John Coogan Co-Founder of Lucy.co and Soylent

Just to kind of get into it. I have been following you for just a little, I'd say a little bit of time and following like some of the stuff you've done on YouTube as of late. I feel like you're kind of, you know, getting into your own, honestly as a YouTuber, but you're really, I'd say you have a natural talent for describing things in a really succinct way. Like, I don't think I've ever seen anyone talk about the history of Silicon Valley in such. I don't think Greg has seen it, but you could watch it after Greg. It's a really like honestly beautiful orchestration about like the detailed history of what Silicon Valley is. Just you doing that John, like, speaks to like you as an entrepreneur and like your, I would say, thought process and how you can like communicate. Like for me, the most successful entrepreneurs are the people who can actually communicate really well, get their ideas out and lay them out. But I guess just to get started, like, maybe you could just tell us a little bit about your story as like a person, you know, why even become an entrepreneur? Why not just get a job at like, you know, Wall street or at a tech firm?

I interned at a bunch of Wall street firms. Yeah, I mean, I think I grew up in California and Pasadena, pretty entrepreneurial town actually. There's this guy, Bill Gross who runs idealab here. I think during the dot com boom he took 100 companies public or something along those lines. Like he was like big, big in the dot com boom. Kind of ran a precursor to Y combinator, like an incubator. But they, they actually build the companies like semi internally. It's not the same as YC where they only take 7%. They're actually building the companies alongside the entrepreneurs in a very different way. So I'd kind of been a little bit exposed. My dad worked at a startup and then I interned at a startup in college. And I also interned at a bunch of financial firms, but didn't really think that I had. It was a combination of like, it's very, very difficult to move up to the top ranks in any of those firms, especially once they're more established. And then also the cutting edge of finance, I feel like right now is very much you physics PhDs doing quantitative research. And I'm not that good at physics. Basically I'm more of like the hacker type. So after graduating College, I found PG's blog, learned about YC, kind of seen that it wasn't as impenetrable as it had Seemed previously. And I also met some entrepreneurs who were very much figuring it out as they went along. Like I worked at a small VC fund and one of the CEOs that we funded came in and was talking about how he was planning to use big data to analyze financial transactions in, you know, in on a payments network and had done some due diligence kind of at mit. I went to a, a couple big data meetups. This was the time when MapReduce had just gotten released by Google and there was a couple different open source like Hadoop was a big buzzword. It was a kind of a software framework for computing different equations across large data sets that are sharded variety of different machines, physical machines. So how do you calculate statistics across large sets of data? This is kind of the trend of the time back in 2012. And so I asked this CEO like oh, are you planning on using Hadoop or are you planning on using an open source system or what? What are you thinking? And he had no idea what I was talking about. And it wasn't. And at the time I was like, oh, this guy doesn't know his stuff. But what I realized was that there's a lot more to entrepreneurship than just knowing one technical thing. And there's a lot of people that figure out the specific technical needs of the system after they've built a team and a flywheel and a business model. And maybe they have the skills to go and build that, build that technology later. But there's just a lot of people that figure it out as they go along. So moved out to Silicon Valley with a friend from high school and did kind of the YC thing. Started one company called Soylent, focused on meal replacements and food. And then my more recent company as focused on helping people quit smoking. So we sell nicotine gums and lozenges and also pouch products, all oral, no tobacco and no inhalation. So we don't do vapes or chewing tobacco or anything like that. So we basically try and help people quit smoking and vaping and yeah, it's been a wild ride. Been an entrepreneur for 10 years now. YC Soyler was in YC class of 2012. So coming up on 10 years since that company went through YC.

So you came out to Silicon Valley with your friend? Like why? Like really? Like was it you felt like you could just do it? Like what?

Yeah, I think it was a couple things. Like we, we had both been on five year tracks. He was doing a postback to get into med school and I was at Northeastern doing a five year program focused on like learning business skills, doing co ops. So I'd actually spent like a year working internally at companies full time. And so we'd kind of seen our friends go off and do the traditional consulting and investment banking thing and seen that they didn't it as much as the recruiters made you feel like you would like it. So we had some really good kind of benchmarks to, to kind of compare against and, and it just seemed like it was just the summer we just graduated. Worst case scenario, we could always go back into kind of the workforce and we actually almost did at one point because the first company failed and David, my co founder, went to go start a PhD at Caltech and that would have put him like very much more firmly back on like the academia track, at least for, you know, a few years while he did the PhD. But then Soylent started taking off and he deferred that program and then came back to work on startups. So it's kind of like back and forth and everyone was kind of doing that like one foot in, one foot out until we got like full traction.

So you, okay, so you came out here to kind of figure things out and see if it was like something you actually wanted and you guys applied to YC or like it's so complicated.

Like I. But depending on who you ask, I've either been through YC once or three times. Like it's very complicated. So our first company, we applied to YC, we got rejected. But then we applied to imagine K12 as well and we got accepted into that program. Then later imagine K12, which had two of the same partners as the YC team, they merged. So then we kind of got rolled into YC and were part of Bookface for that company. But then there was a separate company that we were living with in Sunnyvale, just in the same hacker house. They were in YC proper, but their idea failed. But they still had some money. So we put the ashes of the two teams together and then got this like zombie Frankenstein company that we could have gone through YC again with and said, hey, we're back, we're starting fresh, we have traction, we're good to go. But we had enough traction that we were able to just raise the seed round and we kept the corporate structure the same. So then we became co founders of this YC startup where we hadn't technically been through that YC batch, we'd been through the Imagine K2 12 batch which was the exact same schedule and had the demo Days a week apart. So we'd had a very similar experience, but we weren't technically YC alums, but we were YC fou, where we were founders of a company that had been through yc and then five years later, we took our second company through YC properly. And so we've definitely been through YC at least once. But depend on how. Depending on how you count the old versions, it's two or three stripes, but it doesn't matter. It's all semantics. Right.

And this was 2000.

This is 2012.

2012.

Okay. Yeah. Okay.

So you got into YC and. Because YC, I guess, was thinking about, like, aggressively growing at that point, and.

They wanted to, like, yeah, Summer 2012 was the batch that broke YC because they had 70 teams and I think it's like hundreds now. So, yeah, big, big change. And everyone said, oh, this is. This one's going to underperform. All the companies are overvalued. This model can't possibly work. And then it's just like Coinbase, Instacart, Zapier. Like, it's just so many unicorns came out of that batch. It's crazy. And then there were a bunch of other companies that did really, really well, but we don't even, like, think of them because it's like, oh, they. Oh, they only sold for 500 million or something. It's ridiculous. So, yeah, that. That one, that was a hilarious batch that definitely, like, disproved a lot of haters, essentially.

I mean, I'm from yc, so I'm a.

Right.

I think it's, you know, has its, like, huge perks and, like, going through. Yeah, like, so you were in a batch with, like, megastars, like, big. These were just scrappy guys.

I mean, at the time, everyone was like, brian Armstrong's trying to give out free bitcoins just to use his service. What a crazy guy. You know, like, it wasn't clear who was going to win. Like, literally to onboard people, to Coinbase, the Coinbase team would send you a full bitcoin, which is crazy to think about now, but it was like 10 bucks back then, you know, so it was like an onboarding thing and you just get a bitcoin. But everyone thought. Yeah, a lot of people thought bitcoin was like, just some weird hacker toy. Not definitely not like, the basis for, like, the entire financial system potentially. And then same thing with Instacart. Like, there had been a company exactly like Instacart a decade earlier called Webvan, that was part of the huge.com froth. They built out these massive fulfillment centers and the business did not work well. They IPO'd and they lost billions of dollars or millions of dollars, like a ton of money. It was very, very bad. And it was very easy to look at Instacart and see, oh, we've already tried that. It failed, therefore this is a bad idea. And I was certainly in that camp. I did not see the importance of like the mobile phone and the distributed workforce and using the grocery stores that are already in communities as, as distribution centers instead of building your own physical infrastructure. And it just allowed that business to scale incredibly well. Yeah, so very. Yeah, just really interesting. I mean, Gary Tan was the one who. He was like the partner that I think he basically got Instacart in because they sent him some beer. It's like a great story. But yeah, I mean, what a testament to like first principles thinking. Because I heard about Instacart the same time as Gary did and I did not get it and he did and he made a ton of money on that. You know, it's just interesting to see like, okay, once you're actually been through a cycle like Gary had been, he'd actually started some companies and really had been in Silicon Valley and kind of understood the full model, he was able to capitalize on that like incredibly well.

Going through Y Combinator, I same experience where I just, I had assumptions in my head that this company is the, this is the one that everybody loves, they got the most funding, they're hot. That boy, was everybody wrong.

Like, yeah, yeah. There's also a lot of anti tech propaganda just in the world generally. So if you're not culling your media diet like very aggressively, even though you could like learn to program or love the idea of building and tinkering, you can still show up to YC and not be able to like separate like the signal from the noise. And like put all of that aside because there are a lot of reasons, there are a lot of people that want to see certain new technologies fail for a variety of reasons. Maybe they have an incumbent interest in a legacy technology, or maybe they just have a vision of the future that like misaligns with what is coming. You know, like if you're a car manufacturer, you're going to come up with a million reasons why Tesla can't work. Right? So getting into the YC ecosystem and the Silicon Valley ecosystem more broadly and being able to see that, oh no, like this is real, these technologies get built again and Again and again and again. And like, these technologies keep having positive impacts and scaling really effectively. It's very important. It's really. I don't know, it's hard. It's hard to do. It's a big part of my mission on YouTube is to, like, bring that level of energy and techno optimism to a broader community, because it's not there on YouTube right now. Like, the vast majority of content is extremely techno pessimistic or negative and doesn't. Just wants to find a reason why this can't work. And I think that a lot, There's a lot. There's a lot of underlying reasons why that is. People like to click on things that are controversial, they like to click on things that are negative. And also, if you're just laying on the couch watching YouTube, you don't always want to hear a story about someone who's doing something impressive. You want to hear about it. Well, you know, maybe Elon Musk should just be chilling on the couch because this whole rocket ship thing is just going to fail and he's just going to waste all his time. So watching a video that reinforces that is in some ways reassuring to the person who's maybe demotivated. I want to raise the level of energy and I want to pull people out of that and I want to convince them that it's worth working towards new technologies and building things that are impactful and solving the problems that we have, because we have a lot of them. Clearly, everyone agrees about that. Question is just, do we need more technology or less? And to me, it seems very obvious that the answer is more technology, but it's up for debate.

Could you tell us about your relationship with your co founder, David?

Yeah, I mean, we go back, we went to preschool together. I don't actually remember it, but we, our parents, you know, said we went to the same preschool. We went to different lower schools and then met up in middle school. And in middle school, we, we were pretty close, doing a lot of, like, our math homework together. And then we, we started rival Counter Strike teams. Counter Strike was really, really big back in the early 2000s. And so we'd go to land Cafes and I had a team of five and he had a team of five. And we'd always duke it out and, and like, you know, battle each other. It's a lot of fun. Uh, and then in high school, he was kind of like, you know, in the soccer community, I was in the football community. His parents wouldn't let him play football, even though he would have been like an incredible linebacker because he's massive. And then so we were always like, we played rugby on the same team, we'd always see each other out at stuff, but we were never like, you know, like best friends. All through high school we were definitely like good friends, but just in separate cliques essentially. And then when we went to college, he went to Harvard, I went to Northeastern, so we were both in Boston and we kept in touch. And then we both wound up working for different startups in Cambridge one summer. And so we would hang out and get lunch and like talk about the businesses that we were working at. I was at a company that was kind of a precursor to Siri. It actually got, I think it got acquired by Nuance, the company that does some of the backend for that voice technology. So working on like speech recognition. And that was very interesting because I think it was like a 50 person Series B company. But you could definitely see these like little pods. Like I think the team that built the actual app was like two or three people. And then like the people that did the AI, you know, the voice translation and transcription and kind of the voice assistant, like built the actual search tree that was like two really smart people. Yeah, and, and there were a lot of people in the organization. But it was pretty incredible that like just a few small people could just go and build something impactful that would go and be used by like millions of people. And you hear about a ton of interesting strategies where like they wanted to sell to BlackBerry at the time, where, because the name of the game back in 2010, 2009 was to get pre installed on the phone because there was no real app store. You didn't have this idea of just, oh, you, you put an app in, the app store goes viral, everyone sends it to their friends that didn't really exist yet. So you want to get pre installed. So the company would buy billboards outside of RIM's headquarters in Canada just so that all the BlackBerry execs would see the brand be like, oh, Vlingo, that's a cool app. If they're advertising here, they must be advertising everywhere. If we install them on our blackberries, all of our customers will be happy. But really they were just advertising there. So very, very interesting element of corporate strategy. And there were a lot of like, it was a bigger company, Series B at that point. So there was a CEO who was kind of like an ex military business school guy, very, you know, by the books, really running the ship efficiently. There were a couple really strong MBAs there, some of them went on to start funds and are big time VCs now. I was just like an intern answering like support emails. But it was really cool to see what was going on. And then I went over to hang out with David and we'd kind of talk about what he was doing at his startup and help him with his Excel modeling and all sorts of different stuff that he was working on. And then, yeah, just after graduation, we were just talking, I think, I don't know, I pitched him on a bunch of ideas. Like the first idea I pitched him on was terrible, terrible idea. But he was like super enthusiastic about it. I was obviously enthusiastic about it. Didn't go anywhere. You know, we wanted to make like a homework tracker for. Because we were very interested in. We were like, oh, the only thing that we know is education, so let's make education technology. And it was kind of like, it's kind of a hot space back then. Really, really dumb, you know, to go into like the hot space with something where you don't really know anything and just, you know, abject failure for, you know, basically a full year, but quickly increase the pace of development. So like the first product was probably like two months of failure and then the next product was like one month of failure and then the next product was like two weeks of failure and then the next one, it was like, oh, we would do a hackathon project and get something out to our friends and get feedback on it within like two days. And so we, we just tightened up that cycle. Build, launch, get feedback, assess the results. We tighten that feedback loop so tight that the time that Soylent launched, it was just a blog post. We didn't even have a website to check out. We had an email capture form and a blog post basically saying, Rob, the CEO and the guy who came up with the core idea for Soylent, he basically put out this blog post saying, hey, I ran this experiment on myself, here's my kind of like my idea and just put it on Hacker News. And people were like, I hate this or I love this. And it created enough of a community that people wanted to know more. And then we built that up slowly over time. But it didn't require getting manufacturing equipment or figuring out even an E commerce solution. Like there was none of that. All of that was pushed till after we figured out that we basically had product market fit or like idea market fit, which was really, really key if you're, you know, like a startup with just like, you know, no, basically no funding and no, no real like hard skills beyond like a couple bachelor's degrees.

How did you measure that in sort of a pass fail way that you had product market fit?

Yeah, so funny. It was, it was. I get that question a lot. And it's like, it was so night and day. Like, I think we launched, we probably launched between 10 and 20 products. Like, register the URL, deploy something that sits on AWS or Heroku and send it to your friends and send it out and put it on Hacker News or whatever and say, this is the product. Does anyone want to use this? Right. And I think the high watermark for traction was we had gotten 500 downloads in the app store for an app and basically zero retention. And with Soylent, I think we opened up the email capture form. We had 10,000 people signed up in like a week. It was like night and day. So there was just like no question that like, this was the thing that was going to be popular. And then we surveyed people too, and the survey results were insane. We asked people, like, if you've done 23andMe, would you send us your DNA? And like 93% of people said yes. Like, people were so enthusiastic to like, be a part of what we were building and give us anything we needed. We didn't even need the DNA. We never asked for that. But it was just a good, it was just good milestone. Like, Rob had done blood work on himself to validate that he had actually gotten healthier during his experiment. And he asked people, like, would you send us your blood work? Would you go to Quest and get your biomarkers tested and then send those to us? And I think, like, you know, like thousands and thousands of people said yes. We didn't wind up needing that. That would have been a crazy difficult thing to manage in terms of like, HIPAA and whatnot. But, but like, there's no better proof of product market fit than someone saying, I will send you my blood, you know, or said, I will share anything with you. Like, I need this product.

What do you think was the driver of that product market fit?

Mostly the story. Like, we told a really, a really compelling story around the problem solution. So, like, food is a common problem for software developers. That's what we were. We were spending, you know, a hundred hours a week essentially coding, and we were becoming wildly unhealthy. Like, the ramen meme is definitely real. We were eating ramen noodles constantly and corn, frozen corn dogs from Costco and just like eating really poorly in San Francisco. Basically, there's three, like, you always have this Trade off of you can have healthy, convenient food if you pay a lot and go to a restaurant, you can have healthy, affordable food if you grow your own food and cook for yourself and you can have convenient and affordable food. That's not healthy if you go out to fast food. But all of those are bad options, essentially. And so when you're cash constrained, you don't have a backyard because you're in San Francisco and you don't have a lot of time to cook and you don't want to eat fast food because you don't want to be unhealthy. There's really no option. So Soylent was kind of positioned as salt as something that could solve those thr. Of course there are sacrifices. The sacrifices that you're not eating, you know, this like, wonderful meal. It's like very experiential. But for a lot of people, it hit a chord where people are like, yeah, you know what? My breakfast and my lunch or whatever I eat at work, it always sucks. I never look forward to it. It always drags me down. I feel bad, I feel tired afterwards. So. And then Rob just did like the ultimate stress test. Like the question of is this safe? Like, how can you even question that when this guy lived on it exclusively for 30 days straight? Like, if he can live in on it for 30 days straight with no problems and he gets like somewhat healthier, like, you can probably taste it and if you can taste it, you could probably have one and you can see how you feel, right? So really, really great stress test. There's actually a big history to the stress test. Like, David Ogilvy, one of like the fathers of modern marketing, ran a campaign for glue company where they glued a spokesperson's shoes to the ceiling so they would deliver the pitch for this glue product while upside down, suspended from the ceiling. And it's very high drama because if the glue doesn't work, if the product fails, the person will fall and maybe break their neck. It's very high stakes. So it gets you to pay attention. It's also very striking. It's the same thing for. So like this guy lived on it for 30 days. What's going to happen to him? Everyone was saying, oh, you're going to die this, blah, blah, blah. You know, this is so bad. And that brings out emotions in people. And food is just universal. Everyone, everyone consumes it, so everyone has an opinion on it. So the, the content would go very viral. And Rob's just a great writer. Like he, every time he, he can just, he can just write a 5,000 word piece like in a day. And he writes very controversially. He's very good at finding emotional chords. He's also very technical because he has a computer science degree or computer engineering degree, electrical engineering degree from Georgia Tech, is very like sharp on the, on the quantitative side. And so he can, he can write like a compelling narrative that's funny, entertaining, somewhat sarcastic. You don't really know what's real, what's not. And while still appealing to kind of that computer scientist archetype, that technical person.

I guess one of the things like I'm hearing from this is you're able to pick co founders. Well, John, like how I got, got.

Kind of lucky with the, with the guys in, in Sunnyvale just because we looked on Airbnb and there was only one place and they were like, we're a Y Combinator team. And we're like, well, we want to be a Y Combinator team. We're like this zombie kind of Y Combinator team. So let's move in with that. But yeah, I mean, co founders are super important. Like, I don't, it's very, very difficult to scale business without co founders and co founder conflicts. Like what kills businesses.

I mean, that's something I always talk about is like the incentives and making sure the team dynamics are working. It seems to work well. And I guess like you're, you're either humbled or like, what was the dynamic in your startups like that you see, make it workable.

Yeah, I don't know. We kind of just like always like fell into the natural roles. Like there weren't a lot of like debates over like, who does what. Like, I mean, there was a little bit of like, you know, discussion. But I mean, once Rob had the idea, it was very clear that he'd be the CEO. David really understood the science, so he was great to do the marketing because he understood he could, he could, he could answer any question about the product, like at a level, at five levels deeper than whoever was interviewing him. And then, and then I was just kind of like the most technical on the computer science side. So it made sense for me to handle like the technology, E commerce, like web experience stuff. And Matt, the other co founder, I mean he had a, he had a civil engineering degree and was responsible for operations and logistics. And that's a very natural thing. So in terms of roles, it was pretty straightforward. But yeah, I mean, I think like David's been a really strong business partner for me for the last decade because we grew up together. We have a very solid, we have a very similar set of like shared values, similar sense of humor. Like, and we're, we're also able to look at the extreme long term. Like there's we, we don't see the businesses that we work on as like, oh, it's like two year project. We're just like get in, get out. It's like, oh, like we're building like careers. This is our lives. Like we live in the same town. We both have families in the same town. Like it's not, it's not a very transactional process. It's very much like, oh yeah, like we're just like, like the, the co founder relationship almost supersedes the business relationship.

I think that's the underlying thing that probably made it successful. Right, like the team there.

Yeah, for sure.

Were you scared of like a physical product? Like I, I feel like software in some ways easier. I just feel like it's like there's something about software you either fail or it works very quickly, but you're not.

Yeah, I mean I agree with you that like hardware is hard and like physical products are or maybe harder, quote unquote. But obviously there's some sort of like equilibrium that develops where if software is easy, more people are going to do software. And that's what we see. Just look at the number of YC companies that are doing something in software. It's extremely competitive. But so yeah, I mean, I think food was interesting because we were the only food company in Silicon Valley. There was, there were like one or two others just, Just foods, just mayo. That mayonnaise company. They're still around. I forget what they were called back then. Hampton Creek I think was the name. And then there were a couple other folk beyond Meat and Impossible got started like right around the same time. So there were some folks that were doing food, but it was, it was extremely small. And then even just like in physical products. Like I was, I was always looking for like mentors who were at companies that were further along. And I met some folks at pebble which was really helpful. Still, still keep in touch with like their CTO who is handling a lot of their E commerce and online like business model challenges on the tech side. And then I talked to somebody who was at Anki, this like little robots company and they shipped a physical product. Obviously that's also like a more of a tech product because they're doing, you know, robotics and hardware and machine learning and whatnot. But I was able to talk to someone over there who was responsible for, you know, shipping physical items, which is very different than, you know, just deploying a software service. But, yeah, I mean, there weren't many in the Andreessen portfolio or in the Y Combinator portfolio. So you kind of got a blazer on Trail now. D2C is like a huge thing. I mean, Warby Parker, Dollar Shave Club were also kind of happening at the. At the same time. So we really kind of looked to them a little bit. I talked to a lot of folks at those companies, and then Blue Apron and a few other companies kind of came up around that time during, like, the D2C boom. But, yeah, I mean, it's a. It's. It's very different from like, a traditional tech company. But D2C has been at least. It was maybe like five years ago, like, extremely popular. Like, it felt like every. Everyone who got, like an MBA would like, launch a D2C product at a certain point, but then obviously that competed away a lot of the alpha that would come from just taking a legacy brand and putting it online. And that's why a lot of our, like, our latest company is in a very heavily regulated FDA space, because that creates a moat. It's very hard for competitors to just spin up copycat products.

I. How did you come up with an idea like Lucy? Because that's.

I don't know. It's just. Yeah, I mean, very similar. Like, you know, build a product that you need, solve a problem that you have. David was quitting smoking. Didn't really like any of the products that were on the market. They all felt extremely medicinal and. And they felt like you had to admit to yourself that you were addicted to cigarettes and you needed a medicine to cure a disease, which was cigarette addiction. And that's the way the products are regulated and marketed currently. And so we thought that there would be a better way to use the same kind of underlying technology and the same underlying, you know, like, we didn't want to get too crazy on the product formulation side and wind up with a product that wound up actually hurting people because there wasn't enough data. But oral nicotine products have been on the market for 40, 50 years already. So there's a lot of longitudinal data that shows the impact they can have on people's lives, and it's extremely positive. So we could sleep at night. The question is just, hey, why aren't people using this? Like, like, nicotine gum has been on the market for 50 years, and when it was time for everyone to quit smoking, they didn't use nicotine Gum, they switched to vapes. So what happened? Well, vapes were marketed very differently. They have a very different nicotine release profile. They have a very different experiential profile, flavor profile, branding, packaging, everything about them. It, it feels more like an apple product or a consumer product than a medicine. And I think that's a big part of why they were successful. Now the problem is, is that. But you know, I think, I personally think that vapes are a lot healthier than cigarettes and I think the FDA has recognized that. But they're not perfect. And certainly some brands are worse than others. So the question is, how can we, you know, take only the good and none of the bad from those lessons? Right.

I just see a theme in your life where you're creating these physical products, like items that are like being sold and people can touch. Like Lucy's a physical product, correct?

Yeah, yeah. Oh, you have. Right.

Okay, there it is.

Okay. Use it all the time. Yeah, we have a bunch of losses.

You need it like you need a factory. Like, it's just the logistics. It's so different than just software. And I guess for me, like, I'm always fascinated by you guys are a physical product inventory logistics company all in one with software. That's a lot of moving pieces where software is just a simpler product. But I feel like you've done it before. You're kind of remapping ideas and formulating.

Like the parallels between Lucy and Soylent are, are extremely close. Like doylent, I mean, we never said this, but a lot of detractors would say, like, oh, it's just insure, you know, it's just this medical product. And so in my mind it's like, like that's a good thing. Like it's good that we have 30 years of data from people consuming medical meal replacement products so we can know for a fact that if you consume a liquid diet for weeks or even months, it's okay. And so we were confident in shipping the product for years before doing real scientific studies. And once we actually did randomized control studies, they turned out extremely well and they were great. But we were able to have a lot of confidence. Like we, we brought on this advisor who is a professor at Columbia, big nutrition guy. And we were like, oh, like we're these hackers. We don't really know that much about biology. Like, this is our best effort. We've been testing this on ourselves. Like, what do you think about this, this formula? We thought it was going to be disaster. He's going to come back with all These notes change everything. So unhealthy. And he was like, no, it's fine. Yeah, yeah, it's fine. Because we, we, we know that this is a safe product to use for decades. And sure, you're changing the macronutrient profile, you're boosting some of the micronutrients, you're changing the flavor profile, changing the experience and the texture, essentially updating it for like a more millennial palette at the time. But fundamentally the underlying value proposition or like the fundamental, the underlying technology was pretty safe and pretty well understood and well tolerated. So it's the same thing with, with Lucy products. It is complic. Like we work with the FDA a lot and very, very closely with Lucy. It's a lot more complicated than, than food because you don't need to get food approved as a, you don't need to get it proactively approved. Like the FDA has the right to take a food product off the market. If they determine that it's contaminated or unhealthy or bad for you, they can take it off the market. But you, as long as you're using ingredients that are generally recognized as safe grass, which is the designation, you can just go and make that product. Because imagine if you walked into Whole Foods, you know how they have like those pre made salads or like pre made sandw sandwiches. Like imagine if every single one of those needed to be FDA approved. Like that would be ridiculous. But instead they just say, yeah, we know salad, we know tomatoes, we know balsamic vinaigrette. You put those together, there's no chemical reaction, so nothing's changing. Just literally add up the nutrition facts, put those on the back and you're good to go. Right now with nicotine products, it's very different. The FDA just got regulatory authority a couple of years ago. They're dealing with the whole vapor situation. There's all these legacy products and cigarettes that are staying on the market because they've negotiated this crazy master settlement agreement 20 years ago and so they can't be banned. But really if Anyone at the FDA, the FDA's mandate is, is to approve products that are suitable for the protection of public health. And no one thinks that cigarettes are suitable for the protection of public health. Like, that's ridiculous. Now they're starting to look at vapes and saying, well, yeah, vapes do have some drawbacks. But in general, if they help, if they have a net positive impact and they help people quit smoking, that could be suitable for the, for the protection of public health. And of course in the past, historically the FDA has seen that nicotine gums and lozenges are suitable for the protection of public health, so they've approved those. But it's much more, it's much more regulatory complex.

What steps did you take to finance your business? I know physical products can be capital intensive. Like how did you get the money you needed to launch the product but still keep control of your business?

Yeah, I mean for both companies it's pretty typical venture path like YC Seed Round Series A with. So that we did Series B. Lucy. We're still at Series A, but we just keep growing off of that. There's definitely a world where you build these companies in some sort of cashflow positive perspective. I think certainly that happened with some of our competitors at Soylent. I think some of our competitors raised very little money and maybe made that work out in the long term. I don't really know. I haven't dug into the financials of the competitors at all really, but it's certainly possible. You hear about, oh, some celebrity started a DTC product, raised no money and they own 100% of something and it's like, well, yeah, they threw a ton of brand equity into that for free. We didn't really have any of that. Although we did have this viral market entry moment. So I mean there's definitely a world where you're just way sharper at negotiating with manufacturers, you run stronger processes, maybe you have connections to these manufacturers so you can pay them way down the road and so you don't have a working capital issue. There's also a lot of equity free financing options right now where they'll help you finance marketing expansion if you have a strong payback period. So revenue based financing is an option. There's factoring. There's so many different options. We've looked at them all but, but staying on like a pretty, pretty standard venture track has been what's worked for us.

Have there ever been any moments where you felt like it was at risk of just all collapsing and breaking down? Or has it been just like highlight reels the whole time?

I mean that's the case for every startup, like all the time. David and I call it like the roller coaster. Like you go through like the high highs and the low lows and there's just like a constant ebb and flow. But once you're 10 years into it, it takes a lot to get my heart start racing these days. Like it takes a lot. Like you can get some pretty bad news and just work through it because we've just seen so many times when we've had those like, you know, everything is all is lost moments. And then a couple weeks later we figured it out. So you stop having those, you know, major anxiety reactions. But there's still crazy ups and downs. I'm trying to think of like specific ones. I mean, with, with soy, there were like some crazy highs where we would go, like Robert CEO went on the Colbert Report. At that time, the only other Silicon Valley founder that had ever been on late night TV was Airbnb Brian Chesky. It was crazy. It drove so much traffic. I don't know this for sure, but our Shopify website went down and I think it brought down all of Shopify. There was so much traffic. Shopify is really, really small. To be clear. Back then it was just 2013. They were a new company and Shopify is amazing and Shopify does not go down now. But I'm pretty sure that at least our site had a crash and we weren't managing the edge network like the CDN and the server. So something weird happened. I think we made a million dollars in a day or something. It was crazy. So the high highs are definitely there then the low lows are just like, like always. Like, well, we made a million dollars last month. What happened this month? Like, oh, we made half as much or 10th as much? Like, are we screwed? Is this. If I extrapolate linearly from a down month, I will be making negative money eventually if I just look at that trend. So you got to zoom out a lot. And we've gotten a lot better at that. Like at Lucy, like we'll, we'll, we'll have down days, but when we zoom out, we have never had a down quarter, which is great. So we look at that and that's, and then, and then when we zoom out further and we look at our year over year progress, like we've tripled the last two years, which is like great. Of course there's always, you can always go bigger and there's always more to do. But just like the fundamental, like wide, like on the day to day basis, you're always fighting fires. But then when you zoom out and you look back at like, okay, now we have full, three full years of historical data and things are going very well. Like that's, that's empirical, which is great. So you just gotta like reframe and find the right thing to look at.

How do you stay focused on the mission and not get distracted by other ideas? Lots of things are popping up all the time. But you've stayed, stayed with this.

I mean, the mission is really, really important for this company. I mean, like, everyone knows a smoker. I have, I have family members who are smokers. Keeping them off of cigarettes is incredibly important and impactful. We've helped over 10,000 people quit smoking already. And it's like that number is increasing very, very quickly, which is great. And there's just. Yeah, I mean, with this company, clearly if you lose sight of the mission, it's going to have more of an impact than just a financial one. Like, there's going to be regulatory pressure, there's going to be media pressure, there's going to be, you know, like, you know, family members calling you and saying, like, hey, your products aren't working for me. Like, what's going on? So the mission is extremely important. And then, I mean, there aren't that many distractions. I feel like as I get older, I have less burning ideas that I have to work on. And more and more frequently, if I'm like obsessed with some concept, I'll usually hear about someone who's like 10 times smarter than me building that exact thing within six months of when I thought of it. And I'm like, oh, you're the person to do this. I had an AI idea that was kicking around in my head. I was like, oh, deep fakes. I'm really into this stuff as a hobbyist. And then some University of Toronto machine learning researcher reached out to me and was like, I'm building this. And I was like, yes, that's exactly what needs to be built. Like, let's work together kind of. I just wrote him a check. Yeah.

Yeah. Actually I know a lot of smokers and I think smoking was just. It's really changing now where people are using vapes way more. Yeah, vapes is like a bad thing. And Lucy can solve that problem.

I mean, the FDA sees things now as a continuum of risk. So there are a variety of ways that humans ingest nicotine, and those exist on a continuum. In fact, cigarettes aren't even the most dangerous way to consume nicotine. I believe hookah is maybe worse on a pound for pound basis. And of course you can smoke like hand rolled cigarettes without filters. And that's even harsher. You can add all sorts of things. So clearly there's not some binary. This one's bad, this one's good type of thing. And even for a product product like our lozenges, which are FDA approved to help you quit smoking, it's a, it's regulated as a Drug, even this product does have side effects listed on the bottle. Like, it's like there are side effects now the side effects are extremely mild. Like the side effects are hiccups. And you know, nicotine is a stimulant, so it might, it might increase your resting heart rate while you're using it. Right? So like there are risks to every, every, you know, product. But, you know, we see ourselves as, you know, constantly trying to be on the safest end of that spectrum. And, and then there are a variety of products in between. The FDA is, is like starting to review the applications from the vape companies. They haven't reviewed them all, but they have reviewed some. And it's interesting that for some of them they've, they've basically said that, yes, these are safer than cigarettes, which is from, I mean, I'm not, I'm not an expert. I haven't really studied vapes that closely. But from all the scientists that I've talked to, the scientific consensus seems to be that yes, vapes are better than smoking, which I think is a good thing. The question is, do they? Like, if no smokers switched and only kids started vaping, that would be bad. And underage nicotine use is bad. Like people, it's, it's complicated because it's two completely separate mechanisms, right? One is your lungs and the other is your brain. And they're two wildly separate issues. So if you're, if you're a 13 year old, your lungs are pretty healthy. Like underage smoking, like you're, you don't see a lot of teenagers that are, die from lung cancer, but you do see a lot of teenagers who use nicotine products that then become dependent on nicotine forever and they become lifelong addicts. And, and then obviously that's super bad if they're smoking underage because then they're addicted to smoking for the rest of their Life. And then 30 years later, they've smoked a bajillion packs of cigarettes and then the lung cancer kicks in, right? So that's where it's bad. So you always have to look at these things. And we track youth initiation very closely, as does the federal government. The government has a survey of what products underage. It's called the Youth Tobacco Use Survey. Like what, what, what tobacco products youth use? And, and fortunately, like oral tobacco products are extremely low. Like the lowest, I think, I think hookah is higher. I think cigars might be higher. Which is funny because you don't think about cigars as a, as eventually, oh, a bunch of 15 year olds sitting around smoking cigars. That's not. It's not like an image that you think, as opposed to vapes, which we know are widely used by the youth. So that needs to be very, like, tightly monitored and controlled.

Yeah, I just. There were a few smokers in my family, and I'm like, it really does have a huge effect on people. Like you just Apple computers. You would think that nicotine. I don't know what it is. It's the residue from the smoke, but it just kind of sticks to things.

All over the place.

And you, like, like, if you can actually attack that problem and solve it for people, it's huge. It's like.

Yeah, it is really.

I mean, the more you talk about it, everybody has, like, friends or family that just stop.

Yeah, yeah, yeah. There was. It's interesting. Cause like, like the HBO show Silicon Valley made a lot of fun of tech. People that say, like, oh, we're changing the world with, you know, like, synchronizing data across sharded, you know, data centers or whatever. It's like, okay, like, maybe. And we've actually, for our entire career, like, stayed away from that messaging of like, we're saving the world because, like, it's kind of corny. It's definitely overplayed, and people will pick up on it and then they'll, like, dig into it too much. But it's interesting because even though we're not that, like, bleeding heart company that's going out there and being like, we need to, like, save the world and we need to save people's lives, like, the product does have a really profound impact on people's lives. And I get crazy, crazy messages from people that are like, this one guy was like, they picked up smoking while I was in Iraq and Afghanistan, like, fighting. And I've struggled to quit for, like, a decade. And your product was the first thing that worked for me, that story is just incredible. So, like, those messages that we get are. Yeah, very, very positive and something that you just don't see at a lot of other, like, tech companies. But, you know, I don't. I don't. I don't by any means believe that, like, you can't create a ton of value by, you know, building enterprise SaaS. I think that that's important too. It's just. It's just interesting that, like, we wound up in this situation where we do have a very strong impact on people's lives in a very personal way.

What kind of advice do you often give to young entrepreneurs or new members of The YC batch.

Well, that's, that feels like two very different questions. Because the type of person who's like a young entrepreneur and the type of person who's a YC founder these days with a half a million dollars in their bank account, typically very different people. So for young entrepreneurs it's often like, okay, you have this idea, let's just get all of the basics out of the way. Like you don't need an NDA, you don't need a technical co founder. Like you're 15, you're not destined to be non technical for the rest of your life. I didn't learn to code until I was like 22. I think it's something that you can absolutely pick up while you're still young. So whatever skills you need to build the thing that you're thinking about doing, go and develop those skills and just build a ver, a basic V1 or prototype and MVP, whatever you want to call it and get it out into the world and start that feedback cycle. So, so for like the young early entrepreneur crowd, it's very much okay, let's talk about how can you get feedback on this, how can you build this prototype, how can you, like, let's not talk about fundraising, let's just talk about creating value, building traction. Because unless you have some insane pedigree or some wild connections or some viral marketing strategy, you're not going to be able to raise money pre product or pre traction. Like if you're, if you're young, like even though the markets are crazy, like that's very, very rare that that happens. So, but then for like the YC folks, it's a completely different category because most of those people already understand the importance of having strong traction going into demo day. So it's usually a lot more tactical about, you know, how can you, how can you iterate on the product, specifically, what features can you build, how can you, you know, tweak your marketing and validate that the business model works? And for those folks, it's often, I find that a lot of the stumbling blocks are market size. Just thinking. I mean, one of the side effects of the changing funding environment is that it's very, very difficult to construct a portfolio at a big fund around a unicorn exit. Nowadays the focus is on decacorn exits increasingly. So if you show up with a addressable market, slide in the single digit billions and it's kind of wishy washy and we don't know if you'll be able to get there, you wind up in this, in between spot. Where are you actually building a lifestyle business? Would this be better for a private equity investor or an angel investor who has a different return profile? And then also are you trying to raise at post demo day style prices at 25 million 50 million cap? And realistically the best possible outcome in this particular niche or category is a $500 million exit. Well, 10x return is amazing for a lot of investors, but it's not something that most funds will design their strategy around. So slotting people towards the right investors and the right market size and the right, right problem space I think is a big, is a big one.

If you could see the world in the next 10 years, like what would that look like for you? Would there be different challenges, opportunities, what does that look like?

I don't know. I mean I think that there's a lot of technologies that will unlock really cool things. Space is a big one. We're seeing obviously SpaceX is launching like an incredible amount of rockets. Like it's basically, it's basically one a week now. And that's going to unlock really like a bunch of really, really cool opportunities. So I think the space economy is going to be really, really huge in, in 10 years. I also think AI is going to be really impactful in 10 years. Obviously we're seeing what's going on with, with OpenAI and Dall E and GPT3, but I think just, we continually, we're continually wrong about the impact that things have. Like if you go back 10 years, everyone thought that AI was going to get rid of radiologists. There was that famous quote, I think maybe Jeffrey Hinton, I don't wanna misattribute it, but one of the fathers of deep learning said we need to stop training radiologists. Deep learning has, will solve radiology in 10 years and the amount of radiologists we need actually has increased. And a lot of that's due to the fact that the AI, it's like we're, we're in this like centaur period where the results that you can get from an AI and a human combo are better. Right. And I think we'll see that in a lot of different industries. I don't think a lot of people were anticipating that illustrators and art would be more automatable than say truck drivers. People were definitely thinking that truck drivers would be out of jobs faster than illustrators. But, but if you look at the self driving data versus the dolly results, like it's up for grabs. Like it could be they're kind of neck and neck now. Who knows, maybe we need the, maybe we need the illustrators to go start driving trucks. Cause we have a truck driver shortage now. Who knows. So I think like, like AI is going to change a lot of things and that'll create a lot of opportunity for startups and just new career paths. I think there'll be probably some displacement, but it'll happen very slowly. I don't think there's going to be mass unemployment anytime soon, like a UBI situation anytime soon. I think more, more and more we'll just see like, like there'll be more indie games because of Dolly and that'll be great. Like, and like the indie game market might become a little bit more competitive but really people are just going to want more things and there's going to be more and more room for innovation with like things like oh, now you don't need to spend as much time like doing all this, this texture work or storyboarding so you can accelerate what really matters, which is probably like the core game mechanic and the, and the storytelling behind that that maybe AI isn't as good at. And then I think crypto is probably like the last section that's really unanswered as to where it goes. And obviously like the market's really big. There's a lot of money being made. All of that money is getting reinvested in more crypto stuff basically. I mean there's some philanthropy that's happening but you don't see as much crossover from somebody who made a billion dollars on Bitcoin into their funding and AI company. It's often they're funding an Ethereum thing or whatever. So there's going to be a lot of things there. And I think web 3. 99% scams, 1% super legit and probably going to be daily use in 10 years. So you know, don't put money in that you can't afford to lose. But the technology is very clearly real. You talk to any computer scientist or anyone in the, in the space and it becomes very evident that there is some, you know, fundamental value in product there. And there's already products. Like the big meme is like, like show me a Web3 product that's actually useful. It's not just a coin or nft. It's like, yeah, those exist now there's a skiff is a private Google Docs product that's fully encrypted and people like encrypted stuff. And yeah, it uses blockchain but it's not like a coin that you can pump. So maybe it doesn't get as much attention, but it's there, it works, it's real. And so, like, people are going to start building more and more of those things and the noise is going to die down as people realize what a scam is. And there's probably more regulation on the scams also, hopefully more action by the SEC to clean up some of the junk that's going on to professionalize the industry. But yeah, those are the. Those are kind of the three main areas that I. That I keep an eye on.

Is there any, like, website or anything you want to recommend before we wrap up?

Yeah, I mean, if you're. If you or someone you know are trying to quit smoking, you can go to Lucy Co. That's L u c y.co and pick a product to help you, you know, enjoy nicotine and not consume cigarettes. And I also have a YouTube channel. It's just my name, John Coogan. On YouTube, I post basically weekly videos about tech and all sorts of cool stuff in Silicon Valley, so check that out.