S1 E1: Nik Sharma and Moiz Ali: Why Native Rejected Investors / The Power of Scrappy Branding / W...

This is Limited Supply, the place for refreshingly real takes on what D2C is really like.

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All right, first episode.

Here we go.

Let's go. Twitter was pretty excited when we announced this.

Yeah, Twitter was really excited.

I couldn't believe— you know what sucks is like I keep looking at how many likes your post gets versus my post gets. 'Cause I have like 3 times the followers you do, and you get more likes.

Why is that?

I don't know. I'm like, is my audience getting too saturated?

You know, it's probably— I think I was the person who announced it, so it probably just gets a little bit more attention.

Sure.

I was like the original tweet.

Yeah, Twitter favors you. Yeah.

Uh, but I'm really excited about doing this, and after putting it on Twitter, I got even more excited. There's some things where I'm like, nobody cares about this. I'm gonna stop. This was one of those things where I was like, OK, we gotta do this.

Yeah. When you announced it, I was in Austin, and, you know, the people around me were like, oh, I didn't realize you were doing this. You didn't mention anything. And I was like, oh, yeah, you know, it's just— it's whatever.

Yeah.

We're just doing a podcast.

Yeah, that's right.

Me and Moiz talk all the time.

Yeah, that's right.

And they're like, no, that's a big deal. You gotta tell us when you're doing something like this.

Yeah. Yeah, we have to make it a big deal, I think. Like, we have to make it really good so that, uh, we wanna do it and that other people really love it. Like, the engagement on Twitter really gets me excited, 'cause I'm like, oh, people care and wanna hear about this kind of stuff.

Exactly.

Yeah.

Even now, I just tweeted out, you know, like, I'm about to go talk with Moiz. Drop a bunch of things you want us to talk about. And we got a good amount of stuff here.

OK, fantastic.

Um, so...

But let's start with why we're doing this. And, you know, I think a lot of people would not be— like, you know, I think the reason that I wanna do this, or I got excited about it, was because we would go to all these workout classes, and then we would jam about direct-to-consumer stuff for a couple hours. And then I'd be like, OK, I need to go home and start working right now. And it would just be great, 'cause it was unadulterated, and it was from someone who knows what's going on in the community, which is you, and someone who was like, OK, I understand when people are just giving me bullshit, Yeah. and when people are giving me honest and valuable information. And so I thought that was super valuable. Like, whenever we had that conversation, or every conversation we had, I'd be like, let me go home and work right now, because I'm super jazzed up about e-commerce. I'm like, you know, I just got a bunch of knowledge bombs that I need to go put to use.

A lot of times when I talk to people about e-commerce, you know, you can easily tell when somebody's trying to PR filter what they talk about.

Yeah.

And I think one of the things I love, like texting you like, hey, let's go work out, is 'cause I just know for, you know, 2 hours after our workout, I'm just gonna get to suck all the information outta you too.

Yeah.

And, uh, and it's all like real stuff, you know? And it's, yeah, it's just super valuable. And just the fact that you're, you're such an advocate for bootstrapping is like the other thing that resonates with me a lot because, yeah, I'm Indian too, so I'm—

Yeah, that's right.

And, you know, it's not in our blood to go just raise a bunch of money to do something. It's like, let's put in the work and figure it out and then see if there's that opportunity.

Bootstrapping is great. You can have small outcomes that are really meaningful, right? Like my outcome was relatively small in the grand scheme of things, but incredibly meaningful for me.

Yeah.

And I think it really started back in like 2016, '17, '18. I'm sure it started before that actually, and I just didn't hear about it. But when we sold, and then MVMT Watches sold, and Tuft Needle sold, like all 3 of those businesses had sort of been bootstrapped, grew, were 9-figure businesses. Like I think MVMT Watches sold for $100 million as well.

Yeah.

Tuft Needle was to a private equity firm, and it was less clear, but it was certainly gonna be 9 figures.

Yep.

And that was a ton of fun. And like a ton of like people were like, okay, you know what? This exit strategy or this path for e-commerce makes a ton of sense. In the same way that Andy Dunn had paved the way for digitally native vertical brands and sort of said, hey, this is how you build a brand. Amazon is gonna capture the world. You cannot sell a third-party product and make a meaningful business. With maybe the exception of Chewy, I think he's been right.

Right.

You know, he paved the way of being like, hey, create your own brand. And so did Casper and Warby Parker and Harry's all before us. And they were like, this is how you make your own brand. And then by the time I started Native, and I think MVMT, or maybe Tuft Needle, we were all like, oh, okay, all of these tools that took a lot of money to make are now available for free. Shopify exists. Like, I think you were mentioning, like, the Warby Parker guys, or somebody was telling me recently, the Warby Parker guys were like, we wish we had built Shopify instead of Warby Parker. Right. Like, we built all of the tools to have an easy-to-use, direct-to-consumer business. And, you know, we built the business instead of the software behind it, and the software behind it seems like it's worth a lot more. I think by the time I started, the software was out there and it was really easy to use, and it was a lot easier to bootstrap.

Yeah. I mean, even just thinking, like, from 5 years ago, when I was at Hint, we were manually pulling reports daily.

Yeah.

Of, like, all right, what was our revenue? What was our, you know, number of new customers versus existing? And now that's just all— it's just all there. It's all free, and it's all available.

Yeah. What was the software you guys built Hint on? Was it on Shopify?

Uh, so Shopify is what I was able to get us transitioned to.

Yeah.

Initially, it was on Symphony Commerce, which was— the idea was, like, it's an online platform and a 3PL. The problem was, like, if we wanted to change the color of the add-to-cart button, you had to submit a ticket to their customer service team, and then they would route it to the product team, who would route it to developers, and then it would take the same amount of time for the information to come back. It was a horrible experience.

Yeah.

You know, and with Shopify, obviously, you just one-click and you're done. Yeah.

Oh, wow, Hint is still on Shopify.

Uh, yeah. I was—

friends with the team at Olly Multi, like the gummy vitamins. And, you know, their business was primarily brick-and-mortar. And when I was starting Native, I was like, what software do you guys use? And they're like, we use one by our 3PL. It's built by our 3PL. They're like, you should use it. I was like, that sounds like a terrible, terrible idea. Like, first, you can never leave that 3PL.

There's no out.

Your whole website is like, you know, dependent on that company.

Yeah.

And so I'm glad that was a smart move for you to transition.

There was only one other company that did it, and it was actually, surprisingly, a Pepsi company called Drinkfinity. They didn't last.

Yeah.

Um, they're one of those, like, you know, flavor pouches you pop in the bottle and it looks like it just pees right in with flavor.

Yeah. That makes sense for Pepsi, 'cause, like, the only way to change a color at Pepsi is probably to submit a ticket.

Right.

Like, that's the only thing. There's not a guy who's like, you know what? I think we should change this color. Let's do it right now. He's probably like, we should submit this ticket.

Yeah, exactly. Let me go get approval real quick.

Yeah, that's right. Um, okay, so before we get too far into the podcast, I think it might make sense, since this is our first episode, to talk about who we are.

Yeah.

'Cause there's, at one point, like, you know, I'm not sure who's gonna listen to this podcast. It might just be the people who follow us, or like, you know, the DDC community who knows who we are. And, you know, there may be one new listener once.

Sure.

So why don't you start by telling a little bit about, you know, Nik Sharma, Sharma Brands, Hint, all that kind of stuff.

We should do this, and then we should give like 1 or 2 sentences on each other for all the stuff we left out.

Okay, great.

Yeah, yeah, great. So I'm Nick. I always start by saying I'm Nick and I'm Indian. So I'm Nick and I'm Indian. And, you know, I kind of got started in this world of marketing when I was much younger. Back in high school, I started doing social media management for a few different celebrities, which actually comes back full circle, which I'll get to in a second. I did that for a couple of years, didn't really get the best grades in high school, ended up joining an ad tech company in San Francisco, spent a couple of years there. Learned all about ad arbitrage. Like, how are we getting those guys at the bottom of the articles on the Taboola feeds? How are we getting them on Facebook? And how are we getting them even cheaper cost per clicks? So did a bunch of that. And then I joined a company called Hint Water, which is a flavored water company, which you happen to be an investor in.

That's right.

And spent 2 years there, built out the e-commerce and digital side of that business. Then I came to New York, joined an agency called VaynerMedia for 2 and a half months, realized that the agency life was not one I wanted to live. And then I started consulting here and there. So everything from, you know, a beverage brand like Lemon Perfect all the way to then Cha Cha Matcha. And then it just started getting bigger and bigger— Pill Club, Roc Nation. And, you know, eventually that kind of snowballed into what Sharma Brands is today, where we just consult with different companies. We either have launched them like we just launched Feastables by MrBeast and Give Beauty by Gwen Stefani, all the way to companies like Crocs, Bacardi, Beam Suntory, and then everything in between, you know, the Pill Club, Solawave.

And so is most of your time spent helping companies determine like their tech stack and building out their site, or is most of it spent, you know, looking at ads, or is most of it like where— or is most of it spent doing CRO? Like Between those 3 buckets and possibly a 4th bucket, what percentage of Sharma Brands does each, I guess? Like, you know, is 25% of it building out websites, 25% CRO? What does it look like?

We take this approach, which is like, you know, so we only work with 5 brands at a time. What that allows us to do is like create insanely custom scopes, you could say, for each client. So for example, a client comes to us and says, we are spending, $20 grand a day on Facebook, we need to get to $50 grand a day without losing efficiency. That's our end goal is efficient spending at $50 grand. And then that will then waterfall into a handful of things. CRO is definitely a huge part of it, building out landing pages, testing different merchandising and price points and messaging, developing new styles of ad creative. You know, sometimes that'll even mean like we'll come to the table and say, hey, we think we should be putting out advertorials or whitelisted influencer content, running media behind it. And so we'll take care of all of that. The idea is like we put together this whole kind of playbook and then everything that we present is something we can do. So if that means, for example, you know, with Feastables, one of the things was we want to be able to get reviews in really fast because we know the power of having so many reviews. So that then waterfalled into, all right, so we need reviews fast. Let's go get a reviews platform. that is doing betas and alphas with SMS companies because we know that this Gen Z consumer, it's rare that they're gonna open their email and click something. But if we can text 'em and say, hey, send us a review, and they can reply and that becomes a review, we can get that review pretty fast.

Wow.

So we've got the review platform and we know we need an SMS platform, and then everything also has to be on brand. So the review platform, you know, we'll go find a platform. In this case it was Okendo, and then we'll go, we'll go and negotiate on the client's behalf. So we're not getting market rates. We're going in and getting better rates. And then same thing for SMS. We use Postscript. So we went in, we negotiated with their team, and then even a step further to make it on brand, you know, for MrBeast, we got the phone number 69420 'cause that's on brand for him. You know, and then implementing all that and putting it together so that it actually ships at the end. And so like, that's like one of the little pieces of that big scope that we pulled off for Feastables.

OK, so you said you work with 5 brands at a time. What are the 5 brands right now?

Oh, I don't know if we can do all of them.

OK. What are 2 of them?

Sure. We'll say Feastables is one of them. We'll say 100 Thieves is another one.

100 Thieves? OK, gotcha.

Have you heard of 100 Thieves?

No.

So, 100 Thieves is like... You know, there's this whole industry of esports and gaming. Yeah. Um, they're basically the biggest company there.

OK, so it's not this clothing company that's called 100 Thieves.

Actually, it probably is, 'cause that's their merch that they sell. Got it. OK. So, Sharma Brands is one big part of my day. The second one, we have this branded content studio called 1180. And 1180, it's actually the penal code for speeding in New York. So the idea is, like, we're fast, and, uh, we'll acquire customers a lot faster than you. I love it. Um, so with that, we create a bunch of branded content, written and creator content, and we run all the ads. And the idea is, like, we can just acquire customers more efficiently than you can.

You know who was doing that for a while is, um, The Fascination.

It was very similar to The Fascination.

Gotcha.

Different in the sense that— so, like, The Fascination would create content and put it up, and that's pretty much the end of that engagement. You can pay The Fascination to license their Facebook page and Instagram page to run the ads.

Got it.

With us, it's like, you know, Milk Bar comes to us and says, hey, this is our current CPA internally, and this is what we have coming up in terms of launches or what we wanna promote.

Yeah.

And also, this is our goal CPA. So I'm just making up numbers here. Let's say our internal CPA is, uh, $25. Our goal CPA— goal CPA means like if we hit that CPA, it's— we've got an Amex Black Card. We're spending as much money as we possibly can.

Yeah.

You know, our goal CPA is $20. And so we are now incentivized to create as much content as we need to to hit that goal CPA and then just basically scale.

Yeah.

So that's what's awesome about 1180. The third one is one I just started a couple weeks ago, which I think was heavily inspired by you and also just listening to the My First Million podcast, 'cause everything is all about bootstrapping. And that's a business called Hooks, which is just like, we just make landing pages as a service.

Got it.

And so, you know, with Sharma Brands, one of the biggest asks we always get is, hey, I have this product launch coming up, or we're running this sale, or Black Friday's coming up. Can you build us a landing page for this? And we were doing them one-off for some of my portfolio companies, but it was just taking away from the core business. And so I just thought, all right, I'm going to pump this in my newsletter once and tell people to fill out a form. Yeah, they would do this. We got a ton of signups and then that was enough validation for me to launch.

Are you using your own custom software to build landing pages or are you using like—

No, we use Unbounce. Okay. Yeah. And the idea is that, you know, if you go to most landing page vendors today. Yeah, they're all building on custom code, which is great because you can get super custom. Yeah, but it's just like you can't edit it as a marketer. And again, it's like you have to submit a ticket for sure.

And then what's the biggest win you've had recently building landing pages? Like what would— like, you know, for Feastables, because you talked about that brand or 100 Thieves.

Yeah.

Or another brand that you can talk about. Did you build a landing page and you're like, wow, this really worked?

One of our OG wins on the landers is actually with Caraway.

Okay.

And with them, we were able to drop CPA by 30%.

OK, and what was the win?

Uh, the win was just better conversion.

But was it like an entire redesign, or were you like, you know what?

We moved reviews to the top. Oh, no. So this is what we did. Yeah, so we... So we did a couple things. One is we just looked at all of the customer service inquiries and all the Facebook comments and just said, all right, what are people asking about?

Yeah.

We made a list of everything people ask about, and then we laid that out on the page. The other difference is like with the landers we make, we make them look like they're not product pages. We make them look like they're microsites. The idea is that somebody comes to this page thinking they've just gotten to the homepage, but it just takes one scroll till you're at the end. And by the time you're at the end, you're pretty much convinced. Yeah. So a lot of it was driven by social proof, especially because the price point is high.

What were a couple of the things that you found that they didn't have? So you said like you looked at their customer service tickets and their Facebook messages. What were the things that you're there like, okay, you need to emphasize these 2 things?

Well, there was 2 things. One was just the fact that, like, you— if you go to their site today, you have to click around.

Yeah.

To get to the product page and, like, to get to the information. So the biggest win was just putting everything there.

Got it.

So that, uh, you don't have to click around.

Yeah.

Have I told you about the Kim Kardashian saying that I have?

No.

So I always like to say, like, your potential customer is Kim Kardashian walking the red carpet. You as the merchant are the assistant to Kim on the red carpet. And if she has to go anywhere to get information at that time... You're fired.

Yeah.

You're done. So that's how we treat it. Now, one thing I will say that we do, which I think everybody should do, is— so, a lot of times the first thing we ask for is, all right, where can we go find your reviews? And so Caraway, for example, has, you know, tens of thousands of reviews. And so what we'll do is we'll spend an hour, we'll read through all the reviews, and we'll make a list on the right side with tallies. So, If somebody says, "I love the way these look on my countertop," yeah, we put you know aesthetics and yeah, yeah, yeah, I'm with you. And then we'll reverse the page to say, "All right, we're going to start at the top, focusing on whatever gets the most, and then you know slowly work our way down." Yeah, that makes a ton of sense.

You're just saying, "Okay, what do customers care about the most?" Or exactly where's the biggest end when it comes to complaints?

Yeah.

Okay, awesome. And when did you start Sharma Brands?

When or why?

When.

No, I know why. January 2020.

January 2020. Wow. So 2½ years old.

A bit over 2 years.

Wow. OK, that's bananas. I just feel like you've been associated with it for 50 years now.

Yeah.

So I assumed you started it at the turn of the century.

Yeah.

The last century, actually.

Right.

Uh, that's awesome. OK, fantastic. So let me tell— like, I'm supposed to say one sentence about you?

Yeah, or 2 sentences.

You and I met in Vegas at ShopTalk when you were still at VaynerMedia. And I thought it was ridiculous that you were working there. And I remember us meeting, like, you know— After we met, I was like, hey, let's chat for 5 minutes by ourselves.

Yeah.

And I was like, you need to leave. And you're like, I'm already leaving. And I was like, this guy knows what he's doing already. 'Cause I was like, it was a ridiculous pitch that I heard from VaynerMedia. And I was like, um— Like, I remember someone telling me, GaryVee turned down $500 million to sit on the board of a company. And I was like— When someone said that to me, and I was like, I don't think you know what $500 million is. Like, you know, Barack Obama is not getting $500 million. Barack Obama, Bill Clinton, George W. Bush, and Donald Trump could join a board and nobody would pay them $500 million.

Right.

Like, the CEO of P&G gets paid $18 million a year.

Right.

Not $500 million a year.

Yeah.

Uh, you know, I was like, uh, this is an insane amount. Like, Tim— you're talking about Tim Cook-level money.

Right.

And, um, that was when I was like, OK, I'm not sure what people are thinking about at, uh, VaynerMedia. And, uh, we had that conversation, and you're like, yeah, this is, uh— I'm on my way out. Yeah.

And so I was like, OK, good.

You know, I've talked to Gary Vee. I think he's great, and I think he's much more realistic about life than some of the people, some of his disciples.

Yeah.

And so I appreciate that. I just thought that there was a lot of blind faith going on in that organization when I heard that.

Yeah.

Okay, awesome. I'll tell you who I was. I was a lawyer. Mine's much shorter. I was a lawyer, lawyer for 2 and a half years. I quit. I started an e-commerce business back in the flash sales space back when that was a thing in 2012. We sold it to a family office in 2013. It was 18 months later. The family office owned Books-A-Million and TNT Fireworks and some random businesses. We were probably at a $5 million run rate. We sold the business for $7 million in November of 2013. It was bootstrapped as well. I moved out to California, started Native, raised about $500,000 over the course of Native's life, and we sold the business for $100 million to P&G. I stayed on for about 2 more years after we sold the business. left at the beginning of COVID and sort of been doing nothing since then. We weren't entirely bootstrapped. We'd raised $500,000. I'm not sure if I've told you this story. Our first investor was this Chinese guy named Wei Guo. Have I told you this story?

I think so. When he, he has his baby and—

Yeah, yeah. It's such a good story.

It's a good story though. Tell it.

I'm gonna tell it. Yeah. Uh, you know, I texted him right when we were selling the business. He was a great investor. He was like, I'd see him once every 6 months.

Did he put all $500,000 in?

No, he put in $50,000.

Okay.

He was the first check, $50,000 at a $5 million valuation.

And how, how, like, how, how soon after you started the business was this?

Probably 3 months after.

Okay.

And he was like, this is a high val— he's like, this business is nothing right now. And I was like, yeah, it's nothing, but gimme some time. I think we've got— and you know, I remember pitching to him. I pitched to him and within 30 seconds of me opening my mouth, he was looking at his phone. And he was also like pretty Chinese national in that he didn't speak English really well. Yeah. So I'm not sure he understood a lot of what I was saying. But, you know, I finished my pitch probably in 15 minutes. He listened to a minute and a half of it and he's like, I'm in. I'm either gonna write a $50,000 or $100,000 check. Let me decide and I'll get back to you. And I was like, okay, great. And, you know, a week later, like some of these things, some guys never write checks. They just say that and they won't write their check. I was like, $5 million valuation. He's like, this is a high valuation.

And what were you doing in revenue then?

God, probably like $20K a month, maybe $10K. Like some of, like, you know, Less than $100K, less than $50K probably. In fact, less than $50K for sure. And he's like, well, this is a high valuation, but I'm in for $50,000 'cause I said I was. So he wired me the— I had to go create a bank account for the business actually, 'cause at the time I was using my own personal bank account.

Yeah.

Like Stripe was depositing money into my own personal bank account. I was like, okay, now that we're taking outside money, we actually need a bank account. So I created one, he wired it in there. This was November 2015. 2 years later, we sold the business less than 2 years later, 'cause I think he wired November 15th. We sold like November 7th. November sixth, I text him in the morning and I'm like, "Hey, Wei, I need to chat with you over the phone. Can we chat right now?" And he's like, "Is this an emergency?" And I was like, "Yeah, it's pretty urgent. I got to tell you what's going on, and I need you to sign documents." So he's like, "Give me a call." I called him up and I was like, "Hey, we're selling the business to PNG. It's $100 million. You put in $50,000. You know you're gonna get about a million dollars." And you know he's like, "Fuck, fuck, fuck." All he would say. I was like, "We're selling the business to PNG." He's like, "Fuck." And I'm like, "You put in $50,000." At $5 million valuation, we're 20x-ing it. He's like, fuck. And I'm like, you're gonna get $1 million. He's like, fuck. And I was like, uh, I need you to sign documents. And he is like, I asked you if this was urgent because my wife just gave birth to my first son.

Oh.

Uh, but he is like, this is the best news I've heard all day though. The sale, the money he's getting is the best news I've heard all day. And I was like, I love this guy so much. He's such a fantastic human being.

Did he name his baby Native?

No, he didn't. He should've. Uh, you know, I remember I, I went on a, I, you know, uh, we were on a panel together. Yeah. A while later. And I was like, do you remember this story? And he's like, yeah, I remember it. And he's like, that was the right thing. I was still— I still agree that that was the best thing that happened to me that day. I love him so much.

That's amazing.

He was a great guy.

When did you raise the rest of the $450,000?

Yeah, so we raised $50,000 from him. The next $250,000 we raised from Azure Capital. So the same guy that introduced me to Wei introduced me to Azure. His name's Mark. And so Azure, I talked to in like December and they were like, no, get the fuck out of here. In January, I talked to them. They're like, go fuck yourself. In February, I talked to them. They're like, get the hell out of here. I just update them every month and I'm like, here are my new numbers. Here's my revenue numbers. And they're like, don't email us all the time. Actually, they weren't like that. They were like, just keep emailing us with your numbers. And so it went from like $50,000 to $100,000. And then in April they were like, okay, let's have another meeting because something is working here. And I met with them. They're like, okay, we're like, you know, they had a photo of like the deodorant aisle at Whole Foods and they're like, how are you going to compete with this? And I was like, I don't know.

Whole Foods?

I was like, I have no idea. We're just selling online. I don't ever think about these other guys. And so who knows? And, uh, there was another guy, like, you know, before I walked into the, like, the partner meeting where there's like 3 or 4 partners, uh, asking you questions, I'd sort of already got one guy to buy into it. Uh, you walk into the other partner meeting and there's other partners, uh, the general partner meeting. And, um, I researched a couple of the other partners and one guy was like, you know, he had this spiel about Amazon. Like he had written an article and I read it and I walked into the meeting. At the end of my speech, I basically regurgitated the spiel that he had given. And he's like, this guy is so smart.

Genius.

Yeah, he's so— I couldn't believe— he's like, this guy is so smart. And I was like, thank you. Uh, and they're like, okay, great, we're gonna write the check. And I was like, I just read something you wrote and just spit it back out to you. And they're like, this guy's really, uh, smart. We gotta give him the money. Anyway, they wrote $250,000.

So that was the real— What was the purpose of the capital, by the way?

You know, I—

how much did you start with? Because you sold for $7 million.

We had a partner. We sold for $7 million. Yeah, I got half that.

How much did you put into Native?

Probably like $1,500. Oh, very, very little amount of money.

Yeah. Okay.

Almost nothing. Uh, and like, you know, we— the first $50,000, you know, we might have needed. I don't really remember. The $250,000 we definitely didn't, because at that point we were making money. You know, we were doing 6 figures a month. They wanted to be in it. And to be honest, I was in San Francisco and I was like, we Winning means that you raise money.

Sure.

And so I was like, I'm gonna get a TechCrunch article. That's very successful. Yeah, I'm gonna get a TechCrunch article, and that's how I know I'm successful. And I'm gonna get invited to all these cool parties, and everyone's gonna pat me on the back, and I'm gonna get a bunch of merch that says Native on it.

Yeah.

And I'm gonna send it out to people.

Like your backpack here.

Yeah, like my backpack here.

Yeah.

And that's, that's how I know I'm a real business. And so we raised this $250K, and we didn't like really use it, and we didn't get a TechCrunch article. Yep. Nobody knew we existed. And so I was like, okay, well, I guess we're gonna go back to work.

Yeah.

And then we were like, you know, growing. So, you know, January 2016, we did $100,000 in revenue. By April, we did $130,000, $140,000. By June, we were doing about $250,000 a month with probably 10% margin. So $25,000, $30,000 in profit a month, maybe even a little bit more. And by November, we did $1 million a month.

Wow.

And so now, you know, we're doing $1 million a month and generating $100,000 in EBITDA a month. And I'm like, okay, this is kind of real money. Like, you know, my bank account, like this, I'm making $1.2 million a year. I'm 29 years, I'm like, no, I'm probably like 32 years old. And I'm like, this is pretty good.

Yeah.

Then I start talking to like people who I think can be helpful. I raised $25,000 from this guy named Jeff Hollander, who is the CEO of Seventh Generation. I raised $25,000 from the CEO of Thrive Market. His name's Nick Green. So that's another $50,000. And then the, I raised $25,000 from these guys who were partners at Encore Capital. Their fund tried to invest, and I was like, "Look, I don't want this much capital on the balance sheet, but I really like the partners." One guy was named Kevin Murphy, and so he's like, "Can I invest?" And I was like, "Yeah." He's like, "Me and my friend are going to invest. We're each going to write $12,500 checks." And this was amazing. This was like late in the game too.

And then what was your valuation there?

Oh, it was pretty high, like thirty, forty million. Something like you know, it was twenty-five thousand dollars. I was like, you know, if it's thirty million or forty million, it's not going to kill me. And then we raised one hundred fifty thousand. from this guy named David Marcus, or maybe it was $100,000, who was the head of Facebook Messenger.

Smart.

And I was like—

That was your guy then.

That was my guy. And in reality— And then he got fucking banned. Yeah, in reality, that really never happened.

Yeah.

Although I was like, I thought about it that way.

Right.

And you know what I love about guys like him? They think so big. And like, when we were selling the business, I was like, you know, we're gonna give you $300,000 or $400,000. And he's like, Moiz, this can be the next P&G. Like, you know, You don't need to sell here. You're thinking you're gonna get $100 million. You could get $10 billion. And looking back on it, and also with the capital in my pocket and feeling a lot safer financially, I'm like, that guy was right. And I just didn't think that way. And same with Azure Capital. When we were selling, they're like, you should call up the guy at P&G and be like, don't sell it for— we're not gonna take $100. We need $125 now. And I was too big of a pussy to do that.

Damn.

And he was right.

Yeah.

Like, all of these guys were right. And it's hard when you're in my shoes, 'cause, you know, I was 32, 33 when we sold the business. You know, I had some money, I had a, you know, a million or 2 in the bank, but my business was worth a lot of money.

Right.

And I was probably like a 93% shareholder.

Yeah.

We had $10 or $12 or $15 million in cash and inventory and assets. Like, that was gonna pay off all of the investors, the banker, the lawyer, all that kind of stuff.

Right.

So I was gonna walk home with close to $100 million on closing day.

Right.

And so I was like, that's so much money and such a life-changing amount of money.

Yeah.

I like cannot say no to that.

Yeah.

And I still feel that way. Like, go, you know, putting myself back in my shoes at the time.

Yeah, you still do it.

I'm like, I made the right decision.

Yeah.

But looking at it today in the shoes that I have now.

Sure, yeah. Grass is always greener.

Yeah, the grass is always greener.

Yeah.

You're right. And so that's sort of the way it went. That's who we raised money from and the path we raised money from. And the guys who were most helpful were probably the Azure Capital guys. and Nick at Thrive Market. And, you know, David was great 'cause he's, he just knows everybody. And, um, he introduced me to another guy whose fund I invested in, Mickey Ribbit at Ribbit Capital. And, you know, Mickey's great, David's great, but Paul from Azure and Nick at Thrive, like, I would call them up when I had problems. And the best part was they would never call me up. They were like, you do your own thing.

Yeah.

And when I called them up, they're like, where's the business today? And then they're like, okay, what's the problem? And when I had a problem, they never made me feel like I caused it. They weren't like, why did you do this? Why did you do this? Why did you do this? They're like, we're in it together. How do we solve this?

Yeah.

And that was an incredible feeling. Like, they made it— this sounds ridiculous because it feels like it's, uh, they're my girlfriend or we're like in a, you know, significant other relationship, but they made it a safe space to talk about problems.

Right.

And I feel like a bunch of investors don't, including a bunch of investors that I talk like, you know, I'm on the board of a few businesses and I'm like, this board is not a safe space for the CEO to come talk about problems. I would hate to be the CEO here.

Yeah.

And these guys didn't do that, and that was really fantastic. And whenever I, like, am an investor in a business, I wanna make it a safe space.

Totally.

But yeah, sold the business, have invested in a bunch of businesses. You and I have invested in a couple together. Okendo, Postscript. God, is that the only 2 that we've done together? No, Cadence.

Cadence, yeah. That was a hard one to get you in.

Yeah, I was just, like, busy and not paying attention to it, but the numbers spoke for themselves.

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All right, so a couple sentences on you. So yeah, obviously we met at ShopTalk. Actually, the funniest thing was I remember just walking around there and thinking like, wow, I don't know a lot of the people here.

Yeah.

And then I see you, like there was a taco, it was tacos being catered over there, like inside. And I remember right outside, like under the awning, I remember talking to somebody and then over their shoulder I saw you and I was like, oh shit, that's Moiz Ali. And then, uh, we walk up to each other, and I was like, hey, you're Moiz Ali, and you're like, you're the other brown guy, and he cowers.

Did I say that?

Yeah.

That's hilarious.

And I was like, oh, this guy's dope. But yeah, no, I think I've always enjoyed just chatting with you and just shooting the shit, because, like, as you can tell, you're very blunt. And so there's never a filter of, like, oh, this has to sound good or it has to sound pretty. So yeah, I think this will be an exciting podcast for all those reasons. Me too.

I bought a Last Crumb VIP membership. I don't know how much it's worth.

You did that? It's like $1,000.

Yeah. And I probably spent $4,000.

Did you invest in Last Crumb?

No, I didn't.

Okay.

I probably spent $4,000 because I send out so many gifts to make up for my bluntness where I'm like, I was blunt the other day. Here's a box of cookies to make up for it.

That's amazing.

And that's been, uh, people love it. They're very forgiving when they get that box of cookies.

That is such a fascinating business to me because it's built so backwards. Like, We were gonna do a Valentine's Day promo with them, or help them set up the digital side of their Valentine's Day campaign. And everything that we thought about from a standpoint of conversion or, like, you know, getting the thing, they're just like, no. They want it completely backwards. And it works so well for them.

It does.

It's like anything that they do, if another business applied, it just wouldn't work. But it's like their brand is so strong.

Yeah.

And, um, they've got this crazy excited base of people ready to go. that it just works for them.

It's just such a good gift, because it's hard to get if you're, like, not a VIP member.

Right.

Uh, the unboxing experience is amazing, and it's expensive, uh, and fun and unique. I think that's what makes it so special. Like, I've certainly spent $5,000 with them this year, uh, just giving out gifts. Like, I look at my credit card statement, I'm like, wow, that's a lot of money I'm spending on cookies that I'm not eating. But the unboxing— they must spend $30 on their box. Like, yeah, the box is so nice.

Box and shipping.

Yeah, exactly.

It also has to ship in 2 days.

Yeah.

You know, because of the temperature.

Yeah, I think they ship it overnight, actually.

Yeah.

Um, and just so we can explain it for other people who are listening and not familiar with the brand, it's basically a brand that does no digital advertising. They drop a box of cookies. I think it's 12 cookies for $140. If you're a VIP member, you get 12 of these boxes. for $1,000 and they might have 24 cookies. I'm not sure. I've actually never gotten a box myself. I've never had it delivered to myself. And so it's a great gift. Do you think it can scale? Can businesses like this scale? Because once you remove the this is really hard to get factor, does it just like disappear or how do you think?

I think it can. So like, so I invested in the business at their last round. Wow.

Okay.

And it was really— I was like, I don't know what the endgame is here, but it is just such a fascinating business. It was more like You know, I didn't go to college, so this is where I'm getting my learnings from. And so I thought the same thing. They just bought a massive commercial facility in LA to just crank out more and more cookies. Yeah. I think the plan is eventually to have some type of evergreen cookie box that's always on, but then, you know, continue doing the drops every Tuesday. The hard part about this business is, like, you know, on one hand, they don't have to do any real marketing, so I don't think they've, like, They've even tested if they know, like, paid marketing in the way that we think about marketing. Their stuff is so organic and earned media driven and influencer driven and waitlist driven.

Does that die? Like, you know, I remember Recess, the brand, you know, Recess, that like—

Yeah, exactly.

For 2 months, they were the biggest thing in the direct-to-consumer community, right? Like, matte cans everywhere. The guy, I think he was on the COVID of Inc. or like, you know, all over. the media. And like, once the CEO tweeted out, we've, uh, have never spent a dollar in paid ads.

Right.

And I was like, I'm pretty sure your sales reflect, uh, that you've never spent a dollar in paid ads. Like, you should start spending a dollar in paid ads. I always wonder if brands can scale without that kind of stuff. Like, Last Crumb is amazing. If you open it up, can you run paid ads? Are people going to be like, great, $140 for a box of cookies? It's not hard to get anymore. It's just a, like, a regular— if it does, it become a bottle of Johnnie Walker Blue?

I think it's similar to how, like, Mad Happy and Louis Vuitton spend their ad dollars, which is basically just pushing the brand, the idea of being a part of that brand. Yeah. You know, like, Mad Happy pushes a lot of content of their celebrities wearing it, or influencers going on trips dressed in all Mad Happy. Louis Vuitton does a lot of stuff, like, with Virgil Abloh, or they'll kinda push these, like, uh, live event videos And it's just like being associated with that identity is what they're advertising.

Yeah.

And then once you're kinda sucked into that, it's like your intent just gets higher and higher. But, you know, Recess is an interesting example, because I believe they did start running some paid stuff, and it wasn't as successful. It's also just like the hardest of the hardest categories to run on paid ads.

Yeah.

Like, beverage is hard, and then beverage with CBD, and ingestible CBD is not really allowed. But yeah, it's, it's tough. I know they came out with like a non-CBD version of their product, which I guess is just like juice, and that's what they advertise. But then they also have such a strong thesis in like, we need to be on brand with everything. And so like, if you go to their site, like, it's not built to drive conversion, you know. I don't think their conversion rate is that great.

Got it.

But, uh, but Last Crumb is just— I mean, to me it's so— I'm excited to see what happens, you know, whether it becomes like $100 million cookie brand, or if it just, like, you know, flops.

Yeah, yeah. To be honest, I've spent $5,000 on it. I wish that was an investment. Like, I'm like, I've sort of invested in you guys. Yeah, that's kind of— I put a decent amount of money in there.

Yeah.

When you're investing in brands, how much— like, what check size do you write, actually?

So when I was doing Masala Capital stuff, it was anywhere from $50,000 to $100,000. Personally, the lowest I've done is like $1,000, and I think the most I've done is $50,000.

Gotcha.

Um, but usually they're anywhere between like $5,000 to $10,000.

Can you talk about the brand that you invested $50,000 in?

Uh, I can't, 'cause it's a huge celebrity brand that launches later this year.

Gotcha.

But there's— yeah, there's a couple at $25,000, and then I think majority of them are at $10,000.

Got it.

Yeah. $1,000 or $2,500 is like if I really love the founder and wanna be helpful to that person, but, you know, I'm not like a big believer in that business, but I just wanna, you know... Be there and be along for the ride, then I'll put $1,000 in. But you know what's funny? I always think about is like, so I mean, you probably get the same, like just a bunch of emails like, hey, this is my product. I'm raising this amount of money. You know, I want to get you in as a strategic. So I'm like, all right, if I'm a strategic, like where's my advisory shares in this offer? Why is that not in the email coming in? And also like, why do I have to put money in to then give you advice? Why not just give me advice? Why not offer me advisory shares and say, I think you'd be helpful. and we wanna essentially pay you in advisory shares to just be able to call you, text you, and be done at that. Why do I have to go dip into my savings?

Yeah, I think you can do both.

Yeah, most of the time I do both.

I'm sorry, I think you can do either. You can be an advisor to a business and never kick in a dollar of capital, or you can be like, I wanna get— I'll kick in some cash and get some advisory shares. But yeah, I mean, I don't know about you, a lot of the pitches I get are so generic When you're selling to customers through a direct-to-consumer site and with landing pages and ads, you need to be a salesman. And when you're selling to— when you're pitching to investors, you need to be a salesman as well. And like, you know, I get emails where people are like, I want to start the first wellness company in the United States. I think I might have mentioned this to you. And I'm just like, where are you? Like, you know, this is— you're 50 years late to the game. Have you been to Target? Everything says wellness, right? Everywhere you go.

Like, entire aisle.

Yeah, exactly. And the aisle is like, you know, Target has selected 20 brands out of 5,000 that have pitched them each year to put in that aisle.

Yeah.

I rarely will invest in a brand where I get cold emailed, although it has happened. Like, I'll get a cold email and I'm like, this isn't really interesting. Yeah, but almost always—

What turns you on from a cold email? Is it like you want to see their CAC, their numbers, how they plan to scale it?

That gives me an erection right away. Like, but in reality, I think that If you're like, hey, here's growth, here's my growth, and numbers that are meaningful. People will be like, I did $100,000 in the last 4 years. And I'm like, I get it, but this isn't going to be an investable business.

You're buying time.

Yeah. So meaningful growth. Certainly a founder who's working full-time on the business. I love founders who have— this is their second business and their first one struggled, because I'm like, okay, you know what works and doesn't work, or at least you know what didn't work, so you're not going to make the same mistakes this time. And, you know, a good product. Like, I think people don't value this enough. Like, I wouldn't invest in Mark Zuckerberg selling, you know, urine in a can, even though he's Mark Zuckerberg. But I would invest in a guy who, like, failed recently creating, you know, Snapchat before it didn't exist or something.

Would you invest in— did you see Adam Neumann just raised $70 million?

I did see that. I don't know what he raised $70 million for.

I don't think anybody knows what actually the product is.

Yeah. Okay.

Supposedly, like, uh, have you heard of like Neutral or EcoCart?

Yeah. Yeah.

I think it's like that for crypto. I think I didn't really look into it.

Okay.

But my first thought was like, oh, a16z led it. They're probably just waiting for their markup and then they're out.

Maybe.

I don't know how—

I think a16z usually like, uh, sits in businesses for a long time. And, you know, they were an investor in my brother's business. And I remember, oh, I've got this great story. So I was in San Francisco when my brother was raising money for a business called TinyCo. Yeah, he was probably like the 5th investment or something like that that, uh, Andreessen Horowitz ever made.

Right.

Uh, Marc Andreessen sat on his board, and so he— they were pitching, and so Salman was driving. Like, you know, I was in San Francisco, and Salman's like, I'm pitching Andreessen Horowitz today, come with me. So I got in the car, we took a Zipcar down there. It was classic Salman Ali. We're 45 minutes late. Salman is like typing the, you know, pitch deck. Like, he's driving 150 miles an hour and typing, uh, on his computer on the way down there, like driving with his thighs. And I'm like, This is classic Salman Ali. I know because that's exactly like, you know, I'd have to read him his biology textbook on the drive to high school.

Yeah.

Because he's like, we have an exam today and I've not done— I've never read this book. So just start reading while we're driving there. And so we get there and, you know, he starts the pitch and Marc Andreessen is like, who is— who are you? I'm like, I'm just visiting San Francisco. I'm this guy's brother. Don't listen to me. And so the entire pitch is in Times New Roman, all caps, size 20 font. And there's like, you know, 10 slides. And Mark is like, I really like the amount of, you know, design effort you put into this pitch. And someone's like, yeah, you know, I'm busy. I'm like running a business. And Mark was like, I found there's a correlation between how crappy the deck looks and how good the business is. Like, the crappier the deck, the better. Like, the founder is spending time on the right thing instead of making a great deck.

Right.

And, you know, Natives was also that way when we were pitching. It was, you know, complete garbage.

Yeah. I mean, I feel like your brand design identity, but was also super scrappy.

Yeah, that's right. Uh, you know, uh, it was a mix of 2 companies, right? That's right. It was a mix of Casper and Harry's.

Yeah.

And I met with the Harry's—

Going back to the site, it's like, it's so obvious.

It's so clear, right? Yeah. Yeah. It's so, so clear. I did hide it.

But it was so good.

In part because I was like, we have no money, we have no designers. I'm gonna spend 30 seconds on designing this site. And I built the first version of the site myself.

Yeah.

And I was like, okay, logo, you know what we're going to do is Harry's just typed out their name.

Yeah.

Why are other brands not just typing out their name? That seems really easy. And I met with the Harry's founder a couple of weeks ago at Soho House here in New York. And I was like, you know, he's like, you know, you did such— he was like very appreciative. You know, he said amazing things about Native and he's such a nice guy. And I was like, you know, embarrassed, but I was like, hey, you know, we stole your font. I, you know, went to your website, looked at the font, and decided to use the exact same one. And that was the image. Like, that is where the research came from. And he's like, yeah, you know, probably that looks like it did. Uh, and I was like, you know, he was very nice. He wasn't like, what the hell are you doing? Yeah, go for it. Um, and then we stole Casper's colors. And I remember their blue was— I remember the hex color still, 00237E.

Yeah.

And I took that blue and put it all over Native. And like, you know, now we've spent, you know, it's a $200 million brand. And it's still using the exact same colors and I'm like, and the same font. I'm like, wow, that brand really worked.

Yeah, that's like another reason I love talking to you is because you just realize you don't need all these fancy bells and whistles that like all these DTC news sites talk about. Like these fancy agencies charge you half a million dollars to build a brand. You know, I think people try to buy a shortcut to building that $200 million brand when in reality they're just getting a PDF with a bunch of designs. And obviously they look beautiful and they look great, but you still have to go build the brand.

Definitely. And look, you know, what do you think that agency is doing? They're going to Harry's and Casper and Allbirds and being like, okay, these are the colors that everyone's using.

Exactly.

Let's go mix those together and create a slightly different brand identity.

Right.

But if you look at like Red Antler brands, they're not dramatically different. Like they often look very similar to each other.

Totally.

And yeah, so I'm all for borrowing from other guys. Borrowing is, you know, I was going to say stealing, but I mean borrowing from other brands and, you know, save I was like, look, we're gonna be able to build 80% of the brand, like, you know, on our way there, and we'll see what happens. And so the first version of Native, the homepage did not have a single stick of Native deodorant because we didn't have any sticks in, like, lifestyle shots.

Yeah.

So it didn't have any. It didn't have a single bar of Native. It just said Native in text.

Yeah.

And there was a photo of a really nice bathroom, and that was it.

Was the domain nativecos?

Yeah.

Why COS?

Great question.

only one that was—

Correct. Yeah, it was the only one that was $9.99. And people are like, is COS stands for cosmetics or companies or what does it stand for? And I was like, I got no idea. Yeah, it was $9.99 and it's still working, so it's fine.

That's awesome.

Uh, and then we got a 3D designer to mock up what the sticks looked like. I was like, okay, this is our logo, this is what the component that we're using for Native— put our logo on top of this stick. We don't have any of these, like, we don't have any photos of it. So he 3D rendered it, and he did a brilliant job. So much so that when we sold the business, we'd still never taken a single photo of Native deodorant. It was still all 3D renders that this guy had made.

Wow.

Like, we'd have a rose coming outta stick of Native deodorant and use that in an email or on Instagram.

Yeah.

3D rendered. Everything that was done was 3D rendered. And he was a guy, he charged like $10 for a 3D image. And I was like, I used to tell my team, I was like, if that guy and I are on a boat and it's sinking and you can only save one of us, save him. Yeah, because he is gonna— like, we need him more than we need me. Yeah, anybody can run Facebook ads. This guy's 3D rendering images in a way that make our product look beautiful in a way that we cannot replicate with actual photography. So just save him. And it was amazing.

That's amazing.

Let's talk about startups and valuations.

Okay, that sounds good.

What is— what are you seeing, actually?

All right, let's start. So, so obviously I feel like we just came off this this bridge or short drive of, like, all these companies, software companies mainly, being valued at $100 million.

Yeah.

Like, companies right out the gate, prelaunch, maybe a couple beta customers. They're definitely not paying. All at $100 million, or some of them maybe over.

Yeah.

And a lot of those— I thought it was almost ridiculous that some of these were raising, because I'm like, well, how are you gonna raise your next round? Like, you're kinda screwed if you don't make it. You're screwed. So there was that. And then I still feel like now I'm seeing just a ton of even like CPG brands, uh, raising at insane valuations. You know, a company, I just saw a company that did $3 million in revenue since 2020 is raising at $35 million. And I'm just like, okay, so $35, you know, by the simplest of VC rules, if that exits at $350, I just don't see how that exits at $350 million.

Yeah. Yeah. You're gonna be— you're gonna have to do $100 million in revenue.

Yeah.

And so you're gonna have to raise a lot more, dilute yourself. It's gonna be a higher valuation.

You'll never get there. Right.

Yeah.

And then, yeah, I don't know. I, I've been passing on a lot of stuff recently just because I'm like, uh, it's just overvalued.

Yeah.

There was one business, uh, which I think you're in too. Are you in Jambies?

No, I'm not.

So Jambies was one where I was like, you know, I saw their deck. I think it was— I jumped in at the $5 valuation, something like that. You know, at first I was always been a fan of the product.

Yeah.

The first time I met these guys, I was like, these guys get it. I love this stuff. They're really scrappy with how they go produce their stuff. And, uh, they thought about, OK, we're gonna go produce in Mexico, 'cause it's cheaper shipping. They're running their own Facebook ads. One of the guys is like a former GQ writer, so he had so much press about Jambies. I just loved everything about the brand, but I was like, "You guys should not be raising money. Like you're a cash flow positive business at this stage. You don't like why do you need to go raise money? You should just keep the whole thing." Yeah. And then you know eight months later, I'm like just finding myself wearing pretty much just jambies during the pandemic, and I was like, "All right, just take my money." Yeah.

I love jambies. It's a great brand. I love the guys who are running it.

Yeah.

Are they brothers?

No, just two friends. Yeah.

And they're just like humble, and they're like, "We know what actually matters and what doesn't." Right. One of the scariest things to me is when founders. founders early on, this is a classic first-time founder mistake. They're like, our customers love this product so much, they're going to share it with their friends, and that's how we're going to grow this business. That is so classic first-time founder. I know because I made that mistake. I'm certain when I was a first-time founder, I was like, people love this. We're going to be huge because everyone loves us.

Right.

And that's true for the first 100, even at Native, the first 100 customers got us the next 200 customers, and those 200 customers got us the next 50 customers, and those 50 customers got us the next 5, and that was it. Yeah, like, you know, at some point that like concentric circle ends because your core group is going to be people who love your brand so much, and then it just starts dying down because people aren't as passionate about the category. Like, you know, there's some people who love pajamas, but most people are like, these are pajamas, I'm gonna live in—

like, also, like, what— where do you talk about that?

Yeah, exactly. Uh, so I think that like that's a classic first-time founder mistake that I try and avoid. And like those guys never made that mistake. I really respect them. They have this great thing that I always talk about, which is they've got a Jambies for 2 people, like you and your significant other.

Yeah.

And I'm always like, I'm not sure how you use the bathroom in this. I think you gotta get out of it, but it's a really cute idea.

Yeah, great idea. But yeah, overall, I mean, I still think a lot of startups are overvalued. I think raising money is also kind of a vanity thing. Like, there's a lot of businesses that probably don't need to go raise institutional funding. They could go Like, I'm surprised more people just don't go to like a random rich person and they're like, hey, let's quietly do this deal together versus like, I'm going to go get, you know, 65 angels and go get 2 top-tier firms and then go get a whole press cycle out of this. But also, like, the people reading that press cycle are not your customers. Yeah, there's a weird thing. But, but yeah, I mean, most— I think most startups right now in this space are fairly overvalued and You know, they almost focus— like sometimes when I meet founders, they're just like, I'm like, so what do you do all day? And he's like, uh, well, you know, I fundraise for the business and the business has its own team. And I was like, okay, well this is not something I wanna be throwing my money in if your job is just to fundraise.

Yeah. Who's the guy running the business? I need to talk to that guy.

Yeah.

Yeah, I think that's true. I think that like, um, there's a place for that VC stuff. Like when we were selling, we didn't do this, but a lot of other businesses, will launch a PR cycle before they go out to market to sell their business.

Yeah.

Because that way it gets other buyers interested. They're like, oh, I've heard of this brand, 'cause it's either too small that I haven't heard of it, or this is a super relevant brand because it just got all this PR.

Yeah.

And so I think that like a bunch of people do that kind of stuff. You know, I think you're right, the direct-to-consumer community has been destroyed from a valuation perspective. Like Rent the Runway falling 80%, Allbirds falling 80%, Hims falling, you know, probably 40%, honest, 80%. Almost all of those businesses I just mentioned have raised more money than the enterprise value of their business. I mean, they've raised more money than their business is trading at today on the public market, and probably raised more money than it would take to buy that business today.

Yeah.

And that's terrifying.

Yeah.

And I think that if you're a direct-to-consumer business, it's really time to batten down the hatches right now and sort of say, okay, What does it take to get 18? Like you know, is this business? Do I have enough cash to last 18 months? Probably 18 months with a little bit of wiggle room to go fundraise more or find a home for this business. And I think a lot of people aren't doing that. Like you know, you got to look at your team. You got to look at marketing spend. You got to look at you know what is the growth of the business? Is there profitability on the horizon? All those types of things that people are not looking at, and it's going to behoove them to look at it. I probably saw two e-commerce failures. in bankruptcy that were for auction or for sale between like 2019 and 2020. And I've seen 6 in the last 3 weeks.

Yeah.

And, you know, businesses that were doing $100 million in revenue are now for sale for $6 million, and still nobody wants to buy them.

That's bad.

Like, they've got $6 million in debt on the business. No one wants to buy them. You know, it's a real red herring of like, hey, the market is— there's gonna be a lot more of these. I think we're in inning 1 because you, you know, you fundraise for your business.

Yeah.

You don't know what to do. Some of the businesses are too large to fail, like Thrasio. People will continue throwing cash at that because they've acquired so many businesses. Like, I don't know if the value— like, the valuations may come down.

I think it came down from like 7.5 to 2.5, something like that.

Yeah, yeah. I've also heard that it already came down. You're right, it's already come down. But like, um, you know, I think it's probably too big to fail and that they can continue to fundraise. The terms might get so bad that, you know, it doesn't make sense for the founders, but, uh, somebody will take over that business. Yeah, I think for businesses that are, you know, in the $50 million range. I talked to an investment banker yesterday, and she was like, I get calls from frantic founders 3 times a week now where they're like, I'm looking for a home for this business because it's not going to last 6 months from now.

Wow.

And, uh, you know who I'm talking about, the banker.

Yeah.

And, uh, you know, that's really scary.

That is crazy.

Uh, and I think we're in inning 1. In the next 6 innings, we'll see a lot more of these. And a lot of them will go quietly because even the ones that I've heard of, you know, they're not publicly bankrupt. Like, they're not on the Street Journal or anything, but they're there, right? Uh, and that's scary.

Is there any common theme among all these businesses that are like going out?

Yeah.

Like, are they a specific category or a type of customer or, um, too low availability?

A lot of subscription businesses, now that you mentioned that. Um, you know, all consumer brands, all direct-to-consumer brands.

Yeah.

But I think a lot of it is also just founders who didn't make tough choices early enough. Like, they were like, you know what, things may turn around. And so, uh, we will fix it. Like, you know, things are gonna turn around in the next 3 months.

Yeah.

So let's not cut marketing spend yet because then our revenue will fall off of a cliff. Yeah. Let's not take a, a hatchet to headcount, which is really hard to do and really sad.

Yeah.

But like, you know, it's either you lay off 30% or 50% of the business, uh, 50% of the employees, or you lay off 100% when you go in bankruptcy.

Right.

And so I think like founders who didn't make that decision early enough, I remember talking to a subscription box business and they were like, they get all of the product, they get all the cash from the consumers, they get all the product from the merchants, they ship out the product, then they pay the merchants. And so the cash flow cycle is really good. You've got cash from customers coming in, you've got free products coming in, you ship it out, and then you pay the merchants.

Yeah.

So you're getting cash 90 days before you have to pay it out. And they weren't thinking about it that way. They were like, we get We use December cash to pay off November merchants. And I'm like, no, you should be using— that's not the way it works. You should be using November cash to pay off December merchants. Like, you know, your cash flow cycle is early, not late. And I think it's just founders who are like, like living on the edge. They're sort of like, hey, we're gonna live on the edge and we're okay with it. And they've got a lot of risk tolerance. And that is scary as fuck.

Yeah.

Uh, 'cause like, you know, I've talked with a bunch of them and they feel sad. And I'm like, you know, that I understand why you feel sad. Like, that's really hard. You put your A lot of blood, sweat, and tears into this business, and it's tough that it failed. And you know, I would feel terrible too. But I'm also like the signs are here. Like you know, the signs were there. Like should have taken a hatchet to marketing spend six months ago. There was one I was looking at, and they're like, you know, we're spending a million dollars a month on marketing now instead of two million. And I was like, you were going bankrupt, and you were spending two million a month on marketing. Cut that to zero.

Yeah.

Like what are you doing here?

Yeah.

You know, you really gotta get in. front of this, and you got to have, you know, at least 12 months of runway in front of you. And if you don't, you got to like start thinking about alternatives right now, like, you know, team, finding a home, fundraising at a down round, all that kind of stuff. And I feel like people aren't doing that enough.

Yep.

Okay, I think that's actually all the time we've got for—

Yeah, we've got a lot of stuff that we can talk about next time. And it looks like on Twitter we got, you know, another about 40 questions that we'll go through.

Okay, that's awesome. I'm also excited to get like— I think this is really fun, like when we do it like this, like we drop a lot more bombs.

Yeah, we're just going back and forth.

Yeah, because we both like understand this space, and so we don't have to explain anything to each other. I'm excited to get like, um, some founders of businesses that have worked and have not worked to be like, hey, this is what happened in my business.

Exactly.

And have fundraised. Like all the fund— uh, investors in this direct-to-consumer seem to have disappeared.

Well, at first they said, no more brands; we're doing e-commerce SaaS.

Yeah.

And then they stopped doing that, and then they said, we're going Web3. And then they stopped doing that, and I don't know what fad these VCs are gonna hop on next. Last night I was at this VC event, and, uh, somebody was like, well, what's your secret to, like, knowing which businesses to invest in? And I was like, absolutely don't follow VCs, 'cause they don't know anything. Most of them have never... Seen anything like on the day-to-day side of this business, and they wouldn't know how to interpret it. They wouldn't know how to read it.

Yeah, I could not agree more with that. Like, I remember there was a partner at some big VC firm who tweeted out and he said, uh, Away Luggage is an amazing brand. Away Travel is an amazing brand because they, uh, live in an, uh, and they have a differentiated product as opposed to Casper Mattress, right? And I remember being like, are you a fucking idiot? These people are selling luggage. Have you never seen luggage before? Yeah, like, I can name 3 brands off the top of my head that sell luggage, and I buy this once every, you know, 10 years. You must be— and he's like, you know, I replied to that on Twitter. I was like, look, avoid VCs, look at how stupid they are. And he was like very upset at me, and I was like, this was a stupid thing to say. And like, you're supposed to come from a place of seeing a lot of stuff.

Yeah.

And, um, yeah, avoid VCs is a good— yeah, you have to be an independent thinker.

100%.

Yeah.

All right, cool. Awesome.

Super excited.

Thanks. Wrap this and, uh, yeah, we'll do this again soon. I think our next one we're gonna have a founder on, and so we'll continue this list after.

Awesome.

Cool.

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