Encarta | How To Buy A D2C Startup For Cheap and Sell It For Millions

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It will go down as one of the best private equity deals ever. Over the nineteen years, they put two hundred twenty six million in to weight watchers and got five point three seven billion out. Four point seven billion of realized profits.

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Alright. What's up?

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We are back, and we got another episode

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we got a guest here today. Maytag is here. He's a he's a friend of mine who most people I think probably

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probably haven't heard of unless you're in the DDC world, or you're on Twitter, or you know what's going on in that in that area. But,

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I wanna introduce you because you're somebody who a has helped me a bunch with my DDC brand. You, like, know a bunch of tips and tricks and hacks and shit like that. So I'm like,

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I basically have a little scoreboard in my head, and

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everybody's attributes are there. And then yours, it was, like, business hacks was, like, filled up. And then the other thing was that you I don't know if you listened to the show regularly, but you would send me little nuggets of like, oh, you should talk about this. She's talking about this. And so I kinda got confidence. I was like, oh, I think he's just got his back pocket full of interesting stories that are off the beaten path. And so I kinda like that. Do you listen to the show first? Let's start there. Yeah. All the time, almost religiously.

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So Sam, I go to shower podcast.

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Oh, that's that's perfect.

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We are the number one rated shower podcast of the country.

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Million of men

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lather to us. So,

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Sam, I sent him a picture of, the Vancouver show where, like, the stadium or, like, the the theater was filled up. And he goes, wow. Oh, that's a lot of virgins. And

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hilarious. So true. That's a good point. My fiance listens to the show religiously too, and she wouldn't use chat GPT when I told her about it maybe a month or two ago. And you guys mentioned it the other day, and she was sending me screenshots. So you guys caught her using that? Dude, the Dermesh pod. I I think you're referring to the Dermesh pod. I've been using it all again after talking to him. I implemented a lot of the stuff that he was talking about, man. He got me hyped up.

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Also, what a lot of people don't realize this

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is Dimesh pods always get tons of views on YouTube.

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And finally, Sean, like, texted Dharmesh in a group chat and was like, Hey, Dharmesh. What are you, what are you doing? And he goes, Oh, nothing really. And I go, really? And he goes, well, I'm just taking a few things. And he, like,

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gave this, like, very detailed list of, like, internet marketing, not hacks, but he was, like, I'm just, like, testing, like, buying ads, like, five hundred dollars here just to test this. And then I'm, like, responding to comments. Just like this small stuff that you wouldn't expect someone who runs a twenty billion dollar company to, like, begin. And it It's very tactical. We don't even do it with a it's our own podcast. We don't do any of this stuff. Like, people are, like, the thumbnail, the the title. People don't realize we don't see those. We don't approve those. We don't know about those. We're not involved in it.

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We don't do a lot of this stuff.

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That we probably should, but, you know, can't be bothered to do all that stuff. But he did. He did do it. They say they say the devils and the details, and I trying to hang out with him.

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Dude,

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he's the man. Like, he was like, oh, I'm not doing anything. Then he had this, like, really long list, actually.

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Maita, have you said a phrase to me the other day? I called you, and you said a phrase that I've stole, and I've just been saying all around town. I've just been it everywhere, even when it's not really perfect because I thought it was so funny. Sam, I was talking to him and I was like, oh, you lived in, like, or, like, you're living in Utah. Why Utah? Like, Or aren't you like Canadian? You're like Indian? Like, what's going on here? And he was like, he's like, oh, yeah, my wife something something.

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And I go, I asked you something about your wife. He goes,

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he goes,

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yeah, you know, me, he goes, yeah, you know,

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I I look like I got beat with the ugly stick, but somehow I ended up with an awesome look at why

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I thought It happens. It happens. It's coming here. Beat with the ugly steak was so funny.

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I've been using that everywhere.

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I use it to refer to my business partner all the time. So

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Oh, you take him down with you? Oh, always. Yeah. He's my though too. I don't know. I do believe him. He he's pretty handsome. How how how how old are you?

04:08

I'm twenty nine. Wow.

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I'm looking at that. Interesting because He does stuff that, like, you say words that,

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most people don't say. So I I I pay attention to vocabulary. So for example,

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in the tech world. Me and Sam used to live in San Francisco.

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you couldn't go outside. You couldn't poke your ear out the window. You wouldn't hear the word EBITDA. Nobody says EBITDA in San Francisco. Nobody knows about it. Nobody talks about it. It's not a thing. But then when you get into, like, the cash flow business kinda world, that's all you're gonna hear. A bunch of a bunch of different people talking about the words I have to do with profits. You say a bunch of other words, like,

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dividend recap

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distressed buyout. And he talks about all these things that I frankly don't know what they mean, what they do, how it works, but I know you come from a little bit different world. So I'm excited because I wanna talk about some ideas

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from your your neck of the woods. You're part of the business world. That is less of stuff I'm less familiar with personally. And so I think I'm gonna I'm gonna learn a little bit. Where where do you wanna start. What what what topics should we start on? You sent a doc with some things. I wanna I wanna look at some of these. Let's start with one that we have. Hold on, Sean. I need a little bit of background here. So You you basically,

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I, like, I read your medium posts. So if I understand this correctly,

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the name of your holding company, you guys buy into or you buy entirely outright,

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distressed or the only okay performing D2C brands, and you make them great. Is is that the summary?

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Yeah. That's the gist of it, and we're less of a hold tone more of a, an independent sponsor, if that makes sense. And that just means you do everything on a deal by deal basis. The equity that you're working with might be very different on a deal by deal basis. That doesn't make sense. I don't understand what's what do you mean when you say sponsor?

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So it just means that we're the ones making the investment and say on one deal, Sean's a co investor with us, and then on the next deal, only Sam's on the cap table with us. And you run it or you hire CEOs or what?

06:05

It depends on the the portfolio company. Right now, I am day to day with one of our portfolio companies. And how many do you have? Like seven, I think?

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No. There there's three platform companies, and then there's another eight to ten kind of minority equity and depositions that we have And the whole thing is roughly of what size. So, me and listeners understand.

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The core platform companies, which I would count as part of the revenue because we own the majority of those companies is what are the eight figures,

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it's kind of that that mid eight figure range And is the biggest one, the the flowers company?

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No. That one's slightly smaller than the succulent company, but the flower company is the one of most bullish on. That would solo wood flours dot com. And that's just because,

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there's a lot of room for margin expansion yet. So What's the name that's the one that's the one you talk about the most. So so let's give let's let's give you said three platform companies. So you said a succulent company. Mhmm. Solo wood flowers. So it's

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like a wood or fake flower company. Correct? Made made in our other line, Sean. That yeah. Be exactly. So made in India. People buy them for, like, weddings and things like that. Right? Because flowers are super, super expensive at weddings. And so these

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look really good, but they don't cost as much as fresh flowers or whatever.

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What's the third,

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like, majority owned company?

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That one's an apparel company.

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An apparel company. Okay. Yeah. And so,

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you own these three. Let's talk before we go into the details about each of these.

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I wanna know the origin story because you've told me you've told me some interesting things, like, I think you met your cofounder on Reddit, like, in a subreddit. Yeah. Yeah. And so take us back. Go go all the way to I I see here something about about about getting sick at seventeen, start there and then tell us the story of how how you got to this this spot now when you're twenty nine years old. Yeah. The quick and dirty version is essentially,

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diagnosed with spinal stenosis and degenerative disc disease when I was seventeen.

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So that meant, you know, obviously doing anything physical

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for work was kind of out of out of the picture.

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So I decided to learn more about e commerce and entrepreneurship

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and just kind of stumbled.

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I I started a a Facebook page called Guitarporn.

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And this is back when organic reach was awesome. You know, you post something people would actually see it. Facebook flustest with so much free organic reach. It was the greatest time ever.

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Almost like TikTok is now. Right? And then,

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I transitioned I started doing basically guitar runs, like semi custom guitar runs with big brands, and we'd partner with a a retailer dealer. This is before brands have worked with you directly. Right? And we would sell out these pre order routes to basically take a cut. Eventually, we cut out the retailer and became the retailer ourselves. That got to kinda low seven figures. That was nice because there was no CapEx we didn't have to have much cash. Right? It's all pre orders.

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After that, I started a men's hair product company, which is really ironic because I'm I'm sick.

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So I I don't cut my hair and I have a turban. And,

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so did did that with one of my best friends. That also scaled the kinda low seven figures. Along with a guitar pedal company that scaled below seven figures. And then after that, I decided, you know, these are all fairly small. Like, TAMs really small for niche guitar pedals.

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So I had said to start investing,

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realized, hey, you know, no one's gonna come to me, just giving out nobody. You weren't even doing guitars. You were doing guitar pedals. Specifically?

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So the first company was a guitar retailer, like actual full blown guitars. And then, yeah, the one that was really profitable was guitar pedals. Just because the margin was insane. And I partnered with a, a guy who had met flipping guitars, like just trading guitars with, and he was a grammy dominated guitarist, right, he is. He placed a band called periphery for any metal nerds.

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And, so that went well. Like, those were both flowing well in terms of cash. There's such a small opportunity Were your products any good or were they kinda you're just good at the marketing? Because that's my that's my kinda,

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rub with a lot of DDC companies is

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they have pretty shitty products, but slick marketing.

09:54

What a No. The products are awesome. I mean, I have, like, thirty or forty thousand posts in Guitar forums by the time I was eighteen. I really was into guitar. I used to play six to ten hours a day. So I, I definitely knew it would have to make a good product. So okay. Cool. Yeah. I mean, like, a lot of these companies, like, I'll see them, like, dude, these are shit or, like, this is some Alibaba crap that just wrapped up in something a little bit nicer, but it's still pretty crap. There's no r and d, like, made it a sisperior product. You know what I'm saying? Especially with, like, a lot of the cosmetic stuff, like, bloceans and stuff. I'm like, I don't know, man. This is kinda crappy.

10:24

So did you go to college? Cause sounds like you were doing these when you were, like, eighteen, nineteen, twenty, twenty one. Is that right? Yeah. So I was in school, and then I dropped out

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It just didn't make sense to stay in school. What did your Indian peers think about that? They were not they were not big fans of it. That was Yeah. What was your, like, dropout point? Was it, like, I'm making x dollars and the x was just, like, too big to or you just didn't have the time to go to school? What why did you drop out?

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It just didn't seem like the value was there relative to who I was had the opportunity to interact with on the business end. And

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just seem like there's more opportunity there if that makes sense. Then, obviously, I was doing okay in terms of cash flow. So

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So how old were you when you made this podcast called my first million. How old were you when you ended up making your first million?

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In cash or or equity?

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I don't know. I'd probably put it, like, mid twenties, early twenties, like, twenty four, twenty five. And so you you did that through these kinda, like, smaller e com things.

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And then how'd you get into this kind of like private equity style thing where you go and you buy these distressed companies and you turn them around? So how did that happen?

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Yeah. So in the great recession, when I was a kid reading about it, I always thought it was interesting reading with private equity firms that made money no matter what, like, if the company did well or it failed, And I thought, hey, that sounds great. I hate being an entrepreneur because, obviously, if the company doesn't do well, you fail. Right? And that's still the case. It's not like

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you know, it's just not as black and white anymore. So I started, I just realized the template. Explain that. Why would a why would it make why would it work whether the company does well or not to as well, explain how that works. Yeah. We can jump into that a little later, but part of our thesis is essentially investing on how much liquidity or cash the company can generate in a short term basis.

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So if you can invest today and pull most of your cash out within two or three months, there's a lot less risk. Right?

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Versus say you bootstrap something new, you're always putting more and more cash

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on the working capital side, you need to fuel growth. Right? If if you're doing a traditional consumer brand, that's less of an issue for something asset light like SaaS. Right?

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But but that's the case, then you you don't actually end up pulling cash out of it for so long. So where most people focus on equity appreciation,

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you guys focus on liquidity. You guys focus on how quickly can we pull cash out, whereas most business people just think, how do I make this worth more? Which often results in putting more cash in. Is that correct? Right. And that's just one facet of it. We're okay with holding to the long term or being more long term focused if if it makes sense. And sometimes we're just more of a short term partner. And, like, it's not uncommon for a software company to sell on the low end for three times revenue. On the high end, if it's fast growing ten times revenue. What you just said was you're gonna buy a company for basically,

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one sixth

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times because you said you wanna get your cash and I can't do that math, but you wanna get your your cash back in two or three months. So you're buying it at one six times profit or,

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of cash flow. I mean, like, like, nothing. Right? Give us give us a sample deal economics. So, in a situation where that happened.

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Yeah. So we invested in an adult health from all this retailer, which is a nice way of saying sex toys.

13:34

That's I'm in Utah, so, you know, But what what why don't you ever say the name of the brands? Because you don't wanna you don't wanna talk about it?

13:41

Well, if they're distressed, it's just kind of Got it. Okay. Yeah. Just culturally kinda mean to them. So I I'm not like that, but the and I I can send them over. I think I shot them over to Sean, but

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Yeah. So we we invested

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essentially

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at,

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it's a a fairly far below market evaluation just others were unwilling to invest in a in that kind of company. And this was twenty eighteen back when it was a little bit more taboo than it is now. Now there's a few

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publicly venture funded, brand, like, Dame, etcetera,

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in that space. So it's become more socially acceptable. But we we've gotten far below kind of market valuation.

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The comp give give us a give us a sense. So revenue was about x. And then what was the distress? Well, why was it distressed? They had too much inventory. They had a debt problem. What was the problem? I would say it was more of a case of really bad margins.

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And there was a clear case to improve those margins. They were, so just originally a drop shipper. They're doing, like, six million a year. This is one of our first deals. So they're very small. They're only doing six million a year.

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I'd say market for that for valuation, like, the growth equity side would have been, like, ten, fifteen million. As far as valuation back then, we got in at, like, one And then the company paid us a royalty until we are

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paid back in full on that initial cash investment. And then there's a few other kind of structural things going in. But we got involved and we helped boot up their initial ops. Why would a company like that sell for one million dollars? I think that's I think if I'm listening, that's my question. Right? Like, Yeah. He said they're doing six million. And normally, that's like ten million of value, but they bought it for one. And how are you are you just

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mister charming or what why were you able to to buy it for that that price? So that one was a minority equity investment, and we got involved like, really hands on operationally. So my co founder, he jumped in and he helped them boot up there to physical operations and transition from a drop shipper. To holding their own inventory and booting up ops here in Utah.

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He helped them launch that facility, make their first few hires, GMs, etcetera. And then I helped to raise,

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debt fuel growth, and that kinda took the that six to twelve ish mark. Gotcha. Gotcha. Okay. And then we sold our equity,

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just five secondaries to to VC firm that invested later once that value been created. Okay. Gotcha.

15:52

So so continue on. So you you

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you've done some of these. Okay. So you see so I wanna go back to to sort of how did you get this idea? So you you read about this. You're like, alright. Private equity

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has this trait where they can buy stuff at a certain price or on certain terms

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so that they get their money back quickly, whether they, you know, their equity portion is small.

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They have a lot of debt, and they get their money back quickly.

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You read about that. But still you've never done that. So how'd you decide to actually go do it and how'd you figure out how to do it? Yeah. So I just started posting on Reddit. So try and find initial deal flow, and then I met -- Which sub run? -- one guy.

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Just the entrepreneurship one.

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So I met my co founder who I still work with now, Alex,

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through that subreddit, and that I met a lady who was one of the first few engineering hires at Uber Eats. And she actually ended up retiring, like, eight months after we started working together when when Uber IP owed.

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And then the other one was someone with a very traditional background in private equity. And he's the one who kind of taught me a lot about private equity.

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And you're just, what, building a relationship through Reddit DMs or, like, how are you, like, I don't meet anyone on Reddit. What what is actually happening here? Sounds like you met some pretty high quality people and actually trusted them enough to partner with them. Yeah. It's the same way you meet people through Twitter, I guess. Right?

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Just posting, getting to know people. I'd say that the community there is very low quality,

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on Reddit versus Twitter and some other private forums, like, you know, EO, YPO,

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what Sam has going on. Right?

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So there was a lot of filtering to be done, but we did sort the deal through that.

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That's how the succulent company was was found.

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Okay. Gotcha.

17:31

Okay. So, Sam, what do you wanna do for here? You wanna talk a little bit about this, like, flower company thing, or you wanna talk about other brands that that that he's got on this list? I wanna talk. You have you have,

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three well, woah, shit. You have five categories or four three categories. You have frameworks,

17:47

You have interesting ideas and opportunities, and then you have under the radar companies.

17:52

I would like to start at number one, under the radar company. Sure. I read those I read that reverse order. Number one, under the radar companies. You have things that I've never heard of.

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And I, like, I'm pretty good at finding these unheard of things.

18:05

Yeah. So let's start with a simple one. So tell us about Josh's frogs.

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And, like, this is one of these types of companies This is one of my favorite companies. There's all the characteristics of a company we'd love to invest it.

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And I've I've been trying to invest it since twenty eighteen, but he he always does no. So okay though. I still love him. So, basically, Josh's frogs does exactly what it sounds like. They

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I don't know if you call it farming. Breeding. They breed their own frogs and their exotics,

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and they also grow the bugs that they eat, and they sell the food. But they do all of that in house in Michigan and they ship it to customers. So if Sam wants a frog tomorrow, he could order one from Josh's frogs, and they've scaled really cleanly, totally bootstrap, Josh is awesome. I called him on a Sunday, and the guy was catching frogs with his kids. I couldn't believe it. You know, I think he's been doing this for fifteen, twenty years. And, he's still loves frogs. And frogs, basically. Do you know the price of a frog? Do you know what frogs you're going for? Dude, I'm looking at it. I'm looking at it now. I would have thought, like so you can buy a chicken at track tractor supply for, like, five bucks, like a chick, or -- Yeah. -- frogs are way more expensive.

19:11

Yeah. I mean, they're the frogs here range the most expensive one is four hundred dollars. It looks like the average one is, like, sixty to a hundred bucks for a frog. These are they're beautiful, but, like, You know, these are for pets. Like, people want a pet frog so they go by this, this, sixty dollar black poisonous dart frog. Alright? It's fair enough. Later on, you you guys should watch the tour of his facilities. It's really cool. And so you like this business because what?

19:36

So what I what I really like is the steep ops mode. So no one else, your typical e commerce guy is not gonna go out and boot up a frog operation. Right?

19:44

It it's just too intense for them. They don't really like physical things. We have to show up. A lot of guys just use three PLS, and it requires a lot of specialized knowledge. At the same time, you know that someone overseas not gonna undercut you, and it doesn't become a race to the bottom with monetized products because you you can't really ship a live frog from China or directly overseas to the US. It's just not viable. Thank god.

20:05

So with that, there's a very strong operating vote. You're only really competing against other companies in the US. Right?

20:12

So your your cost per acquisition is just competing against, like, only people weirder than himself. Which is -- Yeah. Exactly. -- only gonna be, like, three other dudes in the country. Yeah. Your CPA, you're seeing a cost per acquisition of customer stays consistent. Does it really spike the way you see it spike in other,

20:26

like, you know, space Josh's frogs, Jack's frogs, Sam's frogs, and, you know, Herbert's frogs. Those that's the the big four in the frog industry.

20:36

If you're Josh, if you're Josh, if you're Josh from Josh's frogs, what

20:41

what would you sell this business for? Or, like, what would be the threshold of, okay, this is interesting. Take the offer, or I'll maybe take the offer.

20:49

Yeah. I obviously, I can't say what his EBIT does. And if I gave you a multiple, it would kind of tell you what his EBIT does. But I would say there's probably

20:56

let let's say your average D2C business, his size might sell, and I'll just use a range for eight to ten x he would get a premium of a few turns on top of that because of that operations mode, and it's not something it would just knock off. Right?

21:10

Yeah. It's the super super defensible.

21:13

Okay. So and how did you even find this? You know this guy personally, or you found it? Yeah. Meet him.

21:19

I I met him through, I did a podcast on e commerce fuel, and then he reached out, and we just got along. And I I always stay in touch with him. We like to hear it out. We have similar problems for their businesses. So fun to discuss them with him, like, implementing lean, etcetera. So By the way, I just read, I just Google Josh's Frog revenue. So that looks like they're on the ink five thousand. So you can find it there. But according to some articles, they're in the range of like fifteen million dollars a year in terms of frogs. I don't know if that's accurate, and I haven't actually researched it, but that's like, just some top searches that are showing that. That's pretty wild. Yeah. I think they're they're bigger than that now. That's Yeah. This guy's a

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there's a picture of him on the about page, and he just looks so happy This guy looks like he's in frog heaven right now. I'm so happy for this guy. Just this one picture. Just like, I I I hope to be as happy as this man right here.

22:04

This is a good one. I like this. And I think what's cool when you so invent in in the sort of like tech world Right. All the discussion is always just about like

22:15

the future dream, like the dream and state. It's like, what could this be if everything goes great?

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And what I've learned as I talked to guys at Angel Wilkinson or the guys from enduring ventures or you, with people who are buying

22:28

who wanna buy, you know, solid stable cash flowing businesses that are profitable, that

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not the, you know, it's not the pie in the sky sort of thinking that you get in Silicon Valley. And instead,

22:41

it's basically what could go wrong instead of what what could go right, it's what could go wrong if I bought this company. And, that's why people love businesses like this that are that have this, like, you know, defensibility, this moat. So it's like, no one's gonna compete with me not internationally because you literally can't ship the frog. Locally,

22:58

you know, the average e commerce bro is not gonna wanna, like, take this on. Right. So who am I competing against? I'm competing against basically nobody, which will let me which means my business is extremely defensible. And so it's just a different way of thinking that is less common when it comes to tech, which is just sort of like half assed can you grow

23:16

you know, can this become huge? Can this become a unicorn? It's a different sort of like mindset altogether.

23:21

What's another example of an under the radar business that that's worth talking about? Talk about this fast growing trees one.

23:27

I think that one's a great example. So similar similar operations about where, obviously, they're kind of growing the trees. Again, no one wants to be a tree farmer. Right? It's not sexy. No one's gonna go ahead and raise capital to become a tree farmer. Oh, no. That sounds alright. That sounds kinda neat to me. Wait. So so literally, what what what is it? They sell seeds or they sell the actual tree? What's going on? Both. And the company, I I first stumbled across the same way the company was being sold six or seven years ago. And I think it went for between a hundred million to a hundred and twenty million, and it looks like they've grown quite a bit since then. I wouldn't be surprised if they're worth closer to double that now, just with their website, recall, etcetera. They are very, like, really traffic estimate shows it went from it's like at almost three million it takes a month. That's pretty crazy for a free website. Their website says,

24:14

flower so here's their h one. Flowering trees are it. You'd hate to miss out on the hottest trees of the season. Wouldn't you? Shop now over one point five million happy customers. And so what you see is I don't know what type of tree this is, but it's like a grown tree that's purple.

24:31

It it does look beautiful. It looks it's a beautiful tree.

24:34

And, I just think it's hilarious.

24:36

You'd, you'd hate to design the house.

24:39

Flowering trees are it. That's like, you know, like, the, like, gen z people are like, He is him.

24:45

She is her. Have you seen this, like, this trend?

24:49

Flowed trees are it.

24:51

This is awesome. I mean, it's it's a really defensible business. It's cool.

24:54

It kind of no no one would really expect something like that to be that large. And so what do you buy? You buy a tree that's mostly grown already, and then they come and plant it?

25:03

I think you plant it. I think it shows up, but then you plant it. Oh my god. In your property. So if you want, if you want a tree to, like, for more privacy, say privacy hedges or something similar or just trees in general, this is where you go. How much remedy do you think they do? Take your fix.

25:17

I have no clue now. Again, I'd be really surprised if it was less than a hundred million in revenue. This is Yeah. I think probably closer to, like, one fifty. And what type of pro what's about, net margins would this be? Or net income or EBITDA?

25:31

I'd be really surprised if it was below twenty percent. Probably cluster twenty twenty five? This is crazy. And they probably don't they probably aren't buying too many ads. I'm I they had a couple Google ads, but, like, It seems I bet you this is a type of company that they I mean, they called their company fast growing trees for a reason. I I imagine that was a search thing.

25:49

Yeah. Yeah. It's an older company. It's been around for a while.

25:52

Under a few different owners, I think a private equity firm runs it now. And who would have thought that, like, you know, when the internet came out, It's like, yeah. People are gonna be able to, like, buy things online. It's like, there's some guy out there who's like, they'll buy trees online.

26:07

It's like no. No. No way. No way. Why would I buy a tree online? It sounds like the most far fetched

26:13

thing. And then here we are, a hundred million dollars selling

26:17

fast growing trees online. You could buy this by the way. Look at this Italian Cyprus. It's like the That'd be perfect for the Airbnb, though.

26:23

Yeah. I am I'm looking at this and I think this is pretty awesome. Like, I, like, the it's they have some beautiful hedges, there's like, fruit trees. I mean, this is pretty amazing. I understand this. I'm getting to the age now to where I appreciate a good tree.

26:42

Yeah. This is this is really crazy. Okay. I like this one. Give us another under the radar business.

26:48

Yeah. What seems more appealing to you? The the first Well, let's do the Betty's one. And then we've talked about this CSE

26:54

generation thing, and we should, but you have more info on it than than we do. So let's do Betty's and then do the CSE.

27:01

Yeah. So Betty's is really interesting business. What I love about it. Is strong IP modes. If you go to their website,

27:08

you can tell something. What do what do they do? It's like a bed cover thing for kids actually don't know how to explain it very well.

27:15

But it may it's so your kids can basically change the bedding really easily, but

27:19

They have it. It's patented, and they have proper IP mode. And when you go to their website, you can tell it's not very optimized, but they've been crushing it. Totally bootstrapped. Great people. A very healthy EBITDA margin.

27:31

you know, it's a it's a duvet cover. It's a duvet cover that's easy to zip, which

27:37

I have a Zip duvet cover as well. Duvet covers are are pain in the butt to to to to do. It's meant for little boys, so that makes sense.

27:48

So this, they bootstrap this to forty million. That's pretty impressive.

27:52

Yeah. I I'm pretty sure it's right around there.

27:55

Yeah. That's pretty good. And you can tell it's all PMF, like killer product market fit, killer product, killer IP mode,

28:01

And, they've done a really good job with that end of the business. What do you think are some of the at? Like,

28:07

I I I don't think this is, like, a

28:10

everything can perfectly do this. But I think that when you, like, look at, like, a software company, you think, alright. So what are the attributes of, like, a great software company that scale, you think, like, well, they have to have good net retention, meaning most people come back constantly.

28:22

Ideally, you can it's a expensive enough product that you could afford to hire a sales team.

28:27

Thing, like things like this, like there's like a handful of checklists, and then there's lots of examples of things that don't check check the checklist that still succeed, but what are the handful of of check boxes that you have when looking at, or building a DDC company, particularly things that people don't think are true. Like, for example, like, in the cool kid circle, and when you're twenty two, you wanna create, like, you know, cool shit that Jen Z buys. You're

28:50

none nothing that you've mentioned fits in that category.

28:54

Right. For us, what we found is the most consistent mode, and some people are are different. Right? It's just the mode that's worked for us is that operating mode. So Anything that requires physical manufacturing and has a good reason for the manufacturing to be in the US or Mexico is great.

29:09

And we found that, like, not sure if you guys are familiar with lean manufacturing.

29:13

It's just like a philosophy behind,

29:15

I guess, running a manufacturer operation. Toyota thing. Right? Yeah. Exactly. It ports over very cleanly

29:20

from company to company, but marketing does not. Right? What worked with your paid ads for a company with, let's say, low AOV, but really fast consideration period. So, you know, something like clothing. I see clothing. I buy it. It's very simple compared to the marketing side for something with a long consideration period. That's very different. Different teams, totally strategy,

29:37

nothing will really carry over Queenley. But on the manufacturing end, it it carries over Queenley company to company to company.

29:44

So for us, that's that's our favorite amount. So it is summarized. You you want a low consideration period, and you want something that can be made in America because it has some type of manufacturing mode. Anything else? Well, we we don't actually care about the consideration period. I think it's just, like, a natural challenge than any vertical that you get into. Right?

30:03

If if if that's there. But for us, we only really care about the manufacturing end now. And then, obviously, the way we enter, the deal is really important too.

30:11

And that just, you know, if you pay next to nothing for something, the odds of making it work and making money on it are much, much higher than if you overpay on entry. I wanna talk about this agency stuff because, you know, the interesting thing about, you know, people like you and the DDC world is they're oftentimes

30:28

really, really good at acquiring

30:30

customers because it's kinda like like the DTC folks oftentimes are pretty good now before it was the gaming company. So, like, if you someone from a gaming company or from the Actech world, like that meant that their internet marketing chops were like, pretty good. Now that, D2C or now that Facebook is harder to buy ads on. The people who are succeeding oftentimes are quite good at that. And Sean and I have a bunch of friends who are starting recruiting companies

30:56

And -- Right. -- which is really interesting because recruiting companies isn't new. Out sourcing isn't new, but people are putting sexy new packaging on it. And I guess, what, from what I'm guessing, because you have it on here, is they're doing a really good job or historically at the end of a poor job of acquiring customers, and you wanna apply that to that space. Is that right?

31:16

Yeah. I just think it's a really interesting face in general, but, I I think Some of these agencies are really heavily focused on, say, the Philippines or other countries in Southeast Asia.

31:26

We've noticed there's a lot higher quality talent in places like Mexico and you don't lose

31:31

the same negatives associated with hiring in the Philippines are not there in Mexico. So for example, you could build an office out there and fly out and be there in person in a few hours if you live in Texas. Right? And the wage disparity is not as high as you would think for really, really good talent. You're only paying a just a large number, but, you know, it's not actually that bad. A thirty percent more than you would be for someone who's great in the Philippines, maybe forty percent more in Mexico, but Again, you can visit them in person, which is really big. You can have them fly out. And, again, it's big for us because we do a lot of manufacturing. Right? So they can actually understand the product. Or interrupted the team in person. So your retention goes up. The quality of work is much higher. And we found the quality of applicants is much, much higher in Mexico too. So if I did start an agency, it would be focused on solely talent Mexico.

32:17

just for, for example, when we're hiring a customer service role, like, a new manager or director,

32:22

We're getting people who used to head up uline. Are you guys familiar with uline?

32:26

I just use it to buy, like, boxes.

32:29

Yeah. We we use it a ton for, like, the when we had our our warehouse.

32:33

Yeah. So their customer service is awesome, but we got one of their former directors And his salary ask was really reasonable. It's, like, I think, five thousand dollars a month, but his tally was the equivalent of someone who's two hundred thousand dollars in the US.

32:48

HubSpot is a CRM platform, so it shares its data.

32:52

Every application. Every team can stay aligned. No out of sync spreadsheets or dueling databases.

33:01

Yeah. You have one agency idea on here that I think is a, is a no brainer, which is site speed. So we have this problem with our store, but I think everybody everybody has problem. Like, Yep. Basically,

33:13

if you're selling something on the internet, one of the easiest levers or the biggest levers you have is your site speed. Because if you have a slow loading thing, you're just gonna lose traffic. You're gonna lose customers.

33:24

As you have a slow loading page, you're also gonna suffer in terms of your Google rank because Google takes into account your your page speed as well. And it's really easy in the e comm space to have slow pages because what happens is you start with a Shopify store. You install fifteen plugins just to get your your Shopify store to do anything because it, like, you can't basically run a Shopify store just out of the box. You have to you're gonna end up installing a bunch of apps, and each app injects a bunch of code into your page. And even if you delete the app, the code stays. Yeah. There's no, like, you have to, like, manually clean that up, which is kind of insane and probably a business of its own. But basically, site speed is a problem that we I think we've hired three different folks to try to fix our site speed. And all of them, I'm like, they claim to do something. I have no idea really if they're if they're doing a great job or not.

34:12

I don't think that they are because the next guy comes in and says, oh, man, your site speed sucks. Let me fix it. So,

34:18

So I think this is a this is a a a product that I wish existed,

34:22

and I think could clean up because it's a it's clearly accretive to the person. But explain your thinking on it. What did I miss? Yeah. So it doesn't really require much in terms of dev skill. It's not like you don't have to be great, at the dev end to actually do all of these changes. And it's almost like a checklist that's very portable company to company to company. It applies very cleanly.

34:41

So for example, changing the order in which your pixels fire for Google Analytics, Facebook ads, etcetera, you can delay some of those very slightly and dramatically increase site speed, and it won't really hurt the business that much. Right. That's just an example of one quick fix you could do or a certain app do not compress images properly. So judge b, the review app, on Shopify for for a lot of sites,

35:01

it does not properly compress images. So if you just apply more compression to those images, your site speed goes up at the product display page level or wherever those reviews are. So How, would you acquire new customers for this?

35:13

Honestly, I would probably just just go. Have you guys used built with before? Yeah. We love it. Yeah. Just go to built with full list of websites, make sure they're they're doing a certain amount of revenue or at least have meaningful revenue coming in.

35:26

Just cross check that against,

35:28

something that shows traffic, right, like Alexa or something And,

35:33

from there, I think you would just ping them if their site's slow. Right? Yeah. Just cold email. I think it's just the way to go with If somebody out there wants to do a site speed,

35:41

shop, just DM me because

35:43

this is a no brainer. I'll be your first customer. I'll help you get the ten because it And you can even just charge this. You could charge purely on contingency too. It's really cool because you can see a black and white effect. Yeah. If you've done a good job, and again, it's really easy to do a good job. It's just nobody specializes in this for some reason. So Yeah. And it's a moving target. Like, you'll do it and then, like, six to twelve months later, they'll need it again because they've installed a few more things. They hired somebody who didn't know how to compress images before putting it up. They started using this new tracking software for hot for heat maps and then boom. Now you need it again because you you've gone from a rank back to a c. C rank on these, like, these site speed graders that are that are out there. I'm surprised the the site speed graders don't have these agency or maybe they do. I haven't I haven't actually looked, but does GT Matrix or were these companies that have the the site speed score? Do they not offer a button that says, by the way, we could fix this for you?

36:36

No. They should, though. To your point. Oh my god. Really easy, especially if all these e commerce sites are on Shopify, right, it's very much checklist.

36:44

Yeah. So that's the other move. You should buy that site. You should buy the site speed site that checks the speed and then just add this button at the end. That's the agency service to, to fix the problem.

36:54

If they don't do that already. That's kinda crazy.

36:57

How are you,

36:58

how are you balancing your time? It seems like you've got a bunch of stuff going on. And these I mean,

37:04

ideas are worthless, but it seems like a pretty good idea to me. When I hear when I'm hearing this, I'm like, no, that's kind of an interesting I actually seem like that has legs. You've got a good network. You could probably spin something up fairly quickly and scale nicely.

37:16

How are you balancing, doing everything that you're doing?

37:20

About fifteen percent of my time is on the investment end in managing our minority equity and credit positions. And then the rest of the time is just spent on the floral business. There's a pretty big lever that we're pulling right now. With booting up, another operating base, like a manufacturing base in Mexico, and that'll get our EBITDA to kinda five or six million. And then from there, it's a pretty good valuation. So we just wanna get that over the hump, then I'll probably slowly phase out, but my co founder is solely involved in that company. And that's the that's called solo wood flowers.

37:47

Yeah. Yeah.

37:49

Sam, when I met Ma stab, I I heard what he was doing. I was like,

37:53

I I told him two things. I I think I go How do I invest in this? Because,

37:58

if you're willing to go down and move to Mexico and build your manufacturing facility, you're gonna win. Like, Paulgram has this essay that he wrote called, just like Shlep.

38:08

And he basically describes the guys from Stripe,

38:11

as being willing to do do the Shlep work. And he's like, you know, in a lot of businesses, there's basically some amount of schlep that you have to do. And for Stripe, they had to do all this, like, banking stuff that was like annoying and bureaucratic, but they didn't really view it that way. They were a, they were so young. They didn't really know what all was gonna happen. They they didn't really realize how much they would have to do. And b, they were just willing to do it. And,

38:33

and, you know, you you are willing to do the Shlep. Like, you're like, oh,

38:37

you know, you're like, I am looking for operationally intensive things. That's the opposite of what I'm interested in. I'm like, I want the least operationally intensive thing. But I get why you would want it because it's super defensible once you have it. It's very valuable once you do it. It's very simple once it's fully

38:53

set up, if that makes sense. Once you once you have, like, the best practices for lean manufacturing running, it's very simple to keep the manufacturer running versus like a DTC brand that's really reliant on the marketing end. Right? Yeah. Exactly. And so I told you I remember being like, hey, can I invest in your Mexico thing? Like, your facility there? I think that's a great idea. And then I also told you, I was like, man, I feel like you play the game on hard mode. You're super smart. And, you are like, I'm gonna go do distressed

39:17

turnarounds of D to C businesses. That's like multiplying three hard things together.

39:24

And I was like, why do you do this? You could just

39:27

you know, there's easier options, and you were like, no, I like this. I like, you know, I'm playing in the mud. Once you get a really good deal, you can't go back. I'm I'm Indian. I need to get a good deal. I need to get a good price. So Yeah. I think that's actually what it is. I think it's genetic that you're like, Oh, you know, the best deal possible,

39:44

a company that's burning to the ground.

39:47

Exactly. You can get it for nothing.

39:50

You're also, I'm trying to find it, but so your website's really good.

39:54

But you have this blog post or you have a bunch of blog some medium. So card adventures, card with a k k k It should be on sub stack now. I killed the medium. Oh, well, I found it on medium, but,

40:06

But, yeah, it looks like it is also on sub stack, but you're really good with language. So, like, your thing starts off with, like, Your your first sentence is just is just good. This is a guide and tend to give distress ecommerce heavy business,

40:19

to give distress ecommerce heavy businesses with ten to fifteen million revenue, a high level overview of turnaround management basics and resources to dive into.

40:28

That's a great first set. So you're telling me exactly what I'm getting. And then you do a really good job of explaining

40:33

kind of your background with Alex, your cofounder. You say you started things in your early twenties. You took, passive rolls or you sold them. And then you, like, helped turn around ice dot com, which is now called ice trends. You met on Reddit.

40:45

And then you say, we welcome complex opportunities that others are unable or unwilling to tackle. As a result, we can invest in non control opportunities. We can grow quickly.

40:54

But you just basically say, oh, here's another good line. My team and I are responsive,

40:58

discreet, and avoid pointless formality.

41:01

We understand how critical speed is both in turnaround and high growth environment, and we can tell you within twenty four hours if we're a fit. And so, you, like, you just do a really good job of

41:10

being very crystal clear about what you're offering is, and you are direct, but you're not rude. And it's just a you you have a really good voice. And you also, like, site, a lot of the books that you've read. So you talk about turnaround corporate artistry,

41:24

and you have, like, a quote from the book. And so anyway, Your language is wonderful. Sean said he pays attention to vocabulary. So do I? You you have really good words. You you you're you're and your rhythm is nice. What did you read to kinda come up with your perspective.

41:38

how did you how'd you become a good writer? You're you're you're you're quite good at explaining complex things.

41:43

I think we all grew up during the era of hardcore. I don't know where it was, but for some reason copywriting and being into copywriting was really popular from two thousand ten to two thousand Thirteen, maybe earlier. What did you what did you learn for that? Or who where did you turn to for that?

41:56

One of my friends was just really into it. So I got dragged to it too and just reading random books. I think there's a compilation of, like, a hundred of the all time best sales letters. That's back when, like, people used to distribute swipe files and stuff like that. Right. So you'd just be on our in a random group, and someone would just distribute it and just rip through it. And that's kinda how I picked it up. It's good. You're you're very good. And what what were some of the other books that you read to learn this because you you learn this at a very young age. Yeah. I'd say corporate turnaround artistry is one of the greatest books ever. That's written by my mentor, Jeff Stands, and that guy is an absolute beast. He's turned around

42:29

handful of fairly large nine figure industrials,

42:33

like manufacturing

42:34

companies. Everything from bakeries, to, I think, large restaurants, roster restaurant groups, etcetera.

42:40

And that guy is it is fifties. I I think I hope he doesn't kill me if I got that wrong, but And he just he just shows up. So you sound like lumber mills, etcetera. He just shows up and turns the operation around within six to twelve months. Absolute machine. And his book gives you

42:54

It's probably the most value in a book that I've read in a really long time. It's just like tip after tip after tip. And you can just take it and apply it even if your company is not distressed, you know, it'll just juice profitability. If that makes sense,

43:06

really awesome. But that's just a complete machine. I'm convinced he could drop them into anything, and he'll just make it more profitable in six months. And that's because what? What is he,

43:14

like, world class at doing? What does he do when you drop him in?

43:17

I'd say he's just very making decisions. He doesn't hold back. In a lot of ways, running a turnaround is like running a startup.

43:24

You you don't really have the benefit of sitting around to make decision Like, you're not gonna hire McKinsey to run a full blown study to see if you should do something. You're just gonna go and do it. Right? And maybe you have some light directional data, but you're not gonna wait for a ton of data, and you're not gonna run some crazy qualtrics survey. Right?

43:39

You he's gonna go out and get it done. And that's that's what he's really good at. It's just taking action. He'll show up For example, when he turned around that that Canadian,

43:47

lumber mill,

43:48

he he's American. So he just he moved and, you know, keep minding his kids, etcetera, but he still just moved up to a lumber mill in the middle of nowhere Canada and turned it around. He's got it done. No one also really do that. Right? And there's a premium for that. What part of this brings you joy. Why are you doing this other than it that it makes you a lot of money?

44:06

I just think it's really satisfying and it's fairly repeatable. So

44:10

And and I think

44:11

the speed at which you learn is really, really good. Right?

44:15

And it doesn't require a lot of equity to keep scaling. That makes sense. So for example, you can probably buy a relatively distressed

44:22

brand doing a hundred million for maybe ten to fifteen million in equity. I, we had, we're friends with Moiz and Suli Ali. So they -- Right. -- Moiz started, native deodorant. And I was like, Moiz, we're in San Francisco. Why are you selling deodorant?

44:36

Why not, like, do software and and be normal, make more money? And he goes, I'm a merchant man. I'm a retailer. Like, this is just it's in my DNA. Like, I just Exactly. I make products and I

44:48

I've been working on these t shirt. I've been working with the t shirt designer to do things. And now I'm just on the lookout for quotables. I'm a merchant.

44:55

That's what he said. He goes he goes, I'm a merchant. What's that say?

44:59

It says protocol

45:00

And then, this is a banana that says IRR, like internal rate of return. That's so funny. Well, and Moi's also said he goes, my second frame or he goes, my first favorite phrase in the English dictionary, distressed

45:13

asset.

45:14

And I and it was funny, but he goes he goes, I'm a merchant man. Like, I and it says, I don't know if it's, like,

45:20

like, an immigrant thing or what it is, but, like, his because I know their their family also owns homes, like, lots of single family homes that they rent out and they own gas stations. And a lot of my Indian friends any friends all do that. They have, gas stations, things like that. And I'm like, I don't know, man. Maybe it's just something in the culture where you just, like, you're just geared towards small business, but,

45:38

Yeah. And, like, for you, is it the product that you like or is it just, like, I just like making sup something that provides value and I just, like, optimize for profit? I mean, what what do you think is driving you towards us?

45:49

Yeah. It's in distress side. It's really interesting because it's like a game of chess.

45:54

With the existing creditors, existing cap table, and kind of figuring out how to squish it together to make it work. Right?

45:59

So maybe you have, like, really angry senior lender and convincing them, like, hey, you know, give me the position at decent price. I'll come in, I'll turn it around. And eventually, you'll get right side up, or at least you'll make more than you would just liquidating these guys. Then convincing the guys that you're getting the company from because they're often really upset. Right? Like, say companies doing twenty or thirty million, it's still run by the original founders in most cases, and they'll be really emotional about it right, rightfully so. Right? So kind of figuring that side out is really, really interesting. And then, obviously, the operating end, I I don't like it as much as my co founder. He really loves the operating end. But, that can be a lot of fun too, just coming in, getting rid of the bad apples very quickly,

46:33

and then building out a team and kind of revising the culture. There's a story of,

46:38

what's the,

46:39

what's the famous,

46:41

the famous hedge fund guy who's probably in his nineties now, but you you guys will know how

46:46

Carl icon? Yeah. Carl icon. He tells the story on YouTube, and he's like, I bought this company,

46:51

and it was not doing great, but I thought I could do great. And so we owned, like,

46:56

twelve floors,

46:58

in this one particular building, and I just went from in one hour, from floor to floor to floor, and I laid off the entire floor

47:05

And he tells the story of laughing. He was like, it was the greatest thing ever.

47:09

And the the audience was like, why? You know, you're ruining jobs. And he's like, but I'm making it better. Like, we're gonna we're gonna have a better outcome. And, like, I go both ways with that. I'm like, well, you're kind of just, you know,

47:20

like these hedge fund guys, I'm like, you're just like an Excel monkey and you're just like squeezing every juice of candy, not providing a lot of value. But I do understand the satisfaction of just like getting something that's not fulfilling potential and achieving potential. You you know what story I'm talking about? Were you like Yeah. I know the exact one. Yeah. What's what's the same video? Did I get it wrong?

47:37

No. You you know that. You know that, yeah, he goes through four by four, and and he does exactly what you said. And he's, like, glowing with, like, he's, like, pride. I'm, like, Carl, you're just, like, ruining these people's eyes. Blushing.

47:50

Yeah. I think layoffs just get him hot and bothered. Yeah. He's like, I'm getting a semi just laying these people off.

47:58

I guess you're you're kind of in that position.

48:01

A a little bit. I guess it really depends on the company. Right? A lot of cases, you have a few really good apples. People left. We're really passionate about the company. They wanna see succeed. And they're the last people left. And then you have all these people who are more or less just leeching off of, like, the corpse. Right? What do you think about how Elon's done this with Twitter? I think it's great. I think a lot of those people are really self entitled, and they have no perspective on anything.

48:23

In a lot of ways, they're they're kind of, like, the modern version of this. Companies in the nineteen eighties that were really fat and just overpaying executives, etcetera. Really feel bad for someone who's making up hundred grand losing their job. Right? It's more so people working blue collar jobs where they're making forty, sixty grand, and they're working their ass off. I definitely don't feel bad for any software engineer, making three hundred grand, who's upset they have to work ten hours instead of six. I don't disagree with you. I just wish you would be less of an asshole when he was doing it.

48:48

You don't. Yeah. Yeah. Yeah.

48:50

That was kind of pointless. Like, I think he made fun of someone who's disabled or something that's obviously horrible. That's inappropriate. And you you mentioned something about

48:58

being in America and how, like, you know, you like things that are in America.

49:02

When I, does it ever give you, like, do you have any sense of pride around, like, creating American jobs, because I know on your website, you said, we've created or saved two hundred different jobs in America, let alone overseas

49:13

Do you are you into, like, that whole made in America thing for, like, the sense of pride thing, or is it strictly like,

49:19

this just this the if it makes sense, it makes dollars.

49:23

Yeah. I think it it's a mix of both. I think it really does make sense. And I'm I'm Canadian, but I'm obviously grateful for the opportunity that exists in the US, you know, Americans just much more gung ho about entrepreneurship.

49:32

They're more willing to write a check and just get involved, than Canadians are. If you go to Vancouver where I'm from, it's a lot of older real estate families. They're not really willing to write a check and get into something the way Americans are. They love taking risk, and I really appreciate that about the US.

49:46

Yeah, man. There's

49:48

was the thing that I've noticed recently about,

49:51

what I call, like, the north star formula for a for a business. And so,

49:56

I like

49:57

when you can boil down a plan

50:00

into, like, a very simple

50:03

equation.

50:04

So let me give you an example,

50:07

like Sam with Hampton.

50:09

I think I texted you this, but I just said ten thousand times ten thousand. So you just need ten thousand CEOs who are gonna pay you ten thousand dollars a year, and you have a hundred million dollar business. Ten thousand times ten thousand. So it's like, Can I provide enough value where somebody's willing to pay ten grand a year?

50:25

And then can I get ten thousand people to sign up for that value? Your whole business comes down to that one equation. Ten thousand times ten thousand.

50:32

When I met, when we were hanging out with Andrew Wilkinson, I was like, how much equity did you put into tiny originally?

50:40

I think it was something like, you know, don't quote me on this, but I think it was something like six million dollars. He's basically turned six million dollars into, like, six hundred million dollars just as round numbers.

50:50

And six million into six hundred million. Like, if you wanna be the next tiny, you can just take that thing. See, I'm turning six into six hundred. Okay. How how are we gonna do that? Let's work backwards from that simple formula.

51:00

Well, I think I would need to compound

51:03

at forty five percent annually. Okay. How am I gonna do that? Well, I need to buy businesses on these terms at these price. Right? So you a formula can be very instructive.

51:11

We have some friends that just raised eighteen million dollars and we're also, like, do you do with that eighteen million?

51:16

And they go, we're just trying to figure out how we could turn, or like the the goal is take this eighteen million of equity and turn it into ten million a year of free cash flow. I was like, okay. Like, that's a a clarifying equation.

51:30

I'm curious, Mitab, for you, like,

51:33

in a best case scenario, how will this have played out? So, like, you've you you go to the start,

51:38

I don't know how much how much equity did you and your co founder put in as, like, your seed capital to get your whole business off the ground?

51:46

Well, it's kinda weird for Cartox. We both had a few exits beforehand. Like, he'd sold a company that he got to kinda low eight figures, in his early twenties, he'd put a bit of cash, but we put in wanna say a couple hundred grand, like two, three hundred grand to start making investments. So you and so and maybe you've put in more over time. I'm not sure, but, like, whatever that's We we reinvest everything. More or less.

52:05

Yeah. But, like, just the out of pocket, like, initial not not reinvestments from the proceeds of what you've been doing. Just have you had to take something out of the checking account or savings account just to to to re to recapitalize the business in any way or no? There's, like, two, three hundred grand. And then anything else we put in was reinvestments

52:21

from what that two or three hundred grand has made us. It was reinvestments from what that two, three hundred grand that we put in initially was. Okay. Amazing. So you're gonna go from, let's say, three hundred grand And, like, if this all plays out the way you want, you know, fast forward. I don't know, the ten years or however long you you plan to to kinda do this.

52:37

What would be the big win for you? How much would the portfolio be worth for this to be like a, you know, a home run outcome for you guys?

52:45

Yeah. We are really goal driven. We're a little bit weird that way, but we both wanna tackle increasingly large distressed deals. That's what we get.

52:52

Pleasure from, I guess, just kind of fun doing it. It will just keep doing it until we don't have fun. So our goal really is get this floral company, I think, can usually get to a hundred million in top line.

53:02

Like, our our allowable customer acquisition costs will go up by thirty, forty percent once we finish with a few manufacturing transitions. On. So you don't you don't have you you're not goal driven. What does that mean? I I don't even that's like not English to me. How do you how do you function without without goal? I I just like to do hoodrat stuff. Just whatever is fun. Right? Dude, he's like a dominant you're like the dominatrix,

53:21

the PE, you just get you just get pleasure.

53:24

You get you get pleasure, like, like, Oh, yeah. You like that? Even ours. Oh.

53:30

How much?

53:32

That's going on. That's my new LinkedIn. Some header.

53:36

You just love the act, man. You just you just like the act of, you know, someone,

53:41

you you you whisper whisper IR into your ears, and you're weak at the knees.

53:46

Well, it's just fun because you get to learn from people like, like, YouTube or or hang out with other people that are really interesting.

53:52

And and that's really exciting too. Right? Like, don't you don't you have,

53:56

like, a, like, a, you know, every a lot of people who get business, they've, like, one day, I wanna make all this so I can buy, you know, a thousand acres, or I want to create a school that does this, or I want to be able to make sure that everyone in my family never has a dream medical bill. A dream it's a miracle. A dream it's a miracle. My initial dream. My initial dream and my co founder this before we met, it just turned out we had, like, the same target, was to make, like, five thousand dollars a month. That was it. That's how it starts, man. That's how it starts. That's really funny. Then you realize that, you know, you you know, what I've noticed, I I have all the same questions. Hold on. Hold on. I what I've noticed is this. Dude, you did start like this had the same thing. And the goal always changed.

54:35

But you said when you started, you guys have had wins under your belt. I mean, before

54:39

that, Oh, okay. Okay. Like, early on, like, when I did my first thing, I was like, I'm gonna be stoked if I make sixty grand a year. Okay. Yeah. Of course. Of course. Of course. But what about now? You know, like, what's, like, the what's, like, the vision, the long term vision that you you that kinda keeps you excited.

54:54

Maybe sometimes sometimes it's buying shit, giving shit away, helping your family, whatever. Right? I think getting this one portfolio company, the next level, either selling it or re leveraging it, taking out cash, and then raising a large fund. Is probably like our our immediate short term goal the next two, three years. Dude, that's so college. That's so not what I thought I was gonna be. Sorry. Go ahead. When when I was in college,

55:16

one semester, me and my my buddy, Trevor, and our our other friend Dan, we

55:21

we had read the the card counting book. This was before the movie came out twenty one, but -- Oh my god. -- the book bringing down the house was out. And,

55:29

and we were like, Oh, not only are we gonna count cards. We decided to create an underground blackjack club on campus.

55:36

And so we started preparing, and we were like, And because we had read this card counting book, instead of just doing the obvious thing of being like, cool. Let's just invite some some friends over to play Black Jack low stakes. Let's see how it goes, and we'll go from there. Right? That's how you would do it if you had any, like, any ounce of IQ in your brain. Instead,

55:54

we were like, okay. Let's go buy this, like, fancy

55:58

blackjack table. Okay. Cool. We get we now we're in the hole, and we've got this, like, fancy thing. And then let's run all these practice simulations to see how bad we could get beat. And then what if somebody comes and count cards, how much are security gonna be? We're worrying about all this stuff that didn't matter. And we spent no joke. We spent like the entire semester at college, which is like that semester cost each of us probably like forty grand just to be there. And instead of focusing on the forty grand that we put into being there, we were doing this thing. And I remember one night we were calculating. We were like, oh my god. If we do this,

56:29

we could make three thousand

56:31

dollars. And then we all started giggling, like, oh, it's like Can you imagine that? Like, we were like, dude, what if we made three thousand? And we just, like, that's a thousand each,

56:41

and we were so pumped about this.

56:44

And it was like it just took over our mind like a mind virus for for for three or four months. It made no sense

56:51

But it was like, you know, the it was the humble beginnings of scheming. It was like the it was the first of many schemes to come with this same group of people. We ended up starting a a company together and and did many more things together. But, like, that first taste of the scheme and how hilariously bad your plan and your goals are Like, now when I look back, I look back with a lot of fondness on that.

57:13

Totally. Yeah. It it makes sense. It's always starts small. And then you what do you like? You bought you bought the safe to keep the cash before you even add the cash and the cash earned them came? Yeah. We never, yeah, we never even ran the ran the club because we, like,

57:26

were too worried about getting kicked out of school because we found out how illegal it was. Well, basically, we had one simulation where I was the again, we were big into these simulations. And I walked in and I played. I lost a hundred dollars.

57:37

And then I go, give me all the money or I'm gonna tell people about this club.

57:43

And I was, like, yeah. What are we gonna do if somebody does that? Like, at any point in time, somebody could just literally take all the money because there's no recourse. What are we gonna do? Call the cops and tell them that somebody stole from our illegal gambling club.

57:57

And we were like, oh, this won't work. Before I sold my first company, I was using

58:02

some type of, like, mint dot com style service. And there was, like, a thing where you could manually, you know, you connect all your accounts and it shows you your your net worth and whatever. And they had this option where you can manually add something. So I manually added this really big number, and I would log into this every day, like, six months in advance. And I'm like,

58:20

Sick. This is awesome. And I remember,

58:23

like, when the money then actually came in. I was like, damn, I I kinda, like, felt most of that joy in that six months leading up, just like, I, I kind of tricked myself into already believing this was real. The the the simulation kinda gave me, like, a lot of the joy,

58:38

it's pretty cool. You can kinda, like, trick yourself into believing these things are true, and you get a significant amount of satisfaction

58:44

from that fake thing compared to the real thing.

58:48

Yeah. You you because what people want is the feeling. You don't want the thing. If you if you ever say, oh, I really want x to happen. Why do you want x?

58:55

If you if you just keep asking, why do you want that? The the the obvious or why you want anything of a relationship,

59:01

money, whatever it is, to have a six pack, whatever. It's some feeling. It's a sense of accomplishment,

59:07

it's a feeling of relief, of real of of less anxiety, less stress, whatever it is. And then you realize Oh, it's not the thing I want. It's the feeling and then you might be able to get the feeling through literally like faking it. You might be able to get the feeling through something simpler. That's not gonna take you, you know, seven years and a bunch of heartache to get there. And, and also if you've never had that feeling before, even when when that thing happens, it'll be your first time having that feeling and you'll suck at it, which is why a bunch of people feel after they get success, they get, like, kinda let down. Because the feeling wasn't as as great as they they wanted it to be. The anticipation was better than the result.

59:43

And the reason is it because

59:45

the feeling is actually a letdown. It's because it's the first time they've let themselves try that feeling and the muscles just very, very weak. And so, yeah, big big life tip is to realize, like, what you want is the feeling and then start practice having that on a daily basis through, like, much smaller things.

01:00:00

Yeah. It works.

01:00:01

May tap you

01:00:03

I'm looking at you on Twitter. You have five thousand followers. I think that being popular on social media doesn't really matter in most all of business. In fact, sometimes it's like negatively correlated. To how popular you are. But in your case, I I at least I know with Andrew, like, when he's buying a lot of companies, having some,

01:00:20

Like, you know, it's basically being on Twitter is a billboard for him. So when he reaches out to someone, they're like, oh, you know, I think I've heard of you. Fine. Let's have a conversation.

01:00:27

For how good it seems like you're doing and how smart you are, your, your

01:00:32

social presence is significantly smaller Is there a reason,

01:00:36

for that? No. I just don't really like it. I I just like to post content about stuff that I actually care about. And it's fairly open. And then I guess too on the distressed side, when you're buying a business, they're more on a forest seller. Right?

01:00:49

And when you're talking to a lot of these senior lenders who you're working with, It's a lot of guys that are in their fifties or sixties, and they're very conservative traditional,

01:00:57

like, banker types. Right? They're not they don't really care about social media or anything like that. So and I'm sure it does help with deal flow of the growth equity side or buying healthy businesses, but,

01:01:07

I've just never really been into it.

01:01:09

Yeah. I mean, you have you have you do tweet interesting stuff. It looks like what's a Daniel Roth Wash. It looks like a pretty fancy or fancy watch that you've done. I was just a nerd about, like, neo vintage and vintage watches, and then as well as some newer brands, but mostly smaller ones.

01:01:23

It's just kinda it's a lot of it's like Angel Investing.

01:01:26

It Like, if you buy into an early independent brand,

01:01:30

which is just like a watchmaker, basically, going at it. Sometimes they can appreciate in value significantly, you get a pretty cool watch for the money plus you support a small business. They'll build you whatever you want. So it's like a win win.

01:01:41

Yeah. Your your social media is actually pretty cool. I'm gonna follow you, but you have some interesting stuff. But, like, compared

01:01:46

to some of the stuff you're doing, I know a whole lot of people in the DDC space that are significant be bigger than you and are much

01:01:54

more of a little Pipsqueak and don't ever walk the walk like you like you are. You know what I'm saying? Yeah. Yeah. I know what you mean.

01:02:02

Leave us with this example of this weight watchers thing. So, explain explain what happened with weight weight watchers, then we'll we'll wrap it up. Super high level weight watchers, we'll start doing so well. And this guy, this tiny firm, not not super small, but relatively small. He convinced Oprah to join them, and they absolutely crush it. That's the very

01:02:20

high level overview of what he did. And so this guy, what what what, like, what were the numbers? So they what did they buy? I'd have to pull it up. And then what I I'd have to pull it up.

01:02:30

So how did this guy know Oprah, by the way? That sounds like, you know, oh, it's simple. He got Oprah on Ford. That that's not doesn't sound that easy. Yeah. Twenty fifteen Oprah is, was a big deal. That's Pete there. Yeah. It's peak Oprah. That's like twenty twelve twenty twelve Obama. Like, you know Yeah.

01:02:44

That's peak Oprah.

01:02:47

twenty fifteen, he did a deal with Winfrey to acquire a ten percent stake in weight watchers since then. The company stock has soared by almost six hundred percent They sold one billion dollars of White Watcher sock and Oprah gained at least four hundred million so far. Okay. That's pretty impressive.

01:03:04

Will go down as one of the best private equity deals ever. Over the nineteen years, they put two hundred twenty six million in to weight watchers and got five point three seven billion out. Four point seven billion of realized profits.

01:03:15

Yeah. Damn. Pretty good. That's pretty good. Not including the stock that they still Especially if that scale.

01:03:20

But they only bought ten percent of it.

01:03:23

I thought they bought more. I think they kept buying more over time. I thought they kept deploying more and more cash into it.

01:03:29

Dude, we have to do a pod on Oprah. Like, I -- I love her. -- I grew up watching her. And, like,

01:03:34

I I for, you know, she's seventy now. I just looked her up, or she's sixty eight or something.

01:03:38

We forget or I forget, like, how

01:03:42

big of a baller she is. I'm, like, just googling. It's like, oprah buys another thousand acres in Hawaii. And she came from nothing and she's strapped. Like, she basically, you know, got got her network to be something absolutely insane.

01:03:54

Yeah. What what's her what's her story? So, what what what do we know about the beginning of her

01:03:59

for born into really poor town, abuse growing up, etcetera,

01:04:02

and then absolutely crushes it. And she should run for president.

01:04:06

I would totally I think she I think she was born in, like, an abusive family. And, like, I think I think there was even, like You got, like, pregnant at fourteen or something. Yeah. And I think that there was some, sexual assault or some some, like, some horrible,

01:04:19

tragic stuff.

01:04:20

And then at age twenty

01:04:22

four, I think becomes, like, a weather woman or, like, like, what, whatever they call, you're a news person, but you're not actually in the office. You're, like, out on the street. Yeah. She did that. And then eventually when she's, like, thirty two or thirty three, she gets a talk show, but it's not like a hit right off the bat, but it slowly starts picking up. And then eventually, she, like, makes some, like, groundbreaking deals. She did, like, one of these groundbreaking deals sort of like Michael Jordan did with Nike, what Lucasfilms

01:04:48

did with Star Wars where it's, like, know, we'll just take a percentage of the upside.

01:04:53

And, and then that, like, turned out to be, like, one of the most, you know, one of the best deals of all time and and it's worked out. And, you know She did this all back when people were very, very racist. It's all like doubt.

01:05:05

Like, I think it was out of National Tennessee,

01:05:07

that she's doing this on the south, and she kinda killed it. We we we need a how to take over the world episode on Opra? What's what's going on? Where is our where is our definitive Oprah episode? Why why have you not done this already?

01:05:20

To to real question for you, Ben.

01:05:23

Put it on the list, Sean. You you Put it on the list. You put it at the top of the list. Let's do this after this after this episode is done.

01:05:30

You you got it. I'm I'm buying my oprah. I'm on amazon dot com, buying oprah biographies. Is there an oprah biography? I would totally buy that. Of course, there is. There has to be a I mean, I she's she's the best. I I'm a big fan of her. And she, like, did this all out of Chicago. So I think she still owns, like, the penthouse and the Sears Tower, which is, like, you know, one of the largest buildings, in the world. But, no, she's the best. Know, I always forget about this. So, like, I'm in Austin, and there's all these nerds talking about crystals. You know, you go to a therapist and they, like, recommend a crystal.

01:05:56

Like, there's like pretty woo woo shit out here.

01:05:59

She was pretty woo woo, but for some reason, she made it very

01:06:04

very likable. Like, if you guys remember that book, the Secret, where it's just, like, it's, like, if you think about it enough and, like, put it in place in your brain, you're the first. We'll grant you this. Yeah. The And, like, she, like, would she was talking about that stuff before any of that stuff was even popular. And for some reason, when she does it, it's very tasteful.

01:06:22

Other times, my friends do it. It looks like, you know, they're one of those women wearing, like, a coachella brown hat,

01:06:28

like, you know, and it's not cool at all. Know, I'm talking about those wide brimmed hats, but I ever see those with with turquoise jewelry. I I run away. I'm out. Get twice. You know, if you work If you're wearing cowboy boots, turquoise jewelry,

01:06:40

I'm out.

01:06:42

Yeah. No wyvern haft hats for me. I'm out. If you if you wear one of those things, I I'm not part of this. But for some reason,

01:06:48

when she does it I'm in. Well, that's what I wanna know. Like, I think the the story I've heard is, like, grew up in these terrible conditions.

01:06:56

Overcame and became super successful.

01:06:59

But I literally wanna know, like, what was the successful part? Like,

01:07:04

Meaning, how did she get her break? And then, like, what led her what it was she doing? Was it literally just better content? Like, was she just that damn good and dynamic as a talk show host? Was it like the Microsoft IBM deal where they like, you know, how did Microsoft take over the world? It's like, well, they cut this really great deal for the operating system where they could be, you know, with multiple providers at once and and they use IBM to bootstrap, and that's how they got bigger. Like, It's like, was there, like, a growth hack? Was there a,

01:07:31

a smart, you know, deal that she struck? Was it,

01:07:34

the timing? Cause, like, you know,

01:07:36

Those show, you know, cable started spreading into every home in the country and, like, she was one of the top three shows and just, like, at she got to surf the cable wave or whatever. Like, Well, I wanna know what actually

01:07:49

led her to the the mega mega fame. What were the actual those those things? It's not like a simple answer. But, that's what I'm actually curious about because

01:07:58

you could, like, in the air in the topics that I know about,

01:08:02

those stories are always the most interesting.

01:08:05

And I feel like when you when I go into other topics, like, I was like, oh, maybe I'm like, what happened? He was like, oh, started off bad. Now the best. It's like, yeah, but act two, the middle part.

01:08:16

That's the part. Anybody who actually wants to make shit happen in their life, you wanna focus on act two. Like Hollywood focuses on act one and three. Right? Like, the the the bad origin and the the the happy ending. But it's the montage, the training montage when, like, You go from, like, scrawny to strong. The training montage that they speed up through is the part where all the interesting shit happens.

01:08:36

I already told you Gina, I go. Billy of the week on Wednesday,

01:08:41

Oprah. I'm on it. Yeah.

01:08:43

There's this really cool book,

01:08:45

called Messi Middle. Have you guys read messy middle. It's by, what's the, Scott Bellsky. Yeah. The most dreamy guy of all dreamy guys. Scott Belsky is the man. Scott Belsky basically started,

01:08:56

There's a guy named Scott Belski. He started behance, which is, where developer, designers could host their portfolio. He started it, bootstrapped it, had a hundred and seventy five million dollar exit, before it became very successful, he said he had, like, fifty thousand dollars and he invested, like, fifteen thousand into Pinterest at a three million valuation fifteen thousand into Uber at a three million dollar valuation. Each of those, you know, fifty to a hundred million dollar outcome, plus he owned seventy five percent of his company when it sold for a hundred and seventy five million dollars. So very, very, very successful. And now he's it's looking like he's gonna become the next CEO of Adobe. So huge deal. He's got this awesome book called the messy middle, and it talks about how, like, you know, starting things can be somewhat easy, but once you start that, Then there's, once you you start it and then there's the middle, and you have the end and the end's the kind of the easy part. Right. You know, things are just kinda working. But the messy middle is that ten year period where it's like, is this working? Is this not working? And it's a really cool book on how to, like, navigate that period? And it's and and I love that title, the messy middle. Yeah. Great title. Guy. He came on the pod once a long time ago. We should bring him back.

01:10:01

But yeah, he's on your like Mount Rushmore of dreamy dudes.

01:10:04

I feel like, you got Huberman up there. You got Belvsky. Who else? It's basically, like, men with strong good looking. Yeah. I gotta have yeah.

01:10:13

Jaw lines. Yeah.

01:10:15

Yeah. You need a you need a good jaw line

01:10:18

and a clear cut jaw. Dude,

01:10:21

have you seen Scott Belsky's jaw man? He's got a strong I know I'm googling after this.

01:10:26

Talk talk about talk about not a dressed asset. Okay. It's chiseled.

01:10:31

Yeah. These are that's a blue chip stock right there. Yeah. You also just dress as well. I feel like dressing well is this, like, really

01:10:39

easy thing to do that nobody does.

01:10:41

And, and he does an amazing job of it. Especially in tech. I know. He's

01:10:46

He's the man because he lives in New York, dude. All those guys are stylish.

01:10:50

He lives in New York. Yes. So he's got that leg up.

01:10:53

Dude, I've never been to his house.

01:10:56

But I've been to his house. I know exactly what a guy like that's house looks like. It's basically

01:11:01

I could picture it so clearly in my mind of how immaculate,

01:11:05

like, the design is of that guy's house. He invested in the hustle. He wrote us a very small check, and I've got the paperwork for where to send the docs to. Immediately. I looked up and I, like, saw the music. And I could tell you I could tell you off air. It's exactly

01:11:19

what you're describing. You didn't even You didn't even describe it. Although, then you do the big words, and it's exactly how you're describing

01:11:26

it. I won't I tried to, in twenty eighteen, would wear hot tech for deal flow? I stumbled across the house. I'm like, this is awesome. I should try to invest in this. So I messaged you on Facebook, but no reply. So

01:11:37

Oh, I'm sorry. Oh, wow. You should go pull it up. It's just kinda funny.

01:11:41

This is your revenge? No. I'm sorry. Sorry. It's just kinda funny. If I would've got, that would've been a good investment, but

01:11:47

It would it would have. I'm sorry. You and maybe you would have known Scott. You know, I could have helped you connect with my with my boyfriend, Scott. Maybe you too could have Zillow him.

01:11:58

Yeah. We're not we were friendly. We're not friends,

01:12:01

but we've goo I've googled his house. He's not googled mine.

01:12:05

Yeah. I can tell you what type of couch he has though.

01:12:09

But, dear, thanks for coming on, man.

01:12:11

You're awesome. I'm gonna go and find that. I'm I just pulled up Facebook. I'm gonna find that message. It's just kinda funny. It's from twenty eighteen. It's like, Hey, I'm an Angel investor. Please let me invest

01:12:21

I look what you're doing. What's your does your last name start with b? Yeah. Yeah. Bogle. If you just type in B HR, Yale,

01:12:29

yeah. I see it. Sorry. There was there's good deal flow

01:12:32

would have been there.

01:12:34

Should have messaged you. Mark, you're should have asked you. Dude, I saw a, a post on Reddit yesterday. It was a map. I don't know if this this might be fake news, but it's on the top. It was, like, one of the most popular popular posts on Reddit yesterday.

01:12:46

It's a heat map that shows the average life life expectancy by town. And there's literally a twenty year age difference.

01:12:56

Between, like, New York,

01:12:58

California versus, like, the size of.

01:13:01

It's, like, you know, people in the south are dying at, like, sixty something and people on the coast who are living, like, you know, sort of the yoga and salads lifestyle are living till they're eighty on average. And and then you can see these small pockets, like, in Florida.

01:13:14

It's like the retirement community where people, like, migrate into. Yeah. Like, they're also living for a long time. Yeah. The Jewish New Yorkers who moved down there, they're living for a long everything around it is surrounded by the walking dead of people who are gonna die at sixty something. And, it's like it's like Boca Ratone kills it. And then, like, George Lauderdale, it's, like, as a thirty year,

01:13:36

shorter life expectancy.

01:13:37

I I asked my data guy. I said, please overlay the a map of filets, and it was a perfect sequence to, like, to to to the to the dying early crowd, which is unfortunate for me because I love Chick fillet.

01:13:50

Chick fil a is not healthy. Well, we're screwed.

01:13:53

Dude, thanks for doing this. We appreciate you. Yeah. No earnings. Thank you.

00:00 01:14:17