Jake Kassan | Hustle Con 2018

Yeah, yeah, yeah, yeah, yeah, yeah.

What's going on, everyone? So, so I like to keep things pretty casual, so I'm gonna talk to Jake, but I wanna get everyone else involved, so my Twitter handle is @TheSamParr. So if you guys have any questions or want me to ask anything or bring up anything, tweet at me at any point and I'll have my phone right here. But basically, we've worked with MVMT in the past before because we are huge fans and I've known Jake for a little while now. And typically at HustleCon, we get a lot of entrepreneurs who are Silicon Valley based, which means they tend to raise a whole lot of money. But what interested us with MVMT and Jake's story is that this company is only 5 years old and they're tracking to do $100 million in revenue this year in 2018. And that's without taking zero funding. Him and his team own 100% of the business and what they've done is really amazing. And so today we're gonna talk a little bit about how the company started, but also why they've decided to take the bootstrap method versus raising funding. So Jake, thanks for coming here. Can you, you know, what impressive stats did I miss when introducing you? Because I know there's so many.

Yeah, I mean, we're on track to do $100 million this year. We have 35 employees in-house, which is a pretty lean team. To your point, we haven't raised any capital. We launched on Indiegogo. Even then, I was in college. I was about 21 years old, so the only money I had was 18 months of interest-free credit on my Chase credit card and basically ran through that pretty quick on samples and just kind of investing in the initial samples and camera equipment, everything that I needed to really start the business and launch Indiegogo.

And how many units have been sold since you guys started?

Over 1.5 million.

Wow.

Units.

Crazy. Okay, so What I want to hear about is the very first month of business. So like you said, you had a little bit of, you had a very small personal line of credit.

Yeah.

How much was it?

It was $5,000.

And you used that to do what?

So samples were a big portion of that. We were very familiar with Indiegogo and Kickstarter. Back then it was still less known. And I dropped out of college at 19, so I spent my time pretty much studying every single Kickstarter that went up and understanding the dos and the don'ts and why things worked. And I could almost predict when a campaign launched if it was going to be successful or not. So first month was really— we bought a camera from Costco, returned it a week later, spent $60 on a microphone on eBay, returned it a week later. I mean, pretty much it was as bootstrapped as bootstraps can get. But really it was, you know, we designed the watches in-house. We worked with the manufacturers. We found them on Alibaba. We were doing a little bit of everything, and the first month was officially just on Indiegogo, and we launched in June of 2013, and we didn't have money to spend on Facebook or Instagram or anything like that. Those weren't even platforms that were well known at the time to recoup your investment for ads, so for us it was, leveraging websites like Reddit and kind of just doing little growth hacks. I had people in the Philippines upvoting my Reddit post to the number one spot and it would generate $5,000 in revenue. I'd make 100 accounts on Reddit, post something about my watch in different subreddits, and then use a proxy to change my IP address and then upvote.

Was this— this wasn't automated though? This was—

no, this is me. This is like— this is as bootstrapped as you get. I mean, this is studying How to Start an Online Business Without Any Capital.

Okay, so, but you had this $5,000, you got the samples, and the samples, you only had samples, and then you did the Indiegogo campaign. Yeah. And that brought in $300,000?

Yeah, $300,000. So the whole concept is basically show the samples, tell the story, and if you can hit a certain target goal, which ours was $15,000, we ended up raising $300,000, that the business would start. You have enough money to place the initial production run and then continue to buy inventory.

And why watches?

I love fashion and was just fascinated with the watch industry. There was one category that I couldn't really afford many of the products out there. So for me, it was really about creating a product and a brand that represented something more than just a physical good, and watches was something that I really liked from day one.

So you, you use this money to get samples, which you you used to make your video. Then you hacked Reddit, which basically you just created 100 different accounts and posted them all over the place and then commented about how much you loved the product.

It was me talking about how much I loved the product over, and yeah.

Got it, everyone's been there. We've did it. And then once you received that $300K, you guys had found, how did you find your suppliers?

So Alibaba, I don't have a good suggestion on how to find the best manufacturer. Really for me it was communication being one. We only had really one go to get samples made because once you invest in that, if the samples were shit, you're screwed. So for me, it was reach out to 30 or 40 different manufacturers on Alibaba, talk to them, understand who they worked with. I think communication is key because if there's something being misinterpreted or missed because of language barrier, then there's going to be issues down the road. And I think people who work with the United States a lot are just better at communicating. They have someone in— their office that can communicate better.

And you're not like a watch designer, but you told me that you were literally just like, you like sketched, is that what you used to do?

I had very little Photoshop, self-taught experience, and it was a lot of kind of, so it's an in-house service where basically you go back and forth with them, they'll create a digital rendering. So a lot of times they'd miss and we'd go back and forth, back and forth, but it was me cutting out inspiration from different brands or sketching different things. A lot of background. I mean, it took 8 months to get samples. Now we're moving much quicker with a designer in-house, but—

But it was you actually designing the watch, like literally drawing it out or using Photoshop?

Yeah, we tried. We went on like Upwork and tried to find a freelancer, but it just, it was easier for, we knew what we wanted and I felt like we could illustrate that better.

And okay, so you get the $300K from Indiegogo in like 30 days?

Uh, the campaign was 50 days, yeah.

50 days. You get that from hacking Reddit. What did you, so with that $300K, how much went to paying the supplier?

A good portion. Basically it was buy the inventory sold and then spend the rest of the money to buy more inventory, 'cause if this is gonna, it was like, do we either take the money and call it quits or do we reinvest that money into inventory essentially? So we reinvested in inventory, saved a little bit for the website, and then me and Kramer paid ourselves, my business partner paid ourselves $10,000 And then half of that really went to the credit card debt.

So how long was that $10 grand supposed to last you?

That was really— I was just focused on paying off the credit card debt because I was running out of time on that. So were you living at home? I was living in Santa Barbara where we officially started it and then moved home with my parents. And I was on a fast track to get out of there as quickly as possible. So I was—

which, for the record, your mom and your brother work for you now.

My mom, brother, cousin, Kramer's brother, aunt. And sister.

So, you know, we're The Hustle, we're a mostly bootstrapped business and one thing I think about when we first started was it costs money to start shit. Even if you, like, it doesn't matter if it's a restaurant, a website, it costs money to get things going. And it's actually quite stressful to watch your bank balance tick down as you hope your revenue and profits are going up. How close did you guys get to running out of money? Because you guys had literally no capital other than your Indiegogo campaign. That goes fast.

Yeah, I mean, early days, early couple years, I mean, it was kind of, what do we think? Because for us, a big piece of our business is Q4. So come around summertime, even right now, we place big orders for the second half of the year. Pretty much every year for the first few years, we had no idea if we were going to sell through this inventory. We were buying very, very large POs, which would deplete a lot of the cash, and then you'd have to sell it, otherwise you're stuck with inventory, and that's how businesses can die. Fortunately for us, we actually had the reverse issue where we'd sell out too quickly. We didn't buy enough, which was a great problem to have.

Was there times where you were like, I don't know if we're gonna be able to make, like we have to do something in the next 4 days 'cause payroll's coming up.

We were very, very lean. For the first year it was just me and Kramer, we did $1 million that year. I mean we had my, I think my mom was doing bookkeeping or something, but we just gave her free watches or something, I can't remember. And so it was very lean. I mean really it was like, it was inventory and then it was our website, which we actually were gonna launch on Magento, Then we heard of this thing called Shopify. We got a quote for $30K on Magento and then went to Shopify and got a better website for $2 grand. So we were just very lean. It was like, if it's cheaper and we think that it's a sustainable option, let's just go that route. And it turned out to be a better route.

So the first year revenue was $1 million, and that was mostly from two Indiegogo campaigns, right?

So two Indiegogo campaigns. Basically we launched an Indiegogo campaign, did $200K, and then realized, We don't have a website, we got to relaunch. And then we did another $100K on that. And then the rest of the year was just our own ecommerce website.

And so how did you— oh, and by the way, of that $1 million, do you know how much was profit?

I don't off the top of my head, to be honest, but probably, yeah, $300K, I would assume.

$300K. And after that first year, how were you able to fuel growth? Because you guys jumped from like $1 million in revenue to—

7.

$7 million and then like what, $20 million?

$7 million to $30 million.

$7 million to $30 million. $7 million to $30 million. $60 million to $80 million. Yeah. And then $30 million to $60 million to $80 million, now to $100 Yeah. What helped that early growth? How were you able to jump from $1 million to $7 million in just one year in revenue?

Yeah, so we really focused, we really didn't spend any money on marketing year one, but kind of depleted a lot of like, we were doing word of mouth and that had hit kind of a, a certain capacity of it just wasn't growing as fast as we wanted the business to grow, so we started spending money. We were looking for channels to spend money on, whether it was Instagram, Facebook, Twitter. At the time, Twitter was bigger than Instagram. Facebook wasn't really proven out yet, but for me it just made the most sense and it seemed to have like, the backend seemed to be equally as built out as an AdWords Google, so for us, Started testing there and found success early on and were able to convert customers at a really low cost per acquisition for like $10, $15. And there just wasn't a lot of— it wasn't saturated at the time. But I think the challenge back then that I always— people are like, oh, you're so lucky you were able to acquire customers for so cheap. That is true, but there wasn't a clear— everyone knows Facebook's a great way to build a brand now. That wasn't known back then. So we had to kind of— trial and error in so many different places first. I mean, we spent money on Twitter, we spent money on Taboola and other areas, and Facebook proved to be the most successful. And I actually taught myself how to do it. I was running the ads, so I really understood what was right and what was wrong. We actually hired someone off of Reddit to run it initially, and then ended up bringing it in-house. But I think the big, you know, way for us to scale was just acquiring customers for a low cost.

Basically in 2014, this is your second year, Facebook had how many— Facebook at this time must have had close to a billion users, but how many advertisers were there, do you know?

I don't remember off the top of my head.

I believe it was, it went, it's 10x'd.

Yeah.

There just simply was not a lot of people advertising on Facebook, and you were one of the early ones. Yeah. Was the game plan just, as long as we're acquiring users, we're gonna spend all of our budget On pretty—

I mean, for the most part, we didn't want to be overly salesy, but people loved the brand. We were, um, I mean, yeah, we were, we were profitable on every single order. We still, to this day, being bootstrapped, we have to be profitable on every single order that we get. You know, I think some brands that are venture-backed are willing to lose money because they're hoping to recoup that, you know, 6 months or 12 months down the road. For us, it was the day we acquire a customer, we need to make money, otherwise we're going to go out of business. So As long as that was happening in any channel that we're spending on, and it was supporting what the brand represented, I think we were okay with it.

And that year that you guys did $7 million in revenue, how many people were working there at the time?

There's probably like 3 or 4 maybe. Maybe a couple people part-time.

Wow. Yeah. So someone was trying to ask, just tweeted at me, and it's actually a good question to ask now, which was, during your Indiegogo campaign, you were able to get the money and then go and buy the product. How did that change? How did you shift to be more operationally savvy to be able to have inventory at all times?

Uh, you can negotiate with your manufacturer on terms. So now we put down, uh, 20 to 30%, and then, uh, we get net terms once shipped. So there's negotiations like that. You don't have that leverage early on. But I mean, if the manufacturer wants your business, then hopefully they can give you terms. We have inventory planners now who are very sophisticated in kind of mapping that out. And we have a line of credit to help with some of these things. But back then, it was we didn't want to overbuy inventory. So it was preorders. And people would come and buy inventory or buy products on preorders. And they'd be willing to wait a month or two. We ended up pissing a lot of people off if it would take longer than a month or two, but we were a startup and if they wanted the product then they had to wait.

What I'm amazed about is how you just said you guys did— So right now you guys are gonna do $100 million in revenue with 34 full-time employees. You did $7 million in revenue with, you said, 4 full-time employees. What tools were you using to make this possible? I mean, it sounds— You must have had a lot of automation. It just seems like one of the most efficient businesses I've ever heard of in my life.

I think, well, for us, another thing is, you know, watches are one size fits all generally, and Shopify is a big secret, to be honest, to our success. I mean, so many brands would launch on Magento or these other shopping carts, and to do some of the tools or the features that we do, abandoned cart or a pop-up or reviews, I mean, they would have to pay thousands of dollars and have developers involved. I mean, for me it was like plug and play. It was click, test it, I do it all. I mean, I was running the entire website on my own essentially. We paid a developer $2,000 to get the template up. The template cost $150, so I probably overpaid on that. And really it was just me running the website and Facebook, getting the Instagram. We really focused on social. I mean, we would do, you know, the movement was always about our community of people who backed us from day one, so we would always do giveaways that every 1,000 likes we'd get, or we'd offer discounts or store credit if people would refer friends. So really focusing on the community, your first adopters to really spread the word and the movement. And we focus on, again, focused on something more than just a watch. We knew early days that we couldn't just be posting pictures of watches on Instagram. No one want to follow that. So it's more of an experience and a lifestyle. And again, I think all— great brands stand for something more than just a physical good.

Amongst my friends who start businesses around here and end up taking a lot of money is that it seems like they try to accomplish a lot at the same time. And in order to do that, what they do is they add in shit that's probably unnecessary. So they'll think, "We should have this type of social page because everyone else has it," or "We need to have a blog because everyone else has it," or "We need to do this and that and that." And a lot of it's unnecessary, and it's kind of like the 80/20 rule where 20% of your effort produces 80% of the results. And it's almost like you just did that to the extreme. Does that sound accurate? I mean, did your team— was your team telling you like, oh hey, it's going great, let's expand to sunglasses right now, or let's expand to this type of accessory, or let's add this thing or that thing?

Yeah, we've had to stay disciplined. I think early days it was— I was more obsessive over We knew what products we were coming out with. And it took a long time, the development cycle. We didn't have a designer in-house. So we knew coming out with more products took a while. For us, it was how do we get more people to the site that haven't heard about us, whether it's Facebook or Twitter or Instagram or radio or whatever else it was. So I was obsessed over finding different acquisition channels to bring traffic. It's like a retail store. If you don't have any walk-through traffic, you're not going to sell anything. So for me, it was just— getting cost-effective traffic and people who are actually in market for a watch. So focused on finding that and then also optimizing the website. With Shopify, you have a lot of leniency to do that, so I was very obsessed with not other watch brands, but other e-commerce players that I thought were doing a really good job and seeing what tools they were using, what review tools or what advertising channels, and there's a bunch of like Chrome plugins that you can do to see pretty much every script that's on the site and know what they use. I'd kind of go one by one and figure out what worked and what didn't, and then just use my gut. If something didn't make sense to me, I didn't do it. So it's just you got to use your intuition as an entrepreneur when things make sense or don't. There were some vendors that would just charge ridiculous rates to use their service, and there's an alternative that's 10 times less, and we would often go with them and find the same results.

So I'm gonna ask you a couple more questions and then I'm gonna go to my Twitter. So it's @TheSamParr. I'll try to answer some of the questions, so tweet them at me now. But in a little bit, I'm gonna interview one of the founders of Instacart, which has raised many hundreds of millions of dollars. And I believe you guys were doing close to $30 or $40 million before you even had a line of credit with a bank. But I know that you've had had— you still do have lots of people wanting to invest in you guys. If you had to start today, do you think that you still could have done this without any financing?

I think it would be very tough. I mean, I think especially in our space, right? Like we're in our space, so it'd be hard to compete with us. And we're spending on different channels and we're working with different influencers. So it's just hard to compete with what we're already doing. But I think if I were to start over, Now, having money to be able to spend on knowing that Facebook works, knowing that influencer marketing works, knowing I need an optimized website, there's different ways to do it. I think Indiegogo and Kickstarter, some of those places are more saturated. There's still people who are raising money. I think for me, if I were to do it again, because I have a win under my belt, so to speak, I would go and either take friends and family money or an angel investor. I wouldn't go out just to go raise money though. Because then you're setting yourself for extremely high expectations potentially. But I think it's doable. I think the ways that I built the brand on Reddit and so forth, those may not work today, but now you have Snapchat, you have Twitch, you have all these other channels that I believe there's opportunity in that big brands are overlooking because they don't have time to invest. It's not scalable yet. Facebook is scalable, TV is scalable, but Reddit wasn't scalable. We don't even do it anymore. Maybe it works, maybe it doesn't, I don't know, but it's not scalable for us. But for starting off when you have no money, it's a good way to generate $10,000, $15,000 in cash.

And you, so you were able to get to low tens of millions in revenue doing these somewhat hacky things like Reddit?

I used it, I mainly used it year one.

Year one.

And I just, it just wasn't, well, basically all the communities of Reddit started to catch on and like someone did this witch hunt and found out that I was doing this. Called me out and I got banned from Reddit. So that didn't work anymore. But yeah, early days, I mean, when you're on Indiegogo and Kickstarter, there's millions of people on those websites. So I think it's important to— you have to leverage and get as many people to that page to convert. And the more you convert, the more sales you generate. Their algorithm works in the sense that you go to the popular page and they send you out an email. So really for us, the reason we won on Indiegogo is because we were able to generate our own revenue, even if it was $10,000, $15,000. and then the Indiegogo system tool put us in an email. We generated $30,000 in a day, and then we got on the homepage. And so I think for us it was just those little things that no one else knew what to do, and that's really what helped us.

Okay, and now you guys, you guys are way beyond just advertising on Facebook or doing direct response ads. You're on— I mean, I hear you on every podcast. I see you personally doing commercials on TV. How are those things working? I mean, that's like a huge gap. It seems like creating a Facebook ad, it takes literally $100 and 30 seconds.

Yeah.

And it seems like going to TV is just way different.

Yeah.

How's that stuff going?

The barrier to entry is definitely more difficult for something like TV. You need a produced spot and just buying ads and testing. You need capital to do that. So we're in a place where we can go and test that or test radio or podcasts.

Can you reveal how much it costs to go in to do a national commercial?

We're buying remnant, so it's like available spots. I don't know off the top of my head though what a typical spot goes for. I think it depends on what channel and what time and if the NBA playoffs are going on or what. But yeah, it's just been a strategy of testing different channels and seeing what's worked. I mean, we've done Pandora. We've done regular radio, TV. Direct mail. I mean, we've done literally everything you can think about other than billboards. But eventually we'll probably do that too.

And so is— are you seeing results from the TV and podcast ads?

If we're doing it and you see it consistently, we're seeing results.

Great. All right. I'm gonna answer some of these questions from Twitter. Someone— a couple people actually asked about the margins. They're talking about $300K profit on 1 million sales in year 1. Have your margins been able to stay the same or increase?

Typically, in terms of product margins, typically as you scale, you're able to work with your manufacturers to get better margins.

There was a question in here about since you guys were a first mover or one of the early movers with Facebook and a lot of the new direct response ads, where do you see— what's the next frontier for marketing?

It's hard. I mean, I'm really excited about Twitch, to be honest.

Is that where you're going to put— is that a bet you'll make?

I think we're doing some tests there. I don't fully understand the ecosystem there yet, but I think that there's definitely— I mean, there was that stat about, I think, Ninja versus— I don't know who the— I think maybe Drake or something, and Ninja had more—

Explain that to folks who don't—

So Ninja, I believe, is some— it's like a Twitch video game streamer, and then I think it was— going off of Drake's Instagram and just saying that Ninja had more impressions, more people that were watching him in a given month or whatever it was. I don't remember the exact stat, but those are things that I think large companies are just unaware of right now, and I think there's still arbitrage that you can go there and scale when no one else really understands it. Influencer marketing, when we started, influencers didn't know they could get paid to post, and we just said, "Hey, we'll pay you, we'll pay you." So we'd spend $100 and then sell 10 watches, and we're like, "Okay, we'll do that all day as long as it's going, and then other brands come up, and now you can't spend $100 for anyone to post.

It's way more.

Yeah, thousands.

That's crazy. What's the— can you reveal the most expensive influencer you've paid?

Uh, I won't say who, but we spent six figures on one post.

What did you get back from it?

Not six figures.

So we only have a few minutes left, and a lot of people are asking questions about what you— what do you think you should have done back when you were starting that you didn't? And I phrase it a little bit differently, but what's one thing that we haven't talked about about your experience without raising any funding to build a big business? What's something that— something that either A, you wish you would've known, or something that people often don't assume is the truth about that?

Yeah, I don't know if there's a specific thing I can give, but I think for me, one of the things that I did is I used LinkedIn and just networks to go and cold reach out to people that I wanted to network with, and I figured that, and honestly, early days, it wasn't the CEOs, 'cause a lot of the CEOs were busy either hiring people or raising money. The CEOs that, of the brands that were doing well weren't really in the weeds as much. So I went after the VP of acquisition at Dollar Shave Club or different brands that I respected that were doing well, and I would just network with them and then get another referral and talk to people who were really running certain channels or whatever it was. Talk to a director of e-com at whatever company it was, and I think my network, I'm in Los Angeles and I'm not originally from LA, I'm from Valencia which is, you know, hour and a half, 2 hours away, but living in the heart of LA now has allowed me to go and meet different founders and meet different people within the companies that have for sure Movement has benefited for. We wouldn't be the brand we are today if it wasn't for that network. And it wasn't, I didn't have the network to begin with. I'd just offer someone, I'd come up with some clever subject line on a LinkedIn and then offer to buy them dinner, a beer, whatever it was, and go up to people. And sometimes I'd have bad interactions, but If I had a bad interaction with someone, I just kind of brush it off and go to the next one. So I think that is really crucial for entrepreneurs. And it's hard, it's awkward, but you have to do it as an entrepreneur.

And I only have 2 more questions, which was, so I'm sure you guys have a ton of copycats now, right? Yeah. How are you gonna continue to win those battles and stay unique and continue growing?

Yeah, I mean, I think as long as people are copying us, they'll always be a step behind. For us, we're the innovators in terms of of what our brand represents, who we work with. I think the people that we have, the talent in Los Angeles is huge. Being in LA, there's not only in our company a lot of talented people, but you have the influencers and tastemakers that all live in Los Angeles. So I think another big piece too is like I'm 27, so I'm a millennial, and understanding what social networks or what products or trends is a really big piece of the success of the company.

And someone just tweeted at me and they wanted to know, because you didn't have the ability to fall back on a large venture-funded bank account, Can you tell one story where it was, the company was at a near-death moment?

So we didn't have it, we now have a VP, Senior Vice President of Finance, and we once didn't, and just struggled with understanding how, like when cash comes in and when it comes out, and there was just times where we—

You're smiling, were you doing this?

I wasn't doing it, but it was no one's fault, it's just we should've hired someone earlier, we just didn't know, but there was times where I think we almost overbought in inventory, and we would have gone— there's been so many times. I can't even think of all of them on— yeah, it's a roller coaster.

And we're about wrapped up, so what's going to happen next with Movement? You guys are launching more stuff. Where do you see— what's your dream and how are you going to get there?

Yeah, I mean, for us, we want to be— we're already a global brand. We sell to 160 countries. We're about 40% international. Most of our business right now is direct-to-consumer. That was our business model, our strategy, but the goal is to become a global omnichannel brand, so having our own retail doors one day, being in different retailers as well. I think as a brand you need to be where your customers wanna buy you, and I think a lot of people get caught up on just direct-to-consumer, direct-to-consumer. It's a great way to start a brand because you keep all the data, it's cost-effective. If you spend money on an acquisition channel, you're able to have all that data and understand how to scale it, At the end of the day, if a customer shops on Amazon or shops in Nordstrom, you need to be there if that's where they want to buy you, and otherwise you're missing out and your competition might take market share.

Fantastic. Well, I think, Jake, you're going to be hanging out throughout the day.

Yeah, absolutely.

So, oh, and there actually was one more question that I wanted to ask you, and I don't know, you guys maybe not, you'll see some Movement employees walking around. And you'll understand this when you finally see them, but do you have to be totally yoked in order to work at Movement?

Absolutely. That's it.

They had a guy at our dinner last night who I swore he was a security guard.

We send— yeah, we send Ethan to negotiate our lease, contracts, anything.

I was like, He was like, I do marketing at Movement. I was like, oh, I thought— I was like, I legitimately thought you were security. This guy was one of the biggest guys I've ever seen. And all 5 of their employees were just jacked.

Yeah, we all, we all, we all try and keep up with him. But yeah, 6'4". He wasn't always that big, but over the years he's, he's grown. So I don't know, maybe there's something in the Movement water.

Yeah, like ping pong table and supplement weights and protein powder. That's your, that's your perks.

Yeah.

Well, uh, alright Jake, I really appreciate you doing this. Thanks a lot. Jake's gonna be hanging out all day, so you can ask him any questions.

Good stuff, dude. Thanks, buddy.