TRX Training INVENTOR Randy Hetrick INTERVIEW (Navy SEAL to Fitness Visionary) | My First Million

This is very casual, so I don't even care. We can record right now. It's recording now, and we'll put that up. So this is very casual, and I'm gonna ask you a lot of questions, and, uh, if you don't want to answer something, just say it.

But, uh, oh, I will.

Yeah, it's very casual. What's going on? You're, uh, Randy, right?

Yeah, that's me.

So I, um, I'm a fan of your guys' product, and typically I, I own it. I have my own, my own gym downstairs. I, uh, I do research on the businesses that we talk to and the people we talk to, but in this case I didn't do too much research on purpose because I only have the product as a fan of the product's perspective, and I wanted to come from that point of view. But do you know, do you know what this podcast is and who we are or anything like that?

Well, give me a little more background because, I mean, I've been doing a fair number of these since this crazy-making period took off, and it's hard to keep up with them. It was funny because— and I love to support, right? Because I do so much in the entrepreneurial community, I love to support young entrepreneurs. So, I'm basically taking pods that I normally wouldn't take just because it's— we're here, we're home, and if I can support other guys that are getting stuff going, then I'm all about it.

And what you said, you've been doing a lot since the making. What are you talking about?

No, I said since this mayhem, right?

Oh, corona thing.

Yeah, I mean, I do quite a lot of stuff in the press normally just to promote, you know, to promote my brand. But since we've all been locked at home, there's a massive proliferation of digital content in the form, you know, sometimes in the form of video blogs and podcasts. And so I, in fact, I just got off another Another one with an investment bank, an industry panel basically, but it was just a call. So I didn't have to be as pretty as I am now for you, Sam.

Good, well, you look great. So let me, we're gonna, I'm gonna give you the 20-second or the 2-minute background and then we're gonna make this all about you. But so I'm Sam Parr, I own this company called The Hustle. And what we do is I started it, we just turned 4 years like 2 weeks ago. So typically we have these conferences that where we host trade shows, conferences where we host tens of thousands of people each year. But we also have The Hustle, and The Hustle is our daily email that goes out to millions of people. So millions of people log in and they get our news from us in their email inbox each morning. And it's a great business. It's an 8-figure wonderful business that we've bootstrapped. And then we also have Trends and Trends.co. It's our subscription product. So we— it's just premium content community, which is also a great business.

So Awesome.

And, and we do this podcast as a— that I think— I forget how many listeners we have, but we've had millions, millions of listens, over a million listens. And what this podcast kind of started as was me and Sean, my co-host, who isn't here right now, but we both have started companies and we always had these interesting brainstorms with people like you who were our friends, and we would just riff on interesting ideas and on cool insights. And most people don't have access to those types of people. And so we just do this publicly. And so that's what we're going to do today. And so what I want to do right now is I want to learn a little bit about your background and kind of how you came to be where you are now and where you are now.

Well, where I am right now is in my house in Mill Valley. I'm sort of like— I feel like Rapunzel. I spend all my time up in the tower above my garage. Right. It's a become my sort of everything from the sports marketing department or sponsorship marketing department of TRX to the, you know, production studio for every one of our sort of, you know, blog interactions and that kind of thing. But, you know, I— so I'm the founder of TRX. I live in, you know, Marin County. Prior to TRX, I was a Navy SEAL for 14 years and actually created the first harness while I was at the special missions unit. And then just decided, you know, after I left SEAL teams, I went to business school at Stanford and decided while I was there that this was a viable business concept, you know, which I think at the time I massively overestimated how easy it would be because the product was so great. But I used Stanford as basically an incubator, second year as an incubator for this concept. And TRX is— I guess this is our 15th year in the market. And we're doing pretty well. We're one of the only truly global fitness brands. And we've put close to 350,000— training pros through our TRX Coach qualification courses. And, we're in about, I don't know, somewhere between 50,000 and 70,000 gyms and studios around the world, most of which are closed right now, which is an interesting experience. But, fortunately for TRX, we were for 10 years all B2B, just serving athletes, training centers, clubs, trainers. and, and boutique studios. And then about 4 or 5 years ago now, we decided, all right, we're ready to start to expand into the consumer, the true B2C consumer space. And, you know, it's good that we did that because obviously that side of our business, uh, in the COVID-19 environment is absolutely off the charts. The commercial side of our business is really struggling because all the, all the gyms and all the trainers are all out of work. It has been a little bit of a tale of two cities over the last couple of months, but that is basically the snapshot of what TRX is. Today, I am co-chairman and really promoter-in-chief of the brand.

Do you own the company, or have you guys been acquired or anything like that?

Well, the company is— I raised a long time ago. I raised a bunch of rounds of of angel money when I started, and then took on private equity back in 2012, and then recently recapped the business to exit those initial partners and bring in some new partners, because that's one of the dirty little secrets about institutional capital is once you take it, it's very difficult to get rid of. So it's a private company, but it's co-owned by a bunch of us, including the capital partners that that came in at the end of 2018, beginning of 2019.

How much did you raise from the angel folks?

Well, in the way back, I think I raised about— oh, I have to think back to my— around $5 million in several rounds of angel money. That is great capital. For, I don't know what the complexion of your viewership is, but for folks who are thinking about raising money.

You can use jargon. It's a very highly intelligent, not beginner audience, so go ahead.

Yeah, well, I mean, by far, the highest, I mean, look, the cheapest source of money to grow a business is always what they call nondilutive capital, and that mostly in the form of sales. But if you're going to take on dilutive capital, I think by far the best source is angel investors for a couple of reasons. Presuming you pick your angels the right way. Because what you get in an angel investor, if you've chosen well, is you get somebody who has a lot of domain— relevant domain expertise, because angels tend to invest in things that they know and they that one way or another they can contribute value to. Uh, if you pick the right angel, you'll get somebody who not only has domain expertise but super passionate about your venture. Generally, angels are willing to, to invest on a common stock basis, which, you know, uh, I strongly recommend to entrepreneurs that they stay away from preferred structures, uh, up until they're ready to, to sell a significant piece of their of their equity or exit altogether. Because once you, you know, once you bring in a preferred layer of equity into the cap stack, everything's different in terms of the solidarity that you once had, right, across the team and the investors, because that changes. And it's a, you know, it's a tough change in the experience of most people that I know to manage. I'm a big fan of angel investors in which you get not only capital, but you end up getting pro bono experts effectively who are excited to be involved in your venture.

How big was the company when you sold it to PE or sold parts to PE?

Well, it's been 2 rounds of that now. The first money we took, and I think we were around I don't know, you know, $30 million, something like that.

And annual revenue?

And annual revenue, yeah. And, and, uh, you know, and, and who knows, you know, we'll be, we'll be north of, uh, you know, probably north of $60 somewhere. Who knows how far, because COVID is an interesting experience. But, and we don't, you know, we don't really get into specifics because we're a privately held company. So if you're heading that way, I'll just to redirect you.

Well, so you already said it's— the ballpark is $60 million. It could be way higher, but that's a number that's been said. Um, a company like TRX, you guys— so we talked to a lot of like these direct-to-consumer folks, which you didn't start out as, but you are definitely are now. But yeah, when I think of TRX, I think that you guys are in the same category as a CrossFit or, um, and this isn't an insult, but like Tony Horton, like you guys are like a brand, right? Like you're not just some Amazon, you don't rank on Amazon and that's how you win. TRX is something that people know and it's a brand. Do you think that your valuation is significant? Like, would your multiples be significantly higher because of that, you think? Or is it still rough to get a high valuation on products like this?

Well, I mean, so for starters, I mean, we are on it. We're the number one selling fitness item on Amazon.

Yeah, but I didn't mean like your way, your path to success has not been like, well, we're just going to rank higher. Like, it was just like people love and know us.

No, yeah, we built— I mean, look, from day one, this was never intended to be a get-rich-quick scheme, right? It wasn't a trend. I mean, it's funny because when I first started the business, there were no predecessors to the product that I brought to market, right? Our initial hero product, which was the suspension trainer. The idea there seemed kind of crazy to bring this strap into the club landscape full of machines and think that you were going to be successful. But one of the things that we did that was a really great choice, and I made plenty of less than great choices, but one of them that was a great choice was really finding this sweet spot in helping training pros of all kinds, right, from chiropractors and physical therapists on one end out to MMA coaches and powerlifting coaches on the other end. And then, obviously, under the bell curve, tons of personal trainers and group fitness instructors. We decided we were going to become the business partner of them. And that we were going to give them this great tool that had— it's like I always describe the suspension trainer like a magic wand, right? If you know the magic, you can really make— you can become a magician to your clients and your athletes and deliver them unbelievable results. That always, you know, you look at 12 feet of nylon webbing and go, yeah, well, what can that do? With the right pro and the right knowledge in that pro's head, You end up going, oh my God, this thing, I've never seen anything like this, right? And that's, that's a unique characteristic that not many products or services ever have, which is you have people that come in with a very low expectation and leave with a very high level of astonishment. Um, and so that's been a, a powerful, um, benefit to us. And then we diversified the, the, the company's scope of operations. We became, you know, the largest provider of professional education to trainers. Then we broadened the product line significantly, all the while focusing on this premium brand that you alluded to, which I do believe brings an enhanced multiple. The reality, though, is that long-term, if all a company wants to be is a product company that delivers durable goods, because our stuff lasts for fricking ever, way too long from—

No, no, I've had the same one. I've had the same one for 4 years. I think I got— it was gifted on Christmas and I've had the same one for 4 years now.

Yeah. I mean, and 4 years is nothing for a One/One, right? I talk to people that are still traveling around using our first-gen strap from 2005 in their bag. And I mean, on one hand, it's a compliment. On another, it's a nightmare, right?

Because you need— what's it called? Plan—

planned obsolescence.

Yeah, yeah, you need a break after like, you know, 5,000 push-ups.

We never, we never planned that because I, I really wanted to be— and I, look, I, I came at this whole thing, you know, I started my entrepreneurial career at 39, so after a career as a, as a Navy SEAL. So I, you know, I had a set of premium level delivery. And if I was going to be associated with this brand, then that's what we were going to do. So we built everything that way. The unintended consequences, the one that you and I are beating around right now, is your stuff lasts forever. And which means that, you know, you either have to create more products to serve your existing customers, which is expensive, right? Because R&D is not cheap. Um, or you have to constantly be in search of new customers, which is not cheap. I think that's why pure product cos get what I would say unfair valuations relative to some of these more fake companies that are tech-based companies that have the potential, not the promise, but the potential to scale infinitely. Those kinds of companies tend to get higher valuations than gear companies. And that's, that's just one of those realities. And it's part of what, you know, we've never planned to be just a gear company. We, we have always planned to expand our services into subscription services and content, and, and that's what we've done.

So let's talk about that in a second. But first, um, right now you guys make— what are your revenue streams? Your revenue streams are coming straight from— your revenue streams are purchases from coaches and things like that, or not, um well, coaches and chiropractors and who— like, you know, B2B people servicing clients, right?

We make— well, we're an omnichannel distributor, so, you know, on the, on the commercial side of the business, uh, which is the B2B side, yeah, we sell the gym— we sell gear to gyms, services and education to gyms and trainers.

Yeah, and that's what I want to ask about. What is education?

So you sell Yeah, so we do. So we, we became early on— I mean, if you think back, nobody knew how to use a strap that didn't stretch and didn't have any weight attached to it. So if I was with you or one-on-one, I had almost 100% close rate in the, in the earliest days. Problem was I can't be everywhere, right? So, and if I wasn't with you and you were just looking at a picture of it, say on the website, the conversion would drop to 5%. So that was something that I realized very early. All right, well, I have to be able to scale my knowledge on how to use this thing. And so I brought in a guy who was introduced to me very, very early in the company's history, a guy named Fraser Quelch, who had been a career trainer and had written a lot of education in the form of courses for other pros. right, to teach other pros the various skills. I mean, how's a trainer or a coach learn his or her craft? They usually get a basic certification from an entry-level certification body like American Council on Exercise or NASM or NSCA, and then they go out into practice and they start developing practical skills. And along the way, they want to learn more about, you know, a particular tool or a methodology or And so they, they do, they have continuing education requirements, right? Just like a doctor or a lawyer, they have to, they have to do so many, uh, continuing education units per year to maintain their basic certification. We became one of the leading providers of those CEC courses that, that help, help a, a new trainer or coach move toward mastery.

So do you charge them for it? I'm on your website now. Uh, I don't—

and that costs money? Yeah, yeah, our normal— our normal— we have about 10 courses of different kinds and, and are all B2B. And the—

oh, cheap, $89.

Well, no, traditionally they were $295, right? So $295 for a 1-day qualification course, and it was 8 hours live in person. What you're probably seeing now is we've done some, some pretty incredible pivots with COVID-19 hitting and changing the landscape. Um, and so one of the things we did early on was try to figure out, hey, all right, number one, we're not going to be able to provide education, right, as long as this thing lasts because you can't get people together. Number two, most of the people who come to our courses are out of work. And so what, what, what can we do to support them was sort of idea number one. And then number two was how do we take this moment, which is really a bunch of lemons being thrown at us and make lemonade out of it. And we decided that, well, we can take our courses, we can make them free, figure out how to deliver them through Zoom instead of live. And we'll do that as long as this crisis continues. And we'll just try to fill our bucket with a whole bunch of new pros of, all kinds of stripes, who on the other side of this will then appreciate that we helped them out when they were down, and also just grows the community, grows the TRX community. That is what we have been doing.

Then you guys have revenue from selling the main product, the main TRX, which it looks like you have a few varieties, but I imagine most is from the main one. Then you make revenue from these $100 to $300 B2B digital products. What's the breakdown? Is the actual product 80% of sales?

Oh, it's falling pretty fast as the education and now what's the big epiphany and the big unlock that's gone on over the last 2 months is that we massively accelerated our what already was a migration toward digital delivery and subscription models. And so, you know, we've also got an app that, uh, that we make money off of that's a $4.95 a month app that supports the end user. Um, and, and we, we have turned off the paywall on that during COVID but that will go back on once everybody gets back to work. You know, we're really using COVID-19 as an opportunity to develop new— to solidify the relationships with our existing customers and bring new customers into the tribe through a free door that eventually, obviously everybody knows that no business can keep their services free forever, but in the meantime we're using it as a big opportunity to, you know, to build new relationships. So the mix is really changing. The other thing that I think —Well, what was the mix pre-COVID? —Yeah, you know, I mean, it's probably, probably 70/30 between, you know, equipment, but you're defining equipment way too narrowly, right? You're looking at our HERO products, which are the suspension trainers. We do the entire ecosystem of functional training. So, from— we have, you know, STEEL ecosystems, that you built the infrastructure that, you know, that not only do you hang straps on, but you fill with kettlebells, bands, balls, you do pull-ups on, right? Everything you would see in a gym. Yeah, you're right.

Yeah, which I, which I, I've used. Um, do you have a sales team to handle that? Like, did you have to do like hand-to-hand combat for that, or, uh, is, is a lot of it inbound and you're just fulfilling orders?

Um, it's some of both, right? I mean, no, I don't think any business— it certainly doesn't exist for very long as, as all inbound flow, right? Generally you have to be out there knocking down the, you know, the targets.

And so I guess I mean, but are you like running paid ads to them, or do you actually have to have a sales force who's hitting the phones and making it happen?

Both. Yeah, both. We advertise into the commercial landscape through the traditional, you know, means to reach gym owners and trainers, but then we also have a pretty significant direct sales force inside and outside that that does account development and service sales.

I'm looking at, I use this tool that guesses website traffic. If I, looking at this tool, I would imagine that your sales are like 4x in April what they were in February. It looks like you guys are just like, like your web traffic has gone through the roof.

Yeah, well, it certainly has. And the reason is, I think, less to do with anything we've changed in our marketing than with the reality that, you know, as a 10-year B2B business, we've put, you know, we serve tens of millions of people around the world who identify themselves as TRXers, but ironically had never bought a product for their home, right? Because they use us in the gym. I run into people constantly, some of my best friends will tell me like, "Oh, I've never bought." They'll call me and be like, "Hey, can you give me a friends and family discount?" I'll be like, "You don't have one of our straps?" These are people that I know are diehard TRXers, and then they'll be like, "Well, no, man. I do it 3 times a week in the gym." That was a reality that comes with being a B2B business for 10 years. But what happened with the virus was when all the gym doors got shut, all of a sudden, all of those installed— that installed base of TRXers went, "Well, how the hell am I going to do my workouts?" And so, they turned to our Amazon site and our website. And that's been, I believe, the big source of the growth, the explosive growth.

You, um, have a unique advantage of seeing, uh, like consumer goods or, well, hard goods and digital products. So you're able to see, uh, how they both work. And my, from my perspective, and I've been an investor and I have friends who sell direct-to-consumer hard goods, and then I also have a digital company and I've invested in them as well. What my perspective is that the D2C guys can grow their revenue from zero to not zero very quickly, but there's massive supply chain headaches, whereas digital, it's often the opposite where it's maybe a little more challenging to get started, but the margins are way better and you never have a supply chain issue. What, uh, knowing both sides of the business, which do you prefer?

Well, I mean, I, I think that Which do I prefer? I prefer the one that's easier and makes more money. Which one's that? Well, the reality is that I think creating a digital company, pure digital, is hard, because it's a very cluttered field. Especially now, this virus has unleashed the digital universe. Now, just like any other marketplace, there is going to be this explosion of would-be participants, and then there will be a consolidation, and they will separate the wheat from the chaff. I think that we are in a really unique position because we started as a physical products company, then we became an education company, education and content, because we made— hell, we probably did 35 DVDs prior to DVDs becoming disintermediated by digital delivery. We've obviously taken all that content and repurposed it into our digital ecosystems, but then we, we became a brand, like a, a really significant premium brand in the space, and then we stretched that brand around the world. So now we're in a really unique position because we have the best of both worlds. Right? We have a, a large customer base that bought our physical gear and that then came to group classes in clubs around the world that we helped develop and, and educate the instructors who were delivering those. So they got comfortable and identified with our brand. And then as we've done more and more consumer branding, we've extended that brand from the, the pro space which is great from a credibility standpoint, because if trainers and physical therapists love you, the consumer at home tends to go, oh, well, these guys must be a quality operation. Now, we're in a really unique position. Now, we're turning on some new digital engines, some subscription engines that give us the best of it all. We will have our products, which you're right, you stock out of. We've stocked out over and over and over during this thing. Because no one plans for a multi-time step function change in the demand curve. You scramble to try to catch up to it. I think a lot of us will find ourselves just about the time we are caught up and we have got this whole new stockyard full of product, maybe the demand will settle down a little bit and we will end up with more product. Yes, scary. Yeah, and it's— but that's just, that's part of being a physical product, you know, uh, just supplier is—

so, well, that's my question was, which one do you find— which one do you personally enjoy more, both in terms of working on and the results?

I'm a, uh, I mean, I'm an inventor, you know, so, so that is part of my— like, it's, it's a— it's probably what made me want to go into the Navy SEAL teams. I have a MacGyver bent to me, and I came up with an old man that can fix literally anything with almost nothing. And so, I sort of grew up out in the garage until the middle of the night holding a flashlight for my old man while he was jerry-rigging some kind of a fix to an old motor or to whatever. It could be anything. So, I really enjoy a lot of time and energy at TRX developing our next products. I also though appreciate and enjoy creating great content whether it's in the form of pro education or whether it's in the form of end-user content, workout content. And so, I would say I like both. I like the economics of the digital side of the equation for the reasons that you pointed out. You don't stock out of it, and it scales infinitely. I don't think that it's an easy business to just say, oh, I'm going to become a digital content publisher, and I'm going to make a billion dollars. Yeah, like you and the other billion would-be digital content producers that are out there are all on the same path. I like them both. I like the multiples on digital content and subscriptions, though, I will tell you that.

I am going to ask you about that in a second, and I am going to ask you about interesting ideas that you are seeing and new opportunities. First, you said something that you are the chairman. Does that mean you are not the CEO?

Yeah, we brought in a president, I've tried a number of times to get out of the day-in, day-out management of the organization because a couple of reasons. One, at this point, number one, there's one founder, right? And so you've got a certain amount of founder cachet that is really valuable in working with the press, in working with key accounts, right, in generating love around the brand. That there aren't others who can do that. Um, there are others who can manage the steady state sort of linear growth of a, you know, of a midsize and growing company. In fact, there's those that can do that better than me because I'm more of a startup guy. So I've tried, you know, several times over the last, call it, 6 years to, to get more out into the market and less in the conference room. We hired a president about 8 months ago, who he and I have been doing a transition where I can basically hand most of the day in, day out over to him and to the team. Then with our new partners, they are very good at the financial engineering side of the equation. I am not. That is just not something that turns me on. I like the outcome, but the process is just not something that floats my boat. And everybody's cut of different cloth. So what I'm really focusing my energy on is promoting the brand, developing new products, and looking at new initiatives. That's something that I'm very good at and passionate about is sort of trying to see around the corner and what the next opportunity is going to be for the brand.

We're very similar, so I've done the same thing. I have a president who handles a lot of stuff, and I do the exact same thing where I can lead vision, but I also come at the very bottom and I can just change pixels and invent. I do it digitally, but same exact crap where I'm just, I have my computer up late at night and I'm just making stuff, and most of it sucks, but every once in a while I'll show it to someone and they're like, oh yeah, let's go make that.

That's the product creation dilemma, right? Most of it, most of it goes nowhere, but But about every 10th effort, you go, "Ah, wait a minute, there's something to this one," right? And that's, you know, you gotta be wired to not get frustrated by that. Just like, you know, just like folks who like to manage at that mid-level, they don't like the scariness and the ambiguity and the, you know, the vagaries of the startup or creator. They like the consistent predictability of weekly staff meetings and a checklist and all the things that make me sort of make the hair stand up on the back of my neck because I feel like, man, this is not where I want to be.

This is a consistent pattern that we've seen. I don't know if you know this woman named Sophia Amoruso, but she had this company called Nasty Gal and it scaled to, I forget the exact number, $100 or $200 million a year in sales and had multiple offers around half a billion. She screwed it up for a bunch of reasons. One of the biggest ones is she was like, I'm brilliant at creating, I'm horrible at operating. And I too am like that, where I'm brilliant at creating, but operating, I just don't find it to be exciting. And I think that most people who start stuff are the same way. But I think there's actually a huge issue in your in Silicon Valley, although you may or may not run in the Silicon Valley crew, particularly amongst that group of people, I've noticed there's a huge problem of people starting stuff who are afraid to hire people to actually run the thing. Um, and what I've really embraced, and it took years to learn this, is that there's actually people who like creating the car from scratch and designing it, and then there's people who love modding it out and making it better. Um, and you— and having both is really important. How did you hire your president and what was that like going through that process? And also, how many mistakes have you made in hiring the wrong people?

Because that sucks too. Plenty. Yeah, plenty. I mean, look, first of all, so I operated the company every single day for its first 10 years. That's a long time, right? And at that point, when the engine of both creation, activation, and management, that's like dogs. You don't have to be a runner.

Why didn't you do that earlier? He was a runner.

Well, I think, uh, a couple reasons. One, I did try a couple of times, right, starting around here together, maybe around year 8, together to bring in, you know, a president. The idea— my idea was always I'll bring in a president, and I never had— I never took a CEO title for years because I just thought it was sort of ostentatious for a little company to have a CEO. That was my personal opinion. So I was the president. So when I brought in a president, and the first one that I brought in, it really cool aligned with bringing in private equity, right? So maybe it was, maybe it was, yeah, about year 10. Why'd you even wait 8 years?

Like, why not in year 3? 3?

I mean, well, because we were still very much evolving, right? And I think that one of the challenges with bringing in somebody to take over the, the daily management is you have to be pretty well defined about where you're headed, um, as an entrepreneur before you can now hand the wheel to somebody, right? If you're wheeling right, wheeling left That's not exactly the moment to be like, hey buddy, here, take this, right? Because then the guy's like, where do I drive, man? So, so I think that's the answer. The short answer is I wasn't ready yet in terms of our, our definition to, uh, and, and this, the enough certainty to the general direction of our course to want to hand that over. But at about year 8, I was, and I said, okay. So I handed over the first, probably the first 2 presidents that I hired, which are both great guys, but the mistake that I made, largely from listening to my then private equity partners that had their Business School 101 playbook they were trying to run, which is go hire a "best practice" president.

Well, okay. Kill me. Kill me. I hear someone say that. Kill me.

Yeah, I was just going to say, I am sure you are going to be hearing something familiar here, which is that a lot of the institutional capital investors, they have not run businesses themselves, so they want to execute what they learned in business school, which is the idea of best practice. Well, what is best practice? That is the problem. Generally, they will say, oh, it is someone from the upper mid-levels of a great big successful company that we have all heard of. What I've learned, and it took me two go-rounds to learn this, by the way, is that that is almost a disqualifier to be a good president of a small company.

I need a guy with an MBA telling me what to do like I need a fucking hole in the head. I don't like— oh my God. I got lucky. I've had a lot of great success. We have a guy, Adam Ryan, who's our president, and I've known him since high school. I'm from Missouri, so I'm not from like this fancy city. San Francisco stuff like I live now. And that was awesome because Adam is wonderful at being scrappy and things like this, but he also can be like a big company suit if you wanted to. And what I found is, and I've hired some MBAs and it didn't work out, what I found is these gray hair, they're not actually gray hair, but it's more figurative, these best practices, this bullshit, they just, these people can't roll with the punches. And I've never had success with that type of, I've hired, I have a few, businesses on this, like little investments I've made, and we've hired CEOs who were like this, and it just, man, it never works. And you, but you think that it should.

Yeah, well, it's, it's a little bit akin to trying to get a cat to bark. Exactly. Cats meow, dogs bark. So saying that, well, you know, either one of them should be able to, to do this thing is just not right, and you wouldn't do it because it would be preposterous. And yet what people do all the time, especially institutional investors make this mistake, is they assume that because somebody operated at a scale, at a successful brand, that, well, that person clearly can— this will be easy for that person. It is almost the reciprocal, because what they do not realize or have not thought through is those people are playing a different game. Michael Jordan was arguably the best basketball player in history, When he went over to Major League Baseball, he hit with a thud. Why? He's a great athlete. He's playing a different sport. So what worked for him on the basketball court doesn't work when you're on the mound of a baseball diamond. And so I think it's a very similar thing. Big company leaders have large staffs, generally a lot of certainty in the direction that they're heading. Single-digit management objectives up or down. It is in a very long, patient, bureaucratic decision-making process. Yeah, you are almost more like a politician.

You are a politician a little bit. You are not—

That is the antithesis of a small company. A small company, and by that, I mean anything south of $100 million, is constantly pivoting and the windows to make those pivots are not years. They're not even quarters. You're lucky if they're months. And so I think the difference in the operating cadence and style is profound. And just going to a big company, a successful big company manager, and thinking they're going to be successful as a small company president, it almost never works out.

Yeah, I think that, look, once Once my business becomes a financial arbitrage machine and I need someone to figure out how to milk out 3% off the bottom line by using less materials, then I'm gonna get one of those nerds. But until then, I need innovative people who understand how to be— it's a perfect balance of art and science, who understand like financial analysis and things like that, but who also can understand what motivates buyers and who can think of widgets that, you know, make people feel good and want to purchase and be— it's just, I've been through this, um, I, so I empathize. Um, you, uh, are you investing in anything at the moment, or is 100% of your time on this? Or like on Saturdays and Sundays, are you tinkering with anything totally outside of, uh, this field perpetually?

Yes. Yeah, what interests you right now? Well, I mean, there's a lot of different things that interest me. I'm an angel investor in a bunch of different enterprises both inside and outside of health and fitness because I'm a super— I'm a startup nerd. So, I live and breathe that. And, I teach classes at both my alma maters at the Marshall School at USC and at the Graduate School of Business at Stanford. So, I get to see a ton of young—

You're badass. So, you're a fitness guy, a Navy SEAL, and an academic.

Academic, I'd have to put that in quotes, Sam. I'm not sure that I would put academic—

Technically, I'm right though. I mean, hey, you teach at Stanford, okay?

Yeah, but I'm a lecturer, right? Not a professor. So, that means that all you had to do was have gone there. And then have done something that didn't suck subsequently, right? And made a lot of mistakes.

You're just an eclectic dude. You'll like, you can kick someone's ass, but then also like, you know, talk to them about Aristotle and like Britain's economic policy and how it impacted imperialism in the 1960s.

I'm an eclectic dude. You got that part right, right? I'm an eclectic dude and I'm a super geeky inventor, you know, which I love. I mean, I've got like 40 patents that I didn't— I could care less about the patents. What I cared about was the thing. Bringing the thing to life. Then once you do, particularly in today's digital economy, you got to protect it because if you don't, you'll be knocked off and blown into oblivion almost immediately with factory direct stores out of China that have FBA shops on Amazon now. That's why I became— I joke about having a minor PhD in intellectual property law that I never wanted. But I had to learn. And so all of that, like all the nuts and bolts of creating, and then articulating a vision and wrangling a team to share that vision and then moving that thing forward, that's the stuff that makes my heart pound. What are your best angel investments? Well, I mean, I suppose we'll wait and see until they pan out. But— Have you figured it out yet? No, not yet. I'm an equity investor. I make a good living now, and so I'm not in any of these for a quick turn, but I think that they all will. Most of them are in areas that I tend to both invest and advise only in things that I think I can make a difference in. I have taken a couple of different flyers on things that buddies that I trust and are domain experts in other areas have said, hey, man, you should get in on this. Also, let us just qualify this, I am a small investor. I am not placing 6-figure investments one after another, but I tend to invest in things where I can help the operating team based on my own experience, and really, experience is just the sum of all your mistakes as much as anything else. I can help early-stage businesses set up their partnership arrangements, figure out what makes a good partner, figure out what capital sources that make the most sense for them are, because I know both the pros and the cons of all of them at this point. Then team selection, I mean, I've been leading teams since I was 22-year-old frogman and led all the way up to the national level. I've got a lot of experience, whether I've done it all right, I certainly haven't, but I haven't done it all wrong either. I've got a lot of experience in helping build culture, create team dynamics that are durable and performance-oriented, and build brands. So if it's in those categories, that's kind of my wheelhouse.

I have to pause real quick. I gotta run to the restroom real quick.

Ha, go. We'll edit this part out.

Sorry about that. No, no worries, man. Are you an MMA fan? Yeah, big time. So I'm a huge MMA fan, and I, uh, this quarantine thing, I've gotten very healthy, much healthier. Like, I've done Ironmans and things like that, but I've like actually started using my TRX, by the way, and lifting weights, and I've gotten strong. But I, I have a weight loss challenge and I have $500 on the line and I have to hit it by Saturday and I have— I'm gonna crush it just through diet and exercise. But I've began just— I'm drinking like crazy amounts of water because I want to do like an MMA weight cut and just like destroy the, the, the, the benchmark that I've got. Yeah. And so I'm, uh, I'm currently drinking 3 gallons of water a day, and then tomorrow and the next day I'm gonna taper down. I just— my goal is just to crush everyone.

Um, that's great. Yeah, well Yeah, I've been an MMA fan since before there was MMA because, you know, coming up in the SEAL Teams, right, you do a— it was very eclectic in terms of the coaches that we would bring in. So I was a, you know, I've been the full gamut. I was, I was an MMA guy before MMA was turned, right? Everybody was still purists in their arts, but because I had this Bedouin lifestyle of constantly deploying and coming back, I I didn't have that luxury, so I became, you know, I'd been a kickboxer and a wrestler in high school, kickboxer through college, then, uh, then I got into jiu-jitsu at the end of college and, and leaned into that, you know, hard in as a SEAL. But it was never— I never had the luxury of being in one place for more than a couple years at a time. And, um, and so, but I've been a huge fan of we did a ton of sponsorship, actually, of the fighters in the UFC prior to Reebok buying the, you know, the global rights to the sponsorship placements. So, yeah, I— in fact, Mike Dolce could help you with your weight cut, right? He's a freaking master at that stuff. Well, so we—

do you know who Ben Askren is? Sure. I've become friends with Ben through this podcast and media, and so he's been helping me out. And I'm name-dropping a little, but I'm— I was a huge fan of his, and then I started talking to him like, that's awesome, I'm friends with someone I looked up to. And then I think we're having Michael Bisping come on and do a podcast as well.

Yeah, both of those guys are great, man. I mean, Askren's a stud wrestler, and Bisping's just, you know, you talk about one of the veterans of the, of the sport. I was so happy when, you know, when he finally got to the mountaintop after all those years of preparation. Fighting everybody that, you know, that was, that was there to be fought. And he just kept sort of somehow falling just short, but he finally got there before retirement.

So I was stoked for him. So you, um, you know about all this stuff, and it's sometimes whenever I talk about like MMA and UFC, I'm like, I think I'm being too niche right now. No one cares. I think it's way bigger than I actually realize. But when you were in the SEALs, This, the SEAL thing interests me for two reasons. One, Jocko Willink. Is it Willink? Yeah, sure. Willink. Willink. That guy's everywhere right now. So, and he's always fun and he's got good clips that are fun to watch. And then I'm also reading David Goggins' book, Can't Hurt Me. Yeah. It randomly came up on my Audible thing and I started listening to it. It's, it's emotional. It's sad. It's hard to listen to. Have you, have you heard it?

Or, I mean, I know, I know David, um, you know, I didn't ever work together, but I, you know, you cross paths. Same thing with Jocko. Those guys are, those guys are both way behind me in terms of age. But the— and so in the SEAL teams, you know, if, if somebody's more than a couple of years ahead or behind you, the, the likelihood of you knowing him is possible but not high unless you worked at the same places, right? In which case then you then you transcend the age barriers because you're all at a command together and you work together. And I never worked with either one of those guys. In fact, I think as I was getting out, they were both coming in. But I certainly know of both of them, and I like what they've both done with their brands. And Jocko's done some really, really cool stuff with his podcast and his other appearances. In fact, he popped up the other day on Billions, which I was laughing about.

Oh, I haven't watched the season premiere.

Does he show up? So this new— the new season, he popped up in that, and I was like, yeah, man, that's what I— I love it when I see other frogs doing good stuff versus stupid shit where they're out there, you know, telling and selling secrets that are gonna, you know, put other guys at risk, which I do not admire. But I really love when I see guys out there doing great things post-career, because that's what the whole country is supposed to be predicated on, right? It's the citizen soldier. You come in, you serve for however long, you try to serve as well as you can, and then you go on and do something, uh, something else cool out in the civilian community and be able to share some of the things you learned. And I, I love that Jocko does that, and I love that Dave's doing that as well.

So when I started my business, I, I was like, like you, where I'm just like, I like to invent things and I like selling them and I like making money. Um, what I didn't— whether— what I, I always did track and field and running and weightlifting and swimming, and those are all individual ports, and what I really struggled with early on was how to be a leader. It's super hard because you, like, for a lot of people, they start stuff because, uh, it's like I said, it's fun and it makes money and it's cool. They don't— but then they, like, if it was successful, then they're like, oh, I got to be like a leader of men and women, not necessarily a creator of products. What do you think? Do you think that— I mean, I know the answer. The answer is definitely yes. But what specifically helped being in the SEALs in terms of business leadership and managing a team? And by the way, how many people do you have?

Oh, we've got about 100 full-timers, and then we, we, uh, you know, we use another 350 master instructors to deliver our education courses. So they're 1099s. Um, but, you know, so 100 full-time plus or minus, and, you know, another several hundred that we that we employ as contractors.

Do you think people would say you're a good manager and/or a good leader?

I think they'd probably say I'm a better leader than I am a manager. That would be my guess, because it maps to— I mean, I can manage. The distinction between that to me is quite a wide gap. There are people, I think, who can do both at a very high level, but not many, because I believe that most of the characteristics that make someone really good at one or the other almost prevent you from being good at both. I mean, there are some extraordinary people, I think, out there that can do both, but management requires just a different level of, you know, attention to to minutia. I won't just say detail because I'm very detail-oriented, but ongoing minutia, which is important in making a business go. I don't have the patience for it. I also never really liked corporate management. I like leadership a lot. Leadership is about storytelling, being authentic, right, motivating and communicating.

Um, and you think you're good at that? I mean, you seem very charismatic. Do you think you're a good leader?

Yeah, I, I think that's one of the strengths that I have developed largely as, as a result of my experience in the SEAL teams.

Um, what are some things I can learn from you then through your SEALs experience, uh, and that our listeners can learn, you think?

Well, I mean, we do, you know, so I do, I do a key I do a keynote that is pretty massively oversubscribed, frankly, called Lessons of a Frogman, and it's leadership lessons, business leadership lessons that I learned as a SEAL, which turns out almost all of the key lessons that I know, I actually learned as a SEAL, the leadership lessons, not necessarily the tactical business lessons. You would think, and I actually had one of the assistant deans at Stanford Business School when I was out interviewing for, to, to be accepted there, you know, give me this sort of patronizing, put his shoulder, hand on my shoulder and basically said, well, that, you know, why do you want it? Why do you think we should take you, Randy? And I talked about, you know, my leadership experience. Uh, you know, I was at that point, I was at the Special Missions Unit as a, as a troop commander and had been in the SEAL teams for, you know, I don't know, 10 years or so. And, you know, then he put his hand on my shoulder and said, you Well then, uh, it's, it's a bit different leading in the real world than it is in the military. Don't, don't, don't you think? Because out here you can't just tug on your collar device and have everyone snap to and do what you say. And I was so astonished, man. I was like, is this guy for real right now, or is he baiting me? And, and I basically said to him, you know, uh, Dean, if that's your view on military leadership, then I think it says a lot more about how little you know than it does about the subject of leadership. And, you know, not surprisingly, I didn't get in that time. But, uh, but, but, you know, I think that if you're talking about people and groups of people, there are many, many more commonalities to how to lead and motivate the group than there are differences, depending on, you know, like irrespective of domain, because you're talking about anthropological behavior and that changes very slowly over millennia, you know, and whether you're a, you know, a baker or a frickin frontline soldier or a software developer, if you're dealing with other people, Humans behave largely the same way. They have different microcultures, but we're all part of the Homo sapiens species, and we've evolved our behaviors over hundreds of thousands, if not millions of years. The commonalities are that people want to be inspired. They want to associate with something they believe in and other people who share that belief system. They want to feel important, right, like they're contributing. Everyone wants approval and reinforcement that what we're doing is good. And so figuring out how in a context to provide those basic human needs is what leadership is all about. And I think that it's not actually very domain-specific, whereas management arguably is much more domain-specific. Right, depending on the industry. And I think that requires, you know, a different set of skills, and very often the things that make someone a good manager prevent them from wanting to be on the podium, prevent them from wanting to take risks, right. And those are things that, you know, you can't lead anybody if you're not willing to get on point. And so I think that, you know, leading and managing are related but not the same thing.

And is this lessons of a Frogman, is that available publicly? If I Google that, can I watch it?

I hope not, because it's one of the, uh, it's one of the, you know, the side hustles that I enjoy doing. I actually, it's, you know, obviously I haven't been doing them during COVID-19, but, but I'm, I'm working on a couple of books in the early stages. One of them is, is going to be that. It's gonna be the deeper look into the substance of my, you know, keynotes that I do for corporations. The other is going to be an entrepreneur survival guide because what I discovered is that the gap between what I learned at Stanford Business School and the stuff I actually needed the day I launched this scrappy little strap startup couldn't have been wider. That's at one of the best business schools in the world, but what those business schools really prepare you to do is enter as a mid-level manager into a large organization. Very few of them prepare you to be a bootscrape entrepreneur, right, that needs to walk out and figure out how to, how to find some space, how to get pesky little things like insurance. You know, when you, when you start thinking about somebody you're going to partner with, what's that all about? You know, how do you go about the nuts and bolts of raising money without screwing yourself, you know, there and ever after. All that stuff you don't really get in business school. You get that by getting out there and doing it, you know, and hopefully—

So, no, I agree. And we're going to be wrapping up soon, so I want to, um, ask you just— I wanted to wrap up the questions on angel investing. Any companies that you've written checks to that we would know about?

Well, I mean, I can tell you a couple of ones that I'm super excited about right now. There's one of my— ironically, one of my board members started a company called Basil Street Cafe, which is a really cool automated pizza kitchen concept that I think COVID-19 has actually now made more viable even than before. But it's a really sophisticated combination of technology, branding, and distribution to create a nationwide initially, and then global automated pizza kitchen, and that produces some of those kick-ass pizza that I've ever had in my life, which is really astonishing because your expectations out of a machine are very low. It turns out it's every bit as good or better than Blaze or any restaurant quality pizza. That's one of the things.

Also, SoftBank backed one of those automated pizza pizza companies. Hopefully, you guys have a better run at it than those guys.

I think sometimes, there are things that were a great idea, but were ahead of their time. I think some of the players that have attempted to do this before had an interesting idea, but the technology, they didn't get right. It's largely a distribution business as well, because you have to make great pizza and be able to keep the machine stocked with it. But I'm excited about that one. Um, you know, I've got another buddy that I'm helping that, uh, has a company called Everence, which I think is a really cool, um, you know, opposite end of the spectrum in a lot of, in a lot of respects. It's, it's basically a very unique way to, to collect, capture, and then encapsulate, uh, can be anything, but the idea is hair, ash, —could be any kind of material, from a flower from the mountaintop where you got married or buried your grandmother or whatever, and then enables that to then be put into either jewelry that you now have. For instance, I'm having some stuff done right now that I'll have my boys' locks of their hair encapsulated and put into a bracelet that I'll have them with me always.

And so, uh, it's like when, uh, it's like when Billy Bob Thornton and Angelina Jolie had vials of blood. Did you ever read about that? They're fucking weirdos.

Yeah, that's a little creepier than I— than I— yeah, than I'm in for. But the other thing they do that's really interesting, you either choose, uh, to put it into jewelry or into tattoos. So for everybody who has tattoos and wants to ascribe a little more meaning to them, right, it's, it's kind of a cool thing to be able to create— to cut a lock of, you know, everything from your dog's hair to your kid's hair, or a cheek swab And you send it off to them, and they've got this patented unique process of— What's it called? Into what, you know, a keepsake, basically a permanent keepsake, whether it's jewelry or a tattoo. How do you spell it? Everence, E-V-E-R-E-N-C-E, I think. Cool. Their website is everence.life. But yeah, there's a couple, you know, and then I'm involved in a technology company in LiDAR radar. Called Luminar, which is a cool company. That is one of the examples of one of those that, all right, not exactly in my wheelhouse, not an area that I can necessarily add value to, but very exciting. Another friend who pays a lot closer attention to that space put it in front of me, and it just made sense. It is one of the companies that is out there vying for supremacy in the self-driving -driven automobile category.

And I feel like if you tell me that category and that you're starting a company in there, I would just invest in there just because it's like, yeah, probably, maybe.

It's kind of in that category. And then you look at the leaders and go, well, those people are really smart people. This is a sector someone's going to win in, probably more than one. So, you know, reasonable Again, as I said, I am a $20K to $50K investor in any given one thing. I am not taking huge exposed positions. Usually, I like to invest in things where I can help based on my experience as a brander, as an entrepreneur, some government stuff that I have got involved with, because obviously, I spent a long time in the government space. Then just some cool companies, right? There's cool companies that I'm trying to help right now like Indie.com is an awesome new platform to help influencers monetize their followings, right, with content. I'm a big believer in that space and it's an area where I can help them by exposing them to our large installed base of trainers, all of whom are influencers in their own right and trying to figure out how to scale themselves. And create new passive streams of income. It is a smattering, and there is a handful of others that are in the same categories.

Were you able to get some liquidity from the first PE event in order to make these investments?

The first one, no, I should have. That is one of the big lessons for anybody who is listening, and I really believe this. Unfortunately, I did not. I didn't hear it, or if I heard it, I didn't listen the first time I heard it. But I really think for entrepreneurs, you really should not— I'm speaking generally because there are exceptions to every generality, but in general, I don't think entrepreneurs should take institutional capital without pulling a significant piece off the table. It just, you know, from the time that you do and you introduce a preferred class of shares into your cap stack, things change, right?

What would be your definition of significant? A million, 5 million, 500,000?

Well, I think it depends on the venture. I would view it from where I sit now as, you know, if you were building and then running a successful company and you thought that the only option for financing was to go raise it from institutions, I would sell at least a third of my holding to bring those people in, basically enough to be okay if things go differently than you expected. That would be the rule of thumb answer.

You had to wait for the second round then to to make that happen.

Yeah, yeah. I probably could have sold more at the first stop, but I was very bullish and very, as entrepreneurs need to be, and I thought, hey, I am not selling anything right now. That was a big mistake that when I look back on it later on, you do not realize that you could be locked up with these guys for a long time. right? And once they're in front of you, then getting any kind of liquidity becomes really problematic. So, you know, that's just something that entrepreneurs need to keep in mind. And, you know, you could, you could lose control, obviously, if you sell control. But there are other ways where, you know, through the preferences that institutional investors tend to get into term sheets, where your autonomy and your ability to drive the bus, at the very least get impaired in ways that you didn't expect.

And you didn't have the ability— and we'll wrap this up in a second— you didn't have the ability to take a couple million bucks, take a million dollars off the profit each year to pay yourself. I mean, so like, you were just strictly earning a, a low salary as the company grew, or were you able to like— because if you raised $5 million bucks right out the gate, I would imagine you would not even have had the ability to say, well, this year, we made $3 million in profit, I am going to write myself a $700,000 check.

No, of course not. That is not, frankly, that is a tough way for an early-stage entrepreneur to even think because if you are starting to think about trying to extract stuff out of an early-stage business, chances are you are going to impair that business's growth. My view was never of that. I wanted to start making money because the first, If you count, you know, 2 years of business school where I was working on this idea, I went the first— those 2 years plus the next 3 without any pay, right? So I was 5 years, you know, into a no-pay environment, basically.

Right, and that's why I'm saying like, but you were like 10 years in before you raised the first round, I think, right? Or—

Yeah, we were maybe a little less than that. Maybe we were 9 years in.

So it's like, by that point, it's like, all right, look, if we're doing okay, like, I could definitely, I can definitely—

I should have taken money off the table then. That was one of the mistakes, right? Because what I focused on instead was, hey, I want, you know, to up my, up my, my salary, right, and my bonus structure to a point at which I can start making, you know, a good living on an annual basis. Um, but I should have, I should have done both, right? Because that That was possible, and I chose to just focus on, all right, let's get my cash comp up to a, up to a level that feels right for, you know, what I've built in the 100 hours a week that I'm working, and not worry so much about, you know, extracting value right now, right?

Oh wait, you're saying you should have it just increase your salary and bonuses, not—

I should have done both is what I said. I, I did increase my salary and bonus structure I did not pull money out of the business, right? And that was a mistake.

What were you paying yourself? That to where it was, I mean, were you paying $50 grand a year?

Well, I mean, no, probably more than that by then, but early on, yeah, I mean, shit, for the first 3 years I was paying myself nothing. Then I think I started paying myself $50 grand, you know, and it just sort of, if you dollar cost average back, you know, it would have been a very bad financial decision, right? On an hourly basis. You get there and I make a good living today. That's plenty. It all evens out, but if you dollar cost average the first 10 years, I probably made $50,000 a year, which after 14 years as a Navy SEAL with a Stanford MBA, right, ain't killing it. Living in Mill Valley where— Living in San Francisco at the time. I fled the Middle Valley like everyone does eventually, or to Marin, you know. But, but, uh, yeah, I was living in, you know, living in the city, paying a mortgage up on Twin Peaks.

And, uh, oh no, shit, I'm in Glen Park.

Oh, well, that's, that's where I was. So I was right behind Tower Market. Awesome. Glen Park was my, Glen Park was my, my, my regular, you know, the Chenery restaurant. I don't know if it's still down there, but that was my, my regular jam. I live in down the hill and, you know, I used to run Glen Canyon every day.

Yep, I live in downtown Glen Park. I ran Glen Canyon today and I have a house here with like a garage and a gym with my TRX. This is awesome, man. You're cool as shit. I appreciate you taking the time. What's your preferred method of— Oh, right on. What's your preferred method of chatting with people?

Twitter? Fuck, it's @randyhetrick, right? Instagram and Facebook. @TRXTraining is the brand, and TRXTraining.com is obviously our website. I'm working on a RandyHetrick.com website right now where some of my stuff that— my next big vision is to take a page out of Richard Branson's handbook and basically figure out ways to grow my brand that can help the brand that I gave birth to. Do things that maybe it can't do and vice versa, right? You ladder yourselves up just like he's done with Virgin and the Richard Branson brand. That's, that's, you know, sort of a goal that I have. Maybe, you know, I'd be wildly fortunate to get to his scale, but I could, I could be happy with a lot less than that scale as long as I'm still contributing value to the mothership and it's giving me opportunities to do cool stuff.

Well, I, I, I think you, uh, you, you look, you You have the, the story, you have the look, you have the charisma. Navy SEAL who's fit and also went to Stanford. I mean, you're a—