Mike Duboe | Growing Consumer Brands That Endure

Hey everyone, I'm Mike Dubeau at Greylock. Welcome to our podcast Grey Matter, where we bring in some of today's top entrepreneurs and business leaders to share their stories from startup to scale up. Today we have Moyes Ali, founder and CEO at Native, which is one of the fastest growing CPG companies in the US And Nick Sharma, who is now a consultant on all things D2C, formerly ran D2C at Hintwater, the Pill Club, Judy Chacha Macha and VaynerMedia. Great to have you here guys.

Excited to be here.

Thanks for having us.

At Greylock, we spend a bunch of time looking at the software and infrastructure layer and kind of underlying technology around the rise of E commerce. And these two are some of the most knowledgeable folks out there on brands and E commerce. So there's a lot of ground to cover. So let's jump into it. I think quickly it would be helpful to give listeners just some sense of your background. So Moise, you had a really incredible journey. Tell us a little bit about that and kind of what you're up to right now.

Yeah, sure. So Launch Native in July 2015. We raised about $500,000 over the course of the life of the business, sold the business in November 2017 to P& G, and then operated the business for the next two and a half years. And just for a little bit of context about Native, it's a direct consumer personal care company. We sell products that adults would use in the bathroom every day. Think deodorant, think body wash, think bar soap, think toothpaste. When we were an independent company, we sold exclusively directly to consumers or through our website. Today we're on Amazon, Target, Walmart, cvs, Walgreens, and a bunch of different stores.

Nick, you're now doing consulting and advising. What led you down that path around kind of being an advisor to this new wave of DTC brands?

Well, it started when I was at Hint and built out their direct to consumer business. And then I went to an agency called VaynerMedia where my main focus was to build out a DTC unit for the agency. And then just being at the agency, I kind of missed being back on the brand side. And the easiest way to get back involved on the brand side was tackling multiple at once. So, you know, luckily I was fortunate to have a few brands waiting to work with me. And so I just hit them up and we started doing things together.

And I think today, like one of the magical things is just how easy it is to start an E commerce business and get One spun up when you see brands starting now, Nick, like, how do you assess whether the space is right? And what general advice do you give to folks who are really just thinking about whether to get started?

I always advise brands to do some kind of product market testing. You know, whether that's running ads to a pseudo brand or a pseudo store online, or on the flip side, going to like, the retail buyers and seeing if this is something they would carry. But essentially getting validation before jumping in is super critical.

I'm seeing more brands kind of just start running paid ads before they could actually sell anything, which is a pretty fast way to get validation, but might not be indicative of the product's actual ability to sell. Like, how do you think about that as kind of a tactic before you get started?

I mean, I like it for validating a brand itself or validating product market fit. I think if you actually launch a real brand and run media for something that doesn't exist, you just give a terrible customer experience, which trumps everything else. But, you know, tactically, when a brand is launching, there's probably a few main things, from site to content to creative to, you know, getting the basic foundation of media set up. That is super important. And then as you start testing things and learning, then you figure out what levers to keep pulling more on and what to pull less of and you just scale that way.

Yep. So, Moyes, to take a tactical example or a real example here, like, what was the insight you had that led you to start Native? And if you were starting today, how might things have looked different?

Great question. There were a few things that led me to start Native. One was I was. It was actually a personal need. Like, I was unhappy with the antiperspirant that I'd been using my entire life. I don't know what you guys used if you use Native today, but if.

You don't, I have Native in my suitcase.

Fantastic. I've been using like, axe deodorant for 15 years, and every time I'd buy it, I'd like, try and read the ingredient label and I'd be like, I can't pronounce a single word on the back of this thing. And then one of my friends was working at Etsy at the time, and she told me that natural deodorant was the number one selling product category at Etsy for, like, in, like, 2013 or 2014. And so I was like, if it's the number one selling product on a site as large as Etsy, but really there's no brand that's sort of dominating that space. I wonder if there's room for someone to come in. Certainly had the idea of, like, hey, what happens if we just launch ads or something to that effect and see if this company works? And that's a little bit of what we did. It was like we had gotten to manufacture lined up, and then what we did is we started. We launched the company on Product Hunt without any actual product. And we're like, look, if this sells, we'll actually go to our manufacturer and produce some deodorants. And if it doesn't, we'll just close up shop and, like, that'll be that.

And what year was this?

This was in 2015, so five years ago. And so that's how we did it. Like, on day one, we were on Product Hunt. We sold one stick of deodorant, and I was like, okay, I'm just going to turn this website off. Like, I'm not going to do this for $12. And then, like, one of my friends was like, actually, I think I can get you on Product Hunt tomorrow as well and get you on, like, the first page of Product Hunt. And I was like, okay, if you can.

It's such a big deal, especially back then.

Yeah, it was huge. Exactly. Yeah. And so then the next day, we sold like 60 bars of deodorant. And I was like, well, that's enough for me to order the 100 moq that I needed from my manufacturer. And that's sort of how the business got started.

Yep. One notable part of your journey is that you raised very little money along the way. Over the last five years since you started, there's big influx of capital into brands like this. And I think those who will raise up front probably take a very different tact or a different journey than those who are scrappy or raise very little upfront. Like, when you had different options to actually raise along the way, how did you think about that? What were the pros and cons?

We took 300k sort of in the first eight months of the business, and that was really what we needed. After that, we sort of controlled our own destiny, and we're a profitable company. And as we were growing the business, at some point I was like, okay, what happens now? Like, we were doing two or three million dollars in revenue a month. We were growing 20% month over month. And I was like, what is the end date? Where does, like, the growth sort of plateau? We have a really lean team. When we sold the business, we had eight people working. I was like what happens to this business three or five years down the line? Certainly we need to start investing more in human beings. We need to start investing more in operations and in talent and in inventory. And so those questions sort of started popping up and then we started having discussions with people who were interested in fundraising. And as those discussions got along, I was like, you know what? I'm not sure what the exit looks like five or seven years down the line. If I raise $30 million, and we certainly had a $30 million offer, you know, I'm gonna have to work here for five more years and earn a 500 to $700 million exit. And I'm not sure how real. Like when you're running a business, you have a good idea of what your business is going to look like this month, maybe this quarter, possibly even towards the end of the year. It's tough to understand what business is going to look like five years down the line, especially when you're a brand new business. And so I was like, I don't want to take all that risk. And so that was really like the thought process, which was, if we raise $30 million at a $200 million valuation, and now we need to build a 400 to $500 million company, that's going to take a decent amount of time. And I'm not sure I'm going to be able to do that. I'm not sure how successful I'll be able to do that. On the other hand, if we, you know, in a short period of time, there's a lot more cash up front, there's a lot less risk, and maybe that exit is smaller for everybody, but I'm not sure how much worse everyone does as a result of that.

It's a very personal decision, and I think that's an important point to note. Something we talk about is we like to invest in businesses where we think there's uncapped upside, or where growth actually becomes easier versus more difficult with scale, which is usually not the case for businesses that are too dependent on paid marketing or have a linear growth curve. In a lot of these categories, I think we're seeing examples right now hitting the public markets where frequency of purchase is less and dependence on paid marketing gets heavier. And so things kind of have more of a gloomy prospect going forward. At least you are forced to think about the category much, much wider than it might naturally otherwise be. How do you think about categories that maybe make sense to capitalize further?

I always look at a few things. One is consumption habits of the product or the industry or that category, order value, repeat purchase rate and the weight of the product. And then I also think how easy is it for that product to be shared and essentially get like offline awareness just by being in somebody's home? And a lot of that usually determines like a whether or not I'll work with a brand, but sometimes even whether or not I'll invest in a brand with the brands that I've worked with, like Hint, for example, Hint was super high consumption. And so a lot of the other metrics didn't really matter because the consumption was so high and the retention was so good. But then you have a product like maybe Judy, where it's a higher order value upfront and, you know, not as many subsequent purchases.

I think it's really difficult to know what that market is. Like, you know, in 2014 when Casper launched, everyone was like, this is a fantastic business, right? Like, I think their first month they did a million dollars in revenue. They were sending out air mattresses until they could demand for foam mattresses. Like, it was fantastic. And if I were looking at that business in 2014, I'd almost understand the amount of capital they raised. I'd say, you know what, this is an expensive product. You need to invest a lot in marketing, a lot in brand. You're going against two behemoths that have been in the space for, I don't know, 75 years between Sealy and Serta, and you have this first mover advantage and you need to preserve it. And the way to do that is to build a big brand and to be the like, market leader in this type of, in sleep. And if you look at it today, you know, the market is, values it for less than the money that they've raised. And so I think the market changes. And so it's really hard to control your own destiny if you're going to be reliant on that type of fundraising.

Yeah, I think something that we're seeing right now that's interesting too is this rise in alternate sources of capital to actually go and raise, raise debt to go and fund your marketing activities. So take ClearBank. Do you have brands that you're working with? Or would you guys, if you're in those shoes, take some of that capital if you're going to go down that route? Raising less dilutive capital seems to make sense for many businesses. Like, how do you think about that?

One of the brands I work with now that we just launched, it's, we're using Clearbank, Shopify capital And Brex, all because the inventory is so expensive. So a lot of the initial capital that was raised went to inventory. And then the payback period for the paid is really great because the order value is so high. So we're able to efficiently use services like Clearbank and Brex. But I recommend it all the time, especially if the payback period is there. But if you're like, if you're just spending money on marketing to hit, for example, if your order value is $30 and your customer acquisition cost is $100 and you're using Clearbank or Brex, you're just never gonna make it back. It's just like depleting capital, you don't have.

One interesting, I guess second order effect that Clearbank could result in is brands actually going to channels that are much more directly and clearly measurable. So like more doctor stuff where it feels like there's other dynamics that are actually making the pendulum swing to offline channels that could be equally affected.

I haven't seen it for offline, but what they do is they will take some money off the top of your daily shopify revenue. So they kind of secure themselves that way. Plus they're plugged into your bank so they know everything that's coming in or going out.

And I guess Moises, you were never in a position where you needed that.

But yeah, those services didn't exist when we were around. I think they would have been nice just for us to sort of have. One of the fears that I had when we were running the business is I was like, what happens when things turn south? And you know, we don't have a ton of money in our bank account and we've got an eight person staff which isn't large but you know, still have salaries that we have to pay. And we only have eight people, but our contract manufacturer has 150 people working to make our product. And so like how do we maintain this growth and how do we maintain our ability to sort of make ends meet with all these like responsibilities. And it would have been nice if there were a clear bank back in 2015 or 2016. And I see why people take advantage of it today. I think ultimately they're fantastic services if you want to avoid like having a lot of people on your cap table. But fundamentally they don't change the nature of the game where you have to build a sound business. You cannot have a negative gross margins, you cannot be losing $200amattress if you want to have a business that has a decent enterprise value.

So Maybe we could spend some time around the moment where you had decided that it was actually right to sell the company to P and G. So you were, you know, it was probably an option. You were profitable at the time. You had this offer for. I think it ended up selling for close to 100 million bucks.

Nice. Cash, not stock, right?

Like, yeah, that's right.

How did you, like, what was going through your head at that time? How did you know the time was right? Like, what were the signals? There was.

Yeah, I think the signals were a fewfold one. I always tell people, and you mentioned this earlier, that it's a really personal decision. Like, if I was a billionaire, if I was Jeff Bezos son, I would not have sold at the time that I did. I wouldn't have needed the cash. And so I think it's a really personal decision as to when you do that. And people will ask me, like, you know, how much salary should I be taking? And I'm like, it entirely depends on your personal financial situation when you're working at a startup. So for me, it was a few things. It was that personal decision of, like, what exit is going to be meaningful enough for me to, you know, not have to worry about finances any longer. But it was also like the future of the company where I was like, there's eight people working here. At some point I'm going to have to take the eye off of growth and focus on building an infrastructure within the company. We had one person running operations. We had five people in customer service. Like, we needed more people basically everywhere. And I was like, if I stop focusing on revenue growth and start focusing on hiring a team, the revenue growth will plateau or sort of flatten out for a little bit, and then it's going to take a lot of resources and time to sort of get that momentum back. And I'm not even sure I'm going to be able to do that. And as a result, I think, like, it might be a better time to sell now than it would be 12 months from now. I think that was the other thing going through my head. And then the other. And then finally I was like, look, growth is phenomenal right now. In January 2016, I think we did like $50,000 in revenue. By November 2016, we did a million dollars in revenue. By November 2017, we were 3 or 4x that amount. And so I was like, when does this growth plateau? And like, there's a lot of sizzle here. You know, we had sold one product in one category. We'd only sold deodorant we'd only sold it through our. You know, there was a lot of other things that we could do. We could sell deodorant Target, we could sell it at Walmart. We could sell body wash and toothpaste. We had all these plans. And I was like, look, these are great plans, but I might not be the right person to execute all of these. And it might be a lot easier or better for this company if we were part of a much larger organization.

So at the time you sold, you were 100% D2C, still 100% D2C? Yep. Which is changing. Nowadays. You see companies getting in a channel much earlier into wholesale. I think one dynamic you didn't talk about is the likelihood of the company to be, like, wildly successful under the umbrella of P and G versus standalone. Like, how do you think about that?

People will ask me, why didn't P and G just create their own natural deodorant brand? And I'm like, why is it when you see a bird flying, you're not like, let me jump off of a building and I'll fly? I'm like, it's not in your DNA, and it's very much not in their DNA. And the people who work at P and G are amazing. I think they're really bright and intelligent, but they were stewards of brands that have existed for generations and that have, like, massive market share. If you run Tide and I gave you $500 million to advertise, you'd be like, yeah, no problem. I know what I'm going to do with $500 million to make Tide bigger. If you gave. So if you gave Native's marketing department $500 million next year, we would have no idea what to do. You know, like, that's just an insane amount of money. And so I think they're like, very different companies. Like, the difference between Tide or Secret or Old Spice or Gillette and Native, we're just very different brands. And so I didn't expect, nor did I see the synergies that, like, you know, I think a lot of other people might have expected where you're like, great, we're gonna have all these marketing sy and we're going to have all these communication synergies. We operated rather independently compared to other brands.

So this brings us into the topic of marketing. And I think looking at the evolution of performance marketing in the years since then has been fascinating to watch and also a little bit scary in some areas. Nick, you've talked a lot about the importance of building Community early on and helping brands find ways to actually mitigate dependence on paid. Talk a little bit more about that. And specifically for brands who are getting started that haven't yet kind of generated any flywheel, what do you advise them to do if not go and spend it on Facebook ads?

Well, I think the biggest shift is like back when MOY started versus today, the price of paid is much more expensive. And so paid has to be used. It just has to be adjusted in a different way. Back then, you could probably launch solely on paid, whereas today paid simply just has to be an extension of what's created organically, whether that's through community that you build, which I think is also kind of a pretty vague word. But whether it's community or like the buzz or the press, your initial customers, your testimonials, your reviews, your. There's a baby company in New York called Lalo, and one thing they push heavily is like a recording of a mom who called in and she's just so thankful for her purchase. But paid is just a tool, right? It's just an extension of what you build or what you create.

Yeah, I mean, I've always talked about it as an accelerant versus a crutch. And I think stitch fix. In the early days, we were really didn't do much of that at all. I mean, we also had the constraint of profitability early on, fundraising difficulties and all of that. And we were holding inventory, so we had to be pretty disciplined with actually not over under acquiring users. I guess in that time we were much more dependent on just focusing on the right demographic that generated word of mouth, but also some like, early influencer stuff before that channel became saturated.

So I'll also say, like a lot of people who say paid isn't the right way to grow a business are people who are usually bad at paid.

I agree with that partially. I do think, if you take the extreme example of that, I don't think that being great at paid is a sustainable differentiator at scale, all these channels converge to market efficiency. At the same time, you could only do so much when it comes to media rates in these channels. So where we found the ability to move the needle was actually focusing on downstream user quality versus trying to optimize for cac. But still, it's kind of like the laws of gravity kick in at scale. So I guess if you go back to the very beginning, going back to that pay it as an accelerant versus a crutch for companies that have nothing to accelerate yet. Like how Else do you get started? You know, and this is where maybe getting into physical retail or like offline channels could help. But what are you seeing kind of there at the most formative stages right now?

I definitely see what you mentioned, which is a lot of brands start sort of starting or thinking about omnichannel or a multi channel marketing approach before launching. So no one's. Very few people are reliant on Facebook and only Facebook right out of the gate. And you know, 24 months down the line, like people will have experimented with other social media platforms, they'll have experimented with going into brick and mortar stores, they'll experiment with pop up shops or working with another company that does pop up shops or doing some sort of drops. Like I think the day where you are a Facebook brand only may be over. You know, I say that, but when I say that, I think of three brands in my head right now that are Facebook brand only brands that are doing incredibly well and generating a ton of ebitda. And so like it's still possible. I think it is much more, it is much more difficult today than it was in 2015. You know, one of the things that you, you mentioned, Mike, was you said rather than focusing on cac, you decided to focus on downstream quality. Does that mean like LTV and how do you retain the best customers? Is that what you mean by that?

Yeah, I don't like the term LTV in a lot of these cases. At Stitch Fix, I remember the first board meeting I went into when I had started there. I was kind of going and presenting our paid acquisition strategy and we had Bill Gurley on the board there and he had written this article like the dangerous seduction of the LTV formula basically is if you take too long of a time horizon, it might not actually pan out. And running your marketing just based on math versus actual substances could be a dangerous path. So I actually, I took many lessons from that and I think it's a subtlety. But looking at things on payback versus LTV versus like some LTV CAC ratio actually is different. So we would look at payback at a pretty granular level. Even like getting down to like audiences and tactics within a channel, which helped us. But yeah, I mean for us it was, we had a more unique challenge than businesses where you could actually get some value at the time of transaction. It took us a little while because like you would order your fix, you would get it three weeks later and then we would know what you kept in return. Like you know, a week after that and so it took us a while to actually get that signal back to our channels. So we had to do a bunch of predictive modeling up front on like, what was someone's likelihood to actually be a good quality customer. But yes, I mean, the long and short of it was optimizing for payback and trying to have control on acquiring the right types of clients as a function of what merch we had on hand at any given point in time was really the sophistication that we got into that moved the needle.

So you were acquiring customers based on what inventory you had in the warehouse at the time.

That was the goal. I think we were trying to move that way.

That's great.

I feel like that brings me back to the days at Hint. We used to always have fights between marketing and operations for the same reason. It's because you're trying to push one thing and operations tells you, oh, we can't push that. We don't even have product. You have to push this instead.

Totally. And I think this gets at the point that for us, I think we were ready to go public even a little bit before we did, and that we always invested in predictability, like I mentioned up front, out of necessity. We didn't have enough capital to just be wasting on this stuff. And so we invested in this demand forecasting team or demand algorithms team, basically predicting fixed volume by client type at a pretty granular level months ahead. And it was absorbing information on our marketing plans, seasonality, et cetera. But there were basically five dedicated data scientists that were just working on this product over time. And that was central to all of our financial forecasting. It was basically somewhat of a media mix model that we could use for measurement and stuff. But that was so core to the central brain of how the company operated that actually predictability comes at an expense. It meant that we weren't doing the types of crazy growth experiments that might actually cause us to have inventory issues. But I think that kind of discipline in running a company and also running a marketing program ultimately helped us how.

Few e commerce companies get to that level. The scale of Stitch Fix was a completely different scale than Native. I mean, native is a nine figure a year business. It's not an insignificant business any longer. But our marketing was very like brute force. It was like, here's an ad, Give us money, we need it right now. And like give us everything you've got, you know, but like it never got to that next scale, or at least it didn't get there when I was there. Of like, okay, how do we figure out predictive analytics around this? If we hired five data scientists, what would they do at Native?

Well, I think also the biggest difference is the number of SKUs.

Yeah.

I'm sure you had more variance on one product and Duo had, like, I.

Don'T know, I don't even know.

Thousands.

But still, it's a very different, like, level of understanding E commerce when you're at Stitch Fix than at Natives.

Well, I think it gets at a point in, like, what is the actual DNA of the company? And I think, like, for us, our core product was a styling algorithm, and that was what we built early on. Then that kind of trickled into other functions of the company, like demand planning, like marketing, like product, you know, building actually our own styles and building our own merch. Whereas I think a lot of brands getting started, like, the core competency is and probably should be brand. I mean, our budget was sizable. Like, there would have been a point in time where having kind of that type of analytical rigor and data scientists around marketing would have been overkill. Right. I think some of the more interesting applications actually in areas where you can find an edge are applying that to channels and areas that are actually, like, more difficult to measure. So we talked about TV before this.

Yeah.

Applying, like, rigorous incrementality testing and like, performance measurement to buying offline media is actually, like, most people aren't doing that. It's probably more common now than it was when I was at Stitch Fix. But that actually is a way to get edge. And so that was kind of one framework in how we think about applying data science to marketing.

We actually did that when we were trying to drive people into Target where we ran ads and locations around a target and then measured lift, like incrementality at the target. We had low, low budgets where we inundated areas around a target where we're like, okay, you're in a zip code around a target. Let's run specific ads to specific people around this area at a very high frequency and monitor lift at that target. And then like a, you know, a target that looks like that target where, oh, you know, would be a holdout, where we'd be like, okay, great, this is a target in a very similar location or like, zip code where there are no ads. Let's see what the incrementality is to the target where we're running ads. I'd say our budget was probably maybe a grand a week, maybe less than that.

Wow.

But, like, for very few stores and then with very high frequency. Yeah. It was incredibly effective for Target. Like it brought us, you know, when we launched there, we were probably doing like 200, 300k a week. It really got us to the next level.

Wow.

We were talking a little bit before this on kind of emergent channels and SMS being one of them. Nick. And it was some of your brands. You're leaning into that pretty heavily. What are your thoughts on that space and how that's evolving?

I mean, I love sms especially because it gets to everybody. Whether you have a flip phone or an iPhone, that's like my big thing. Also, I think your phone number is like a bank account, your email is like a credit card number where one changes and the other doesn't. I personally love sms, but it has to be used very carefully. There's a whole art of copywriting that comes with SMS and you learn very quickly if you're bad at it because everybody unsubscribes. There's a lot of companies that use it for the purpose of selling things, which is not necessarily the best case in my opinion for sms. I think SMS like paid is another tool you use in your arsenal really to A, build brand and B, like bring value to the customer. So for Judy, we use SMS in a couple ways. There's the standard flows of you come to our site, you put where you live and we will send you like a vulnerability guide depending on where you live. And then there are the ancillary purposes of text, which is if you live in San Diego and there's a fire breaking out near you, you'll be the first to know through Judy's sms. It's really like any other marketing tactic, right? Like how do you get that conversion? You bring value in some form or another. And in Judy's case, we use value in the form of like emergency alerts or tips and tricks around safety. In other brands, you know, like Pill Club, for example, SMS is used as a concierge service. So instead of having to log into a HIPAA compliant portal and deal with the all the bumps that may come in with doing that, you can do it right on your phone with SMS and talk to a doctor.

So one thing on SMS is it feels like the channel is early right now. And so the engagement rates open rates that you're seeing relative to a channel like email are just, they look really attractive right now. Right. But as everyone starts using it as kind of, you know, becomes more prevalent to use SMS marketing, it feels like that's going to follow the law should he click throughs. Just like any Other channel. And so how should brands think about that? Is it inevitable?

It's definitely inevitable. It's going to happen. I think it's just down to, like, how smart are you? I mean, email is a great example. Like Morning Brew or the Hustle, for example, have insane open rates because their content's really good. And I think that similar thesis applies to any other channel. If you have good, if you have good stuff there, people are going to open it and want to read it. But if you're just like, Brooklinen, for example, will blast you with on like a Sunday night saying, we're almost running out of our last color. Buy it now, here's 20% off. And the next morning, hey, we just launched a new series of colors. Come buy it. So there's ways, I mean, yeah, you have to invest in. You have to think brand first and I think experience first rather than revenue first.

Yep.

I think it's less inevitable that open rates become shitty on an SMS versus email just because people are more protective of their SMS. Right. Like, if you start SMSing me every day and you know, I bought from a brand that did that, I unsubscribed within the first five days. If you shoot me an email every day for the first, like, week after I purchase from something, it's probably going into the promotions tab in my Gmail folder and I'm never looking at it anyway. And so you might, you might still be able to continue to do that. But on sms, I'm a lot more, you know, concerned about, like, the frequency with which you hit me. You know, you mentioned, Mike, that you guys had switched, you were like doing influencers and you sort of switched after that, became really saturated. I think these are the days where, like, SMS isn't saturated. And so a lot of people will pour time and resources into it to try and figure it out. Some brands will, a lot of brands won't. And just like any other marketing channel or marketing idea, once it becomes really efficient, people sort of move on and try and find the next thing to find an advantage. But right now, I think SMS may be more power. Like, it's probably more powerful than any brand is giving it credit for.

But Moises, if you were starting native today or if you were kind of still in the shoes of running it, like, what marketing channel will you be investing in now that you were not back then?

Probably podcasts. If I were starting native again today, I would again, like, Facebook was our primary channel of customer acquisition. I'd still. Facebook would still be my Number one channel back acquisition. But like, you know, today we, we spent, we spend on, you know, Facebook and Pinterest and Google Display and Google Shopping and podcasts and television and direct mail. And podcasts are fantastic because one, they have really long shelf lives like you, you will benefit from podcasts over a really long period of time. And two, there's still a lot of inefficiencies in podcasts. Like it's not like, you know, you gotta find the right person targeting the right audience, get the right sort of messaging out there. You gotta make sure that the host talks about it and there's not some third party ad over there. But it can be really effective. And once we figured out what we were doing, it was really effective for native.

Yeah, we noticed that at Stitch Fix too. I mean we were relatively early to start investing in that channel and I think giving, we would basically give the host like a fix and let them kind of experience the service and then just lightly script it, but ask them to talk about it. And that definitely worked best because they knew it was going to convert best for their audience or what was most authentic. The thing I will say is it was the most difficult channel in our mix to measure because you don't actually know when the media is consumed. And so you basically need to rely on vanity URLs or, you know, how do you hear about us promo codes? But we would, we never discounted anything. And so, so the, the incentive to actually go to some like extra vanity URL just like wasn't there. That said, like, it still backed out and we still kept doing it because like media rates had not reached market efficiency yet and we could just find great rates.

It's really difficult to like, you know, as marketers in E commerce, you have to constantly be on the cutting edge of finding out what's new. And you can like, you can never like go to bed being like, okay, I got this. It's like, it's like studying for an exam, you know, and the ex always tomorrow where you're like, I got to study tonight for the exam tomorrow. And then there's another one tomorrow because you're like, what happened today? What's new? What are other people doing? Where should I be investing time and resources. Yeah, but like, you know, you have to be worried about market events that have no relevance to your business and somehow still affect your advertising or your business. And that's hard to do. I remember like the week that Donald Trump got elected in 2016, our Facebook ads were terrible. And I was like, what happened? I was like, I'm not sure what's happening with our business. I was like, I think it might be over. Like, is our website, is our website up? Is it not working? Like we're getting some orders, but like it's, you know, the scale dropped 30, 40% overnight. And like, you know, it just took a week for sort of the Donald Trump is now going to be President of the United States news to percolate and for everyone to accept it. Before our ad sort of started resuming and got to back to a normal spot.

Yeah, I mean, even with Judy being so relevant right now, we went to launch with this whole plan. We had a huge influencer seating with everyone from Chrissy Teigen to Kim Kardashian. And then all of a sudden the coronavirus hits and now we're not spending anything on Facebook. You know, we're only investing in things like Google where we're just trying to capture intent. Yeah, but it's like, yeah, market events will completely shift your strategy. And now it's okay, how do we take this? And whether we capitalize on trying to find new channels while this is going on or we don't know when we're going to relaunch paid on any other channels just because of things that are going on in the world.

I think some of it is just this focus on direct measurement, direct attribution. You tend to associate one customer with one channel, which is why we actually started to take a step back from that and actually look more globally at incrementality testing. And we never got deep into kind of multi touch attribution. But really just the question of which channel did you acquire this customer from? Typically that's a short sighted way to look at things. And as much as we could, we tried to move away from that.

There was a really cool story that our CFO at Hint told me, which was. Or not a story, but just a way to think about attribution. Which was if you like, for me, for example, I just flew from New York, got here, checked into the hotel, came to the podcast room, and if you asked me how I got here, I'd say I took an Uber, but we're forgetting the flight. The Uber from my apartment to the airport, everything in between. And that's attribution. It's like you don't necessarily get the right answer all the time and it's hard to get it.

Well, that's a great example.

So one of the areas I wanted to hit on with you guys is this kind of Proliferation of third party apps and tools that kind of abstract away a lot of the complexity of running an E commerce operation. I mean, it's watching. The rise of Shopify over the last handful of years has been incredible. Not just Shopify itself, but also this kind of whole ecosystem of third party apps. You know, I'm curious, if you were starting a brand from scratch, like roughly what would your stack look like?

I would not be on Shopify. I would be on WooCommerce, which is crazy.

Really?

Yes.

Why?

There's just so much more control over an open source system. Like when we switched from Woo to Shopify, we had to, you know, we obviously had to use like Shopify sort of checkout plugin and all. Like, it's just less efficient than WooCommerce. Like we were able to customize it in a way that made ours really efficient. So for instance, one of the things that we did is we'd ask for zip code first where like type in your zip code will populate your state and city.

And that blows my mind that that's not a standard.

How is that? Yeah, how is everyone not doing that? Like when you, when you try and type in your credit card, like, you know, we, we populate a number field and same thing with an expiration or cvc. And like, not everybody does that. And that customization is really important. And so are things like promo codes. Like when we remove the ability to have a promo code from the cart page and only put it on the checkout page, which is what Shopify has, our conversion rates go down and go down materially. I don't understand why those things are not better on like, what is basically the standard platform that everyone uses for E commerce. And to be clear, I'm a Shopify shareholder and like, you know, I believe that a lot of people will adopt it and I believe in the business model. I just, I think there are a lot of market inefficiencies and when you're running a large business, like our business was large, we were spending a lot on marketing and our AOV was incredibly low. Like we had a $20 AOV. And so in order to build a successful business, we could not leave those dollars on the table. And so Native was built on WooCommerce. I think I'd build another business on Woocommerce. You have to use Klaviyo for emails. We used postscript for text messages, which I really liked and I thought was really intuitive. We used talkable for like refer a friend programs, which was good. But not great, but it was like simple, I guess. I think there are a lot of things that we did that we wouldn't use anymore, like Facebook messenger bots. We were trying like everyone was sort of investing in those, I don't know, two years ago and today everyone's like, no one talks about them, right?

Yeah, we talked about cart kind of functionality. So backend, Shopify, et cetera. But think about front end. There's a question of do you use a third party page builder or you develop yourself with your own engineers?

Well, my thesis on that has always been build a site that looks sick and is true to the brand. But then for acquisition purposes, you build literally a clone site or just a series of landing pages where you drive the traffic. I think a lot of brands that if you build a very direct response homepage, it's not the most inviting page, but if you build a sick homepage and then that's. Those are for the people that come organically use landing pages for everything else.

What should it cost to build a site?

Well, it depends, right? If you're going like some of the sites I've built recently are fully custom designed and fully custom developed and they have a lot of integrations on the back end. So you know, those sites are anywhere from usually 80 to 100K. I've seen sites site's been built for, you know, 15K. I've also worked on a site that was 160K.

Okay. And what was the 15K one?

It's called Kadence. It's actually a really great site. I think it's keepyourcadence.com but great site. They were just really lean. Right. Like they had all design in house. The founder is essentially the creative director. She's also a designer herself. So she figured out what she wanted and we worked on what should be in the site and then she just hired a developer to build it. That's probably how I would go about it. Yeah. And then for. With some of the brands I work with today, sometimes I'll either have my designer design pages or we'll pay an agency to do it. And then it depends how efficient you want to get with cost. Really? Yeah, if you want, if you have the cash, then you go to one agency and they do everything and you can work on 10 other things while they build your site. But if you're trying to be super efficient, then you focus on design and you find a really talented developer who works at, you know, Red Antler during the day and has nights and weekends where he wants to make some extra cash.

I think one of the important trends here is like the need to actually iterate and conversion optimize these pages much faster than like you're getting more data and you're able to action on that data much faster than in the past.

Yeah.

And so the worry about being reliant on like an outsourced dev or anyone externally or honestly even internal dev teams is that you just can't iterate fast enough as an investor now I look at opportunities to actually solve both those problems. Right. And so like if you can allow non technical folks to actually spin up their own pages or iterate on pages fast, I think that's an interesting kind of. And there's a bunch of page builders out there that do this but I think ones that are native to commerce. I think that's an exciting area. I think there's also interesting ways to mitigate dependence on in house or outsource designers as well.

What's a good landing page builder that you've used?

So I've played with all of them. Mike and I always discuss them when he's about to invest in one. My favorite for the ease of use is probably Unbounce because you can spin something up in a matter of an hour and everything works really nicely. The page loads at I think a Google site speed of between 96 and 100 which is, you can't get better than that. But then there's also there's limitations on like customizing the page.

Yeah.

So more recently I spent my last week learning how to use Figma, the design tool and Greylock investors. Nice. And so basically I'll just, I'll design something on Figma and then I have two or three developers that are essentially like they either have full time jobs during the day or they're just freelance developers and you know, they live in like one lives in Utah and one lives in New York and they'll just code it up for me and then we're ready to go. So yeah, I mean the, the Unbounces and the Shoguns are great. We use Shogun at hint primarily to drive like millions and millions of dollars but I think you lose out on some customizability.

Yeah, I think all of them are moving towards like deeper customization and I think I know that Shogun team is Great. There's Builder I.O. as an earlier one that is really more oriented around like better importing pages. You could actually start editing pages that you had previously developed on one platform if you're re platforming you could just edit that page on the fly. They're also more geared around progressive web apps. And so I think it's an exciting space right now and I think it's bigger than might initially meet the eye. How about getting down the stack so on to take fulfillment for instance, like that's another area that there's just a wealth of options. If you think about tech enabled 3pls also shopify is their own version of that right now. How should brands be thinking about this if they're just getting into the game of third party fulfillment?

I'll tell you what we did, which turned out to be fantastic for us at the beginning. Well, one, I was doing all the fulfillment early on. Then we found a 3 PL that was like in Oakland, so very close to where our headquarters were. And what was great is we could drive out there if there was an issue or if we were launching a new product or if we were trying a new, trying out a new box. Like it was a 45 minute drive. And it wasn't the most cost effective. I mean it wasn't like it's not like we were price insensitive. It wasn't the most cost effective though. But what was more important was being able to be like hands on. And then once we got to a phase of the company where we're like, look, this is now something that we understand really well. We no longer have any issues when we have custom boxes or custom packaging or we have an operations team where we understand what our timelines look like. Then we move to a place that was more commoditized and where we were looking for cost efficiencies, both from a postage perspective and a pick and pack perspective. And I would really encourage almost everyone else to follow that path as well, which is make sure you do some yourself so you understand what the unboxing experience is like. Make sure you find someone who's really close to you and nearby so that like, if you have any problems, you can go and solve those issues and be hands on. If you're a young company and once you're a much larger company, you should look for, you know, price savings because, you know, postage is more than the cost of deodorant.

For instance, at Native, were you shipping international?

We do, but in very few countries. I mean really the reason we did it was because we get so many people from like London being like, hey, can you ship this to the uk where we're like, we'll let you ship this, we'll now ship this to the uk. So we can reduce customer service inquiries and, but like it was a, an immaterial part of our business when we were independent.

If you look at it from a CAC perspective for many brands, like if you're driving any traffic, you're going to be driving some unintentional international traffic to your site. And so just letting them through the funnel immediately hits cac. The challenge is like the complexity of actually being able to fulfill internationally, but it feels like that complexity is actually getting reduced right now.

I couldn't agree more with that. Yeah, I mean that was definitely the case. We were trying to advertise only in the United States. Almost every English speaking country became like 3 to 5% of our revenue at some point. And you're right, just opening up those gates so that you can ship there makes it really easy for you to reduce cac.

I guess the last part of the stack would be returns. There's been this rise of third party returns providers. What are your thoughts on those and were you working with any?

We weren't working with any. We were like doing it very manually in part because we thought we could save a lot of customers. We weren't like, okay, you have a return, click this link and let's get this process started. We're like, why do you want to return this product? And a lot of those returns were like, oh, I don't like the scent. In which case we're like, great, tell us what scent you want to try next and we'll go ship that out. Take the one you have and throw it away or give it to a friend or do do whatever you want with it. And we found that to be like a significant percentage of the returns that were people were trying to get. And so we never wanted to like eliminate the handholding process because we thought we could keep those customers.

Yeah, I think for pretty much all the brands I've worked with, it's very similar. Like the returns is almost another potential opportunity to win a customer back or sell them something new or exchange their product. But I've never interacted with a company that helps a brand with returns. Mostly just like, like Moy said, asking them why they didn't like it. Oh, okay, if you don't like it, let's fix that for you.

I think it gets harder. Our returns are always less than 1% of our revenue. If your returns are 20 to 50% of your revenue, you're probably going to need to automate that process.

So we should short the companies that are returnly clients.

Maybe I'm not sure, but, like, if your returns are that high, you probably need something that's like, more automated.

Yep. Yeah. And I guess come to think of it, deodorant is probably not the logical category for, you know, returns.

Yeah, yeah, that's right. That was really one of the sweet spots we found where we're like, look, this is a premium price product, but not so premium where you're like, oh, man, I like, you know, I don't like this product anymore. Let me make sure I return it. Like, if you buy, I don't know, Casper Mattress and you don't like it, what are the chances you're not gonna return that? Right. Like, that's $700 to $1,000.

I also feel like with the rise of just the need for really good customer experience and good customer service, there's just less returns in general. You know, like if. Whether it's on Amazon, if you have a problem, like, I had a coffee machine that I ordered from Amazon, it stopped working and I hit them up to return it and they were just like, oh, throw it out and we'll send you a new one. There's just the need for customer service and customer experience is so high that. But I think returns are often put up on a pedestal and used as a way to win back a customer.

Both of you have been exposed to a number of brands and e commerce operations over the years. You've invested in them, you've advised them. If you look for common threads on people who are just like, when you see them, you hear their idea, you know they're just going to be standout, exceptional. How do you spot those people?

For me, I think there's two things I always look at when I invest in a company. One is like, if worse comes to worst, could I jump in and potentially save it? The second is, how does this founder think and how do they see the vision of the company being put out? But I think in general, it's the founders that tend to win the most are the ones who are really obsessed with their current brand or their current business, not necessarily ones that are building something today with the mindset of where it's going to be in five years. You know, like we were mentioning earlier about the holding companies that are being built in D2C. Yeah, the ones who are obsessed with today's business, today's brand, today's customers, you know, today's customer tickets, even. Those are the ones that I think are the ones that tend to win more. And even on that, I would say when I hear from a founder that they spend their own time answering customer tickets rather than whether it's outsourcing or hiring somebody to do it. That's like another huge sign.

So customer obsess. Deep customer empathy versus being almost too forward looking.

Do you live and breathe this business? Like, if you're, you know, like almost all the entrepreneurs that I talk with, that I invest in and are sort of like me are like just talking about their business. It's the. They know their metrics inside and out. As soon as you ask them if you're like, what's your cac? They're not like, let me go look at it. They're like, I know exactly what it is. If I said, what's your revenue last Thursday? They'd know that number off that they'd be like, which hour are you talking about? Because I know an hour by the hour basis. We're a direct consumer business and the direct to consumer advantage is we have a relationship with our consumers. These are the people who are answering the tickets that give us the relationship with the consumer. Like, let's listen to what they have to say. What are the problems that they're seeing? How can we make our product better? And like, not having an ego when it comes to, like listening to advice or feedback or understanding channels. Like, a lot of people will be like, I want to be in the press, I want to have a huge Twitter following. You know, I want to be the face of the company while other founders will be like, I don't care about anything other than driving metrics up into the right. And like, those founders that don't have those egos and are willing to get their hands really dirty tend to be more successful, in my opinion.

Guys, great conversation. Thanks so much for coming. For our listeners out there, where could they find you?

For Nick, you can find me @Mr. Sharma on Twitter and for Moise.

I'm at Moise Ali on Twitter and at Moise R. Ali on Instagram.

Thanks, everyone.