you have to let them go?

We had to, right? But the problem is that we kept them on for so long, there's a lot of friction. Like, our expectations were different, their expectations were different, their capabilities were different. We wanted somebody, you know, we wanted different capabilities and there was friction there. And so it came to a head where we had to let, you know, a fair amount of people go because it just built up, right?

So what got you here won't get you there, right?

Yeah, exactly.

Great. Well, Andrew, thanks so much for doing this.

Yeah, thanks for having me. Anytime.

Hey, so I hope you enjoyed that interview with my buddies. Let me know what kind of value you got from this video in the comments and let us also know if you'd like to see more of these videos as well. So if you wanna check out the next video, go that way to watch the Drip Club.