In this episode, Rob and Josef talk about bootstrapping. Rob shares his experience bootstrapping to $70M in revenue by age 32 with his startup, NativeX.
They are joined by Michael Martocci, who is the Founder and CEO of SwagUp. SwagUp is a company that sells curated swag packages to startups. Michael has bootstrapped his company to $50M in revenue by age 27. He gives advice on bootstrapping and when to hire devs. He also outlines how to build an e-commerce site with free software, which he did himself, reaching $3M in sales after 18 months of operating without a developer.
Who does Michael see executing? Ramp.
Full Transcript:
00:00
Welcome to the execution is King podcast where we talk to successful startup founders, investors and ecosystem builders to uncover insights and best practices for the next generation of great global startups. Today, my co host is Rob Weber, managing partner of Great North ventures. Today we’re going to be talking about bootstrapping. Now, the phrase was originally meant to be sarcastic, right, describing this physically impossible action of reaching down to your own boots to lift yourself up. But entrepreneurs and founders have embraced the phrase. And today it means building your company without taking outside funding. So for instance, like Rob, you and your brother Ryan, bootstrap your company, right?
00:44
Yeah, we had the classic dorm room startup, we had been, you know, building ecommerce, businesses and internet businesses in the 90s as teenagers. And by the time we went off to college, and were in the dorm rooms, we had this idea to create this publishing business around PC software, which eventually took us into mobile apps, with iPhone and Android. So as a 16 year journey, I was pretty proud of what we were able to accomplish from age 20 to age 32. At our peak year of what was native X at the time, we were at 70 million in annual revenue, having never raised anything but a small angel round. And we had 170 employees in Minnesota in San Francisco. I learned a lot about building businesses, you know, through through those years and pretty exciting to be a part of I think, for a lot of the people who are a part of the early team, especially, you know, there’s something really magical when you can scale a company like that.
01:43
Yeah, and our guest today, Michael Mark Tachi followed a similar path, he bootstrapped his company swag up, up to $15 million. And he just turned 27 years old.
01:55
For those people who know me, I’m pretty active on Twitter, Robert J. Weber. And I follow Jonathan treble from print with me, he was on an earlier episode of our podcast, and Jonathan’s a really scrappy founder, you could hear that in the episode that we had him on. And he tweeted about this company swag up, that was rated 23 Out of the Inc 5000 for fastest growing companies in America. And he was 26 Now 27, and at this $50 million run rate, I was so impressed, I had to reach out to Michael and after a little bit of back and forth on Twitter, he decided he joined us for the podcast, I thought it was super cool. You know, here, I thought we had a unique story that we are these young founders that got to this kind of scale. And Michael is five or six years younger than us at the scale. He’s already yet.
02:44
Michael mark. Tachi is CEO and founder of swag up. Welcome to the podcast, Michael.
02:49
Thanks for having me. You. We have a VP of sourcing and merchandising from the Twin Cities area and you guys say swag up the same way?
02:56
Maybe? Is it a little Canadian to it? Or how does that how does that come up? Come out?
03:01
Yeah, I don’t know. A little like Midwest like Twin Cities Twain, you know.
03:05
Nice, nice. I used to travel out globally. And it would, I would either a lot of people in like Europe around the world would say we sounded Canadian up here. But then sometimes I would also joke around with friends and like the Nordic countries that, you know, at least from a latitude where we’re close, we can be brothers or something. I don’t know. But anyway, kind of the first question I had, there are many founders who decide to bootstrap their startup. I’d love to learn more about your story. Predict, you know, kind of pre dating swag up? What were some of the things that you did to prepare yourself for swag up and just tell us more about kind of what everything leading up to swag up for starters.
03:45
Yeah, yeah, I mean, you’re always like that quintessential kind of like entrepreneurial kid. You know, I always love making money for the sake of making money. I don’t know what it was. But there was a there’s a picture of me I’m like four or five years old, standing outside my mom’s house growing up like reselling our groceries to our neighbors, you know, on a little you know, picnic table with a little sign that’s like yogurts, five cents and ICE T 10 cents. And so it was it was a good business because the cost basis was zero. So he couldn’t really lose on that. But that just like snowballed into lots of different stuff. So like I used to set up a little table at the bus stop like baseball cards so that when when kids would come off the bus nothing come by and like shop through my assortment. And you know, I’d gather a few kids to, you know, shovel snow from different neighbor’s houses to make some money. And so I just always like that enterprising type of personality. Yeah, I used to play video games on my computer, but they were like the games where you make money. It’s like lemonade tycoon and roller RollerCoaster Tycoon stuff. But then I actually run 13 I got really into finance. I ended up buying my first stock. Ford at the time, because I like the Mustang. And my mom was at Morgan Stanley for 33 years and her boyfriend at the time was like a big, big wealth manager. And so I got really kind of engrossed If you’re managing money, and you’re learning about s one filings and 10, KS, and you know, discounted cash flow analysis, all that kind of stuff. So I ended actually ended up going to school for finance. I had an internship when I was 18, at a hedge fund, actually commodity trading hedge fund that was based in Illinois, just outside of Chicago. So I got really into that, and then, but it kind of became a distraction. Because deep down I always was like that entrepreneurial kid. And I kind of like suppress that a bit because of this, like artificial desire to go into finance, because it seemed kind of interesting and exciting. And then one of my buddies from high school reached out to me while I was at school, and he’s like, hey, you know, I want to, I want to build an app, I have this problem where I can’t find kids at Rutgers University to play basketball with and I was at William and Mary in Virginia. So we weren’t at the same school. But we were friends in high school, and we have like little side businesses and stuff. And he’s like, you know, like, do you want to do this with me? And I was like, Yeah, sure, whatever, screw it. And we got like this Indian development firm, and we designed and prototype the app, and we work together on it. And we ended up launching it on my campus. And it was like mildly successful, we got like a few 1000 kids from the school to use it and stuff like that, we didn’t really know what we were doing. But in the process of launching that on campus, we wanted to get custom flags to put up in the dorm rooms and like on the walls and fraternity houses and stuff to promote it. And so that was like my first foray into trying to source custom printed materials. So I ended up finding a supplier. The US suppliers wanted, like $130 for the flag, and I found Alibaba and got them for $8 from from an overseas supplier. So at the time, I was like, Okay, we have this app. But why don’t we just get a little side business going sell resell these custom flags and banners from from overseas manufacturers. So that like I said, that was kind of like my first eye opening into the world of custom printing, we ended up starting to do some, like T shirts for fraternities as well, like, we would do flags and T shirts as like a bundle deal and sell to them. So I always kind of had this in the back of my mind. So I ended up actually dropping out of school became business partners with an NFL player very randomly, because I was just like, when I got back into the entrepreneurial spirit, I was like, you know, I don’t want to be in finance anymore. I don’t want to stay at the school anymore. I don’t really care about the degree. So I had this opportunity to partner up with him. And you know, we’re again, even there, we’re doing fitness training programs and stuff, but we’re bundling them with like custom branded shaker cups and resistance bands. So I was still flexing that like ability to source these products. And I ended up going to a VC firm in New York City for like four months after working with the NFL player for over a year. And you know, just being around startups, you just saw how much they care about community and brand building and how swag plays a central role in it. And you everyone was doing it very differently. It was a very kind of stuck in the 2000s type of, you know, industry and supply chain. And just kind of bringing two and two together. Like I think these high growth companies are really looking for a more interesting better way to do it and buy from a brand that really resonates for them. And that was kind of like the initial spark for diving deeper into it.
07:58
That’s really interesting. So you have this entrepreneurial tendency going way back to even four and five years old. I’m curious, did you also have graphic design or software development skills prior to starting swag up? Or did you I think I read in a blog somewhere that I think one of your pieces of advice for new founders was trying to rely on more like freelancers as much as possible. Was that more how you got to kind of the technical side of swag up off the ground? Or did you have some of the technical skills too?
08:29
Yeah, I mean, you the proliferation of like these, no code tooling has really made it much easier to get stuff off the ground. So you know, I, I’m a relatively good visual kind of designer type person can kind of say, Does this look good? Does this not look good. And that was a great kind of skill set to have. So then I just built the first website on Wix. And the reason I liked Wix so much is one, it’s super cheap. But two, it’s also super flexible, like, you can literally start with a blank white slate and design exactly how you want. And it was good enough, you know, we ended up using that Wix site for like two and a half years, you know, and we and all we did was, instead of trying to build out some sort of like catalogue experience, or E commerce experience, I use that type form. And the reason I like tight formula is because when you can embed it as an iframe on the site, so it looks native and natural to the page. And it’s a very visual form experience. So you can actually use like imagery. You can even do calculators or things like add up the pricing. So there’s like this dynamic kind of logic that you can use in type form that allows you to almost be a software engineer without really being an engineer. So I was like, critical. I had enough critical thinking and creativity to kind of like put different tools together to make it feel like like a productized experience. But I didn’t need to really rely on on third parties mean the business didn’t really take any money to get off the ground. I think when I started the business I had like 25k saved up 30k or so. And we did end up like using it because I hired like a buddy of mine that lived down the street and we pay him and you had we had an office It was a stupid expense at the time. But you know, I think having the resourcefulness to, you know, teach yourself a lot of stuffs, you know, is super viable in those early days so that you can just kind of not have to rely on other people. And just and just make it happen for the first few months, because you just want to see in the beginning, like, do people even care about this idea? Like, is there enough traction there to make us want to dive deeper. And if you just go straight ahead to being like, hey, well, I don’t have resources, and I don’t know how to design and I don’t know how to do this or that, then you immediately like, relinquish power, and you have to give it to somebody else. And you say, hey, I need to raise money now. Right? Right off the bat, because I can’t do anything without people. And it’s like a very, it’s this, just this trap mentality, though, that if you always kind of have that mindset, like I can’t do it, I need other people, I need other people, that mentality will stay with you, as the company grows, you have too many employees, too many people that don’t take ownership, all that kind of stuff. So like, it’s always been embedded in our mentality, like, you have to be able to figure it out yourself, take ownership, just make it happen, learn things, etc.
11:00
That’s something I see all the time with people with startup ideas, you know, we’re like, I’ve got to raise money. So I can hire developer to build this thing. And I mean, how long did you go before you actually hired a developer?
11:13
About 18 months, and we had already done, like, over $3 million in sales without any technical talent, you know, we used we use that same kind of no code setup, it was. So what it was was, you had a Wix website type form was embedded, I built some Google advertising, you know, sem campaigns to get people in the door. And I use Zapier to connect everything to Trello. And Trello became like this back end kind of project management order management system. And then we have like Google Sheets and stuff to kind of make, you know, presentations and like quotes and stuff like that. I even made like this really big like pricing spreadsheet where it had all of our skews, and then you’d put in how many units you want, and how many colors it is. And then it would spit out what the price should be. So that when we hired like a second salesperson, they could just go in there and make their own pricing. And then we had like these templates that you can make a quote in Google Sheets that like okay, line item, price, line, item price, here’s our addresses our number, and you just like download that PDF, and send it to people. So we did that process to like six and a half million dollars of sales. And you know, it wasn’t great, but it didn’t stop us from like testing and validating that there’s actually interest and you can build a business around it. You know,
12:23
that’s fantastic. Because all of these tools that you mentioned, I mean, have free levels, right, like Trello, Zapier, I mean up to a certain amount of connections with Zapier and up to I forget where Trello starts charging, but that’s fantastic.
12:38
You can reach out to these companies, even the ones that are more expensive and say, Hey, I’m a startup, do you have a startup program or something and a lot of times they do, it’s like, you know, intercom, for example, intercom is very expensive. It’s like, I think right now, we were paying like $1,600 a month for like the chat feature and the different automation that they have. But the startup plan was like $99 a month, you know, it’s like 1/15 of the cost for all their feature set. And they’ll let you use it for like, a year or two years, until you have like more than 50 employees. So there’s so many of these AI platforms out there now, too. They give you discounts on different services from different vendors and stuff as well. So there’s really it doesn’t cost much to utilize even best in class like software platforms when when you’re starting out.
13:20
So on the customer acquisition side, I think you mentioned initially used sem as kind of a main driver for customer adoption. Did that start to change over time as you had success? And I guess, as you scaled up?
13:34
Yeah, for sure. I mean, today, about 70% of our business comes from organic and direct traffic and sources. But in the beginning, it’s like it, you know, first off, to really validate something, you need to just go out into the random world and see if people care about it, you know, because it’s very easy. You know, it’s very easy to start something and just ask your friends to buy from you ask your parents to buy from us, like people you know, to buy, they’ll buy at a pity, but it’s not necessary. It’s not necessarily validating that people care enough to like use this if they have no idea who you are. And you do want to use your connection to get a few sales off the ground, because that gives you credibility, you learn how to operate all that stuff. So I’m not saying like don’t do that. But at the same time, you want to just go out randomly, like nobody knew who was behind those Google ads or behind that site. And they still cared enough to like actually put their information in and go down the funnel basically. So that’s what I wanted. I wanted to make sure that random people would care enough and and we tried different things. We tried Google ads, we tried Facebook ads and what was good as I taught myself, you know, digital advertising when I worked with the NFL player, because we were doing like these fitness training programs. And you know, what’s great about fitness training programs is they have no cost or digital program. So it’s just a pure marketing kind of arbitrage. So we’re doing lots of Facebook advertising and stuff and that’s how I kind of learned about multivariable testing and all this kind of stuff. So again, back to the idea is like, you know when you’re starting out like have the curiosity and resourcefulness that kind of figures out stuff stuff out on your own. And the Google Ads worked, you know, like the initial ads worked well, at the time, that idea of like swag packs like, which is what we really centered our positioning around for the first few years, and we still kind of do. There wasn’t even a known concept like people, there was no competition for it. It was getting like minimal, you know, a few 100 searches a month or something. And we just went after some of those, like longer tail keywords. I didn’t, I didn’t try to bid on, you know, promotional products or swag, because they’re just, you pay too much per click for them. So I tried to figure out like, what what would people actually search for, that would eventually lead them down the path of wanting what we have without being so direct? Like, you know, because those are, there’s two wildly competitive those spaces.
15:42
One of the things I had read on your blog was, you attribute a lot of your success to just staying focused. And that was one thing you would share with other founders. Can you elaborate on some of the decisions you had to make where you had to maybe there was that opportunity to be, you know, to widen your focus or be less focused? And maybe things that you didn’t do? Or, or maybe examples where you were, you know, you stayed very focused?
16:08
Yeah. I mean, it’s still a problem today, especially as you hire more people, because then it’s not only the company’s vision and goals need to be focused, but then you need to make sure that all your leadership and you know, every the focus is kind of driving down throughout the organization. And I think that’s one of the hardest parts of scaling is helping people stay aligned and moving in the right direction. But in the early days, like, so when I when I first learned about the custom printing, and I, you know, we started like that side business with like reselling stuff from from China, we had a little website, it’s like, cheap, custom printing. com is an E commerce site. And, you know, we did like 40 or 50k a year or something off of it. But what I realized there was just, you’re not going to build a business on the premise of like, work cheaper, like, that’s not interesting enough, and the products themselves, you know, it’s just like flags and banners like there was it, you couldn’t come to cheap customs, calm and be like, wow, like, these people are specifically different and distinguished in this specific thing. And we need to be using them for that. And that was something I had in the back of my mind when we started swag up, I was like, How can we niche down to a point where people really, really understand like, wow, these people are the best in the world at this one thing. And we know if we need this one thing, we can go to swagga for it. And in the beginning, the very beginning was just a matter of like, oh, focus on startups, like brand, the experience and design in a way that’s resonates with them and curate the selection so that you eliminate kind of decision fatigue and the whole kind of paradox of choice mentality. And that was good, and it attracted some people, but it wasn’t enough of like, wow, like, they’re truly like changing the game. And and one of our first big orders was for swag packs, like this company was like, hey, we want to put together 100 New Hire kits. And it was a $10,000 order. And it was like a sweatshirt and a shirt and a tote and a bottle and notebook, etc, that every new employee was going to get the same thing. And I was like, there’s so many ways that a company could use these kits. These packs, it could be for welcoming new customers, it could be for venture companies sending it to their portfolio Yoko’s, it could be new employees, it could be work anniversaries, there’s just so many reasons why you might want to send kind of this bundle this preset uniform to people especially in like this idea of remote work, like, you want to have this uniform consistent experience for people across the globe. And I was just like, there’s no way to make this happen easily for a company. If you think about the process, it’s like, you got to find the packaging supplier, the apparel supplier, the hard goods, handled the design, work, pay different vendors coordinate all the logistics, I was like, if we can become this end to end solution for this specific problem, we’re gonna grow incredibly quickly. So that was that was a big moment of discipline and focus, because we didn’t know it at the surface level at the time. It’s like it felt limiting. It’s like, Oh, are we not going to take on like these bulk orders and become more of an all encompassing so I company? Are we are we just going to focus on these kits, like is that a big enough market? Do people care about it enough. And ever since we did that the business just exploded, you know, we went from doing a three to 4000 a month to like 30,000 50,000 100,000. And it was the genesis of really like our growth trajectory. And it was because we said, hey, we’re gonna be the best in the world at this at this one thing. But this, you know, this plays out on a daily basis. Now, you know, we like to think about the swag pack concept as a mousetrap that allows us to get in the door with a lot of companies. And we’ve worked with over 4000 companies in the last four and a half years. And obviously, as you deal with these four and a half 1000 companies, they you know, they constantly asked like, what if you did that, could we do a swag store for employees where every employee gets like points and credits and system? Could you integrate with this system. So every day, you’re kind of faced with these, you know, challenges and we used to actually do stores for companies, we would set up like the Shopify store, we manage their inventory and send it to their employees and stuff. But we realized pretty quickly, it’s just like, we’re not set up to manage that. Like it’s a way to manual process. It gets in the way of a scale we dealing with like the core problem that we’re solving that is already a large market. So we ended up just dropping that and not doing it anymore. So there’s, there’s a lot of stuff like that that pops up on a daily basis where it’s like these are these look like shiny, good opportunities, and they would definitely bring in revenue. But I’m, I’m of the belief that if you can do something at a B plus level at scale, that’s way better than trying to do everything and try or try to be the best at everything. So other things, too, is like, Okay, we do swipe packs for companies, and we handle for new hires, and all these different use cases. But we also don’t try to be like this really customized boutique tea, like, let’s design everything really special, like, let’s use the most unique products all the time, because you can’t provide that level of experience to everyone at scale, you know, so I’m always about like, I’d rather have a B plus consistent repeatable experience than try to be a plus at everything, or try to be your C at a million different things, you know.
20:51
So whenever I’ve ordered swag, you know, I don’t I don’t want to pump anybody that I go through. But say you go to like, for imprint. And you get into that. I think you mentioned like decision paralysis or something like that, right? It’s just kind of overwhelming choices and things like that. So that was kind of interesting. You talking about niching? Down, Right, and focusing on just these this Bita b2b target. Whereas like the b2c focus for selling swag, it seems like that’s a pretty crowded space. Did you focus at all on b2c? Or did you go straight to servicing these kind of businesses or other businesses? Did you start out servicing individuals?
21:36
No, it was always businesses like and specifically, like high growth startups was the initial target when I don’t know what that percentage is. But it’s got to be like 70% plus of our business comes from software companies, you know, just kind of were where we focus. So we’ve always had like, very large average order values as well, which, which allows us, which is great, because it allows us to invest in marketing if we need to, in a way that’s really profitable. Because if you have 8000 $9,000, average order values, or you know, or they’re spending over 20k A year annually, you can you can afford to spend $1,000, to acquire a customer doesn’t matter, you know, whereas when you do these b2c, you’re going after crowded keywords, crowded markets, only to get $500 Order $600 orders, and then you have to have like either a really scalable e commerce experience, or like a large customer support team to manage those relationships and deal with the subsequent issues that are going to arise afterwards. So you know, I’ve always been a fan of kind of go where the money is, you know, and you know, there’s a lot more money in enterprise type companies and, you know, high growth startups, and they’re, and they’re also willing to pay a premium to get their time back. And we were very much around my calculi make this an end to end experience for them and embed ourselves in like their workflows, and really provide them value versus just being a transactional company that sells them a t shirt, because when you sell somebody a t shirt, now it’s all about price. It’s like, you know, which ways can I get this t shirt for cheaper, and we always wanted to take ourselves out of the price conversation. It’s very, it’s very rare that somebody comes to us and like, Hey, I don’t want to use swag up because I can get this shirt for, you know, 20 cents cheaper somewhere else. It’s like, well, that’s not why you’re coming to us, you’re coming to us, because you’re looking for help dealing with this process. From from end to end, you need help with the storage and the distribution logistics, you want us to help you figure out which items to do. So yeah, it’s just it was a more appealing market and approach for me the way that we kind of went after
23:33
I find it just inspiring, like, I’m sitting here like, oh, man, I’ve kind of just starting with SEO and like looking at running ads and like what can I take? And what kind of business could I service? You know, it’s almost it’s industry agnostic, this approach that you took, you can almost spin up any another number of businesses using that same approach that you went with not saying they’d be anywhere near as successful, of course, but
24:00
I think it’s really interesting because I I purchased from a for my my prior business that we bootstrapped pretty successfully, we ordered a lot of swag over the years for employees or for customers, and, as always, sort of the old school players. But when I think about that, the by targeting startups your net, you have the potential for pretty high net revenue retention, because these startups are growth companies. So if you can land them and keep them happy, you know, they’re, you know, you have the chance to just keep growing on the back of their own success. And that can happen in other categories. It’s not just startups or other, you know, industries that are maybe have a characteristic where the whole industries, there’s sort of like the rising tides side of it. But also I think startups are probably generally going to be more early adopters of maybe higher expectations for tools they want to use. And I know you have like you have API’s or some of these like No, no code tools, like startups are going to appreciate that a lot more than if you’re targeting some like upper midwest. arcade business that’s been growing by 5% a year for 50 for a generation, and, you know, they’re just kind of set in their ways. Like, that’s probably not a great customer to target industry, that’s been around a long time.
25:12
Ya know, it was a very deliberate decision to work with these types of companies, you know, they were looking, as I said, they value their time a lot, there’s a lot of very high opportunity costs in high growth environments. And like you said, you’re placing a bet on them to grow. I mean, we even had conversations of like, we’d make more money if we just started an investment fund investing in the companies that are working with us, because we know how fast they’re growing? We know that they really care about being deliberate about the employee experience and the customer experience? But yeah, I mean, I almost liken it to a tax, you know, like us working with these high growth startups, it’s almost like we’re getting a tax on the startup ecosystem, you know, not maybe not as big attacks, as like AWS, like at AWS is a tax, you know, like they’re taking like a 1%, you know, take rate on all startup revenue, basically, by handling kind of the cloud for all these companies. And we’re, we’re same thing like, every company needs swag, for some reason, you know, and we want to make sure that we’re the vendor with them, and we’re growing with them. Have you come
26:10
across any other places where you’ve spotted these kind of inefficiencies, like the inefficiencies that you saw, in your own experience? Ordering swag. But have you spotted anything else when it comes, particularly to serving startups? Like you mentioned, AWS is basically attacks. So I would say that they’re running at pretty damn good efficiency, if they’ve reached that level. But do you see any other places where there’s, there’s kind of money on the table left, specifically, dealing with like startups?
26:44
I don’t know. I mean, my mind races every single day with ideas and opportunities. I mean, I think, in general, though, that there’s just a lot of opportunities to digitize the physical world, in general, both from a marketing standpoint, and a product standpoint, you know, I have a friend that, you know, it’s a successful kind of tech entrepreneur, and they’re their newest business, these are these guys sold their last business for $2 billion. Their latest business is a pest control company, and they’re digitizing it, they’re operationalizing it, they’re building out your complex digital marketing programs that are sophisticated at the level of like technology companies, and they’re taking, you know, they’re going into new markets and standing them up for like, $200,000. They’re doing, you know, unique, like routing systems to make sure that the right people go follow up on the leads at the right time. Like, I just think there’s a lot of room to take legacy type businesses that are, you know, that haven’t changed much. And there’s a physical component to them, and utilize technology to make them much more efficient, and then utilize like, true innovative marketing strategy to get in front of, you know, customers cheaply at scale that, you know, traditional companies are not usually great at.
27:53
So Michael Kennedy to change gears a little bit, you know, in the last few months in the you know, during this COVID time period, there’s been a real, a lot of constraints on supply chain. I’m curious, with E commerce, businesses or your business, have you? Have you had any really major hiccups, just in terms of your supply chain and servicing your customers?
28:15
Yeah, for sure. I mean, we’re in an interesting position where it’s not as bad as like some direct to consumer ecommerce brands, because we don’t have inventory. So we’re very much like a just in time manufacturing type situation where our customers want to place a certain order, then we accept that order. And then we handle it with our supplier base and our supply chain. So we’re able to kind of be insulated from, you know, inventory risk and demand forecasting to a degree because these direct if you think about like a direct to consumer ecommerce brand, if their production times have gone from 60 days to 120 days, and you know, the turnaround time on the ocean went from, you know, 50 days to 100 days, instead of trying to plan forecasting and demand for the next 100 days, you have to plan for almost like a full year. Now, if you get that wrong, and you overbuy Are you under buy, you’re in a situation, because you don’t have that you’re not nimble enough to fix that, you know, and you can either be left with no stock to sell, or you have too much stock and you can’t afford to kind of carry that inventory costs. So, you know, I feel for a lot of other e commerce entrepreneurs that had to kind of deal with that, especially if they don’t have good handle on their data and an on demand, especially as like, digital marketing got more expensive, and it became harder to track the customer with like the whole Apple and Facebook stuff going on. But for us where it impacted us was that, okay, it’s great that we don’t have you know, pay for inventory ahead of time, but we still need that production process to run smoothly. And where it used to take us like three weeks from start to finish the finish like a project and on all the components of the order. Now it’s more like five weeks, you know, and so it’s just taking longer to run through projects and your customers get antsy. They’re okay, it’s been three weeks. Where’s my order? You know what The status what’s going to be the date, the we and also we don’t have great visibility sometimes as to exactly when the order is going to be ready. And then the other part too is, you know, we run, we ran into a lot of issues of like stock outs in the sense of like, okay, we thought we could sell you 500 kits or 500 bottles that are this bottle. But actually, we can’t, the supplier no longer has it. Because you know, what ended up happening at the beginning of the pandemic was the suppliers, a lot of them got nervous about the industry. And they started to hedge their bets by selling PPE instead. So they sold sanitizer and masks and stuff. And they weren’t placing the large inventory buys of their core products. So a lot of them is like demand starts to rebound a bit, or at least for us demand never kind of took a hit because we fill the certain need that always persisted, especially in a pandemic, we found ourselves with, like more demand than they can handle from a stock standpoint, and there was a lot of issues there that we had to then deal with reworking the order, figure out what alternative to put in there do have to credit the customer that we didn’t really have workflows built out for that kind of stuff, because that wasn’t really a problem for us in the past. So it’s definitely been a very challenging, like operating environment to provide like a really high quality customer service, at scale during all these disruptions. And then you also have labor, labor disruptions to it, can you hire people for the warehouse, can your vendors hire people for their production facilities, it takes a while to hire them. And then those people are also much more expensive. Now it’s a higher from an hourly standpoint, where I think going into the pandemic, we started people at like 12 $13 in the facility, now it’s like $16, with people going up to like $25 an hour for some more senior, hourly. So it’s definitely more expensive to operate the business and things take a little bit longer. But there’s also an element of like, being able to pass some of those costs of the customer as well. And also customers have started to become conditioned over the last year that, you know, expect that things are going to be challenging. You know, there, you know, in the beginning, the first six months, people didn’t know why things were taking longer. They didn’t know why they had very high expectations. And I think we piss some people off. But as the pandemic kind of continued, they started to realize, like, oh, I tried to order this thing from Wayfarer, and it took six weeks, and I tried to get this thing from, you know, Home Depot, and they don’t have any more stock. And I think people just started to like, settle into the reality of like, you know, things are screwed up. It’s not just like a side thing. It’s like all over the place. So
32:22
Michael, just in terms of founders who are thinking about bootstrapping, a startup, are there any other just, you know, one or two major takeaways or advice you would give to them?
32:32
Yeah, I mean, I think some of them mistakes kind of that we made. And if I was like, bootstrapping, again, you know, how I think about it is mostly related to people, you know, I think that the, you start to realize, you know, because this is like the first real major scale business that I’ve run, but you and I’m still young, you realize that people are everything, you know, if you have really strong people and leaders, you know, you get a ton of leverage, you can trust them to go run and build like mini empires within the company. And then when you’re Bootstrap, I think the the impetus is typically like hire a lot of middle level people, you know, try to get deals, like where people are willing to take less, and you’re better off just getting some bodies in the door, how them like, become arms and legs for you and scale that way. But going back, I’d much rather be like, much more hesitant about hiring and invest a lot more in 1234 great people than having 20. People that kind of constantly have to be told, like, Hey, this is what’s important, this is what to do. Like I didn’t really get a lot of leverage in the first couple years. So I would say like, yeah, it can be scary to like, invest heavily in getting great talent. But at the same time, you’re not making you know, if somebody is $200,000 salary or $150,000 salary, you’re not committing that to like a year, it’s like you know, things don’t work out in a few months, then you cut ties, and you move on. And you start to realize that they’re not cost these are people are investments, you know, getting great people are going to be accretive to the business and very quickly prove their worth and be impactful to the company. And sometimes it’s like a trap if you never make those investments to those people because you can never get out of the holes and get out of your problems. So I wish we would have just like brought in, you know, more seasoned people sooner and bit the bullet on that. And then besides that, it’s just like, constantly, you know, constantly be scrappy, and be aware of what your expenses are, you know, it’s very, it’s easy to kind of, you know, I brought in a finance partner suit are very quickly as well, like Artem, he’s one of he’s one of our partners, and he was the first exec that I hired. And I was like if cash flow is going to be so important to us, like I need somebody looking at it day in and day out and you know, optimizing for it. So I felt confident that I can focus on the growth of the business and he would have kind of the safety net figured out how to make sure the cash is in a good spot. If not, what do we have to do? And that gave me that peace of mind to just keep focusing on growth and that I had kind of the yin and yang partner to focus on kind of the downside. So I think you’ll sooner or later getting somebody that can own that, if that’s not your your thing. And watch that so that you don’t feel like you have to constantly be on top of it every single day, or else you’re gonna go crazy, but but also just being aware of what the expenses are, even if you bring in someone like that, it’s not like, oh, oh, I just pay the bill at the end of the month or something, or you should just let me know, it’s like, no, like, what are we actually spending money on? And? And does it actually help the customer in any way? And if not, like, why are we? Why are we spending on it? So we’ve always been very, like frugal, you know, even till today. And even when we write, you know, if, if and when we raise money from investors, like, we’re still gonna be the same scrappy, frugal company that we that we always were and and that’s, you know, Amazon’s very much like that, too. You know, they’re one of the largest companies in the world. At this point. They have plenty of capital. But they’re, they’ve always been so frugal and scrappy, because that’s kind of like their humble beginnings, like they didn’t raise a lot of money when they first started.
35:49
I like to ask every guest on the podcast, Michael, what’s a company or who’s a person that you really see executing? This might be somebody under the radar, or it might be Amazon, for instance, but someone some piece of execution that you really see being great that you want to call attention to?
36:08
Yeah, well, I’ll bring up to two examples. First off from a company and like founder standpoint that I really admire company called ramp, they’re pretty, pretty well known your fin tech company out in New York City, they’re worth about two or 3 billion. At this point, they’ve only been around for like three years. So I’m pretty close with Kareem, the CTO, and they just move incredibly quickly. They’re really deliberate about how they structure teams, the types of people they hire, you know, getting people that are at like the inflection curve of their growth, like they’re very high potential, what maybe they haven’t been put in a spot to really fully maximize that potential have the autonomy to to go with it. So they’re really deliberate about trying to find those types of really high potential people and then putting them in a place where they have autonomy, and power to directly contribute to to the outcomes. And that allows them to just move really fast, there’s no bureaucracy, there’s no, there’s very limited kind of layering of people where you have to go through them to get to this approval or communicate, they just kind of run in parallel. And I’ve, you know, I’ve really found that to be impressive, and something I try to emulate in how we build out a team structure. And then, and then on the other side, there’s a book that I read, so not necessarily specific, a company, but a book called amped it up that just came out from Frank’s Luqman, that’s the CEO of snowflake, and then before that ServiceNow and data domain, and it’s really kind of like the blueprint for how to build a high performance culture that just executes at a very high level, and how to be a leader in that environment to hold people accountable, set the proper expectations, set people up for success, how to make hard decisions, all that kind of stuff. And I think that, you know, if you can get to that level, quickly, in your career, you’ll you’ll just be in a much better spot because I think a lot of young founders averse, kind of scared to make big bold moves. And that’s kind of what you know, Frank’s learned over the last 2030 years leading companies is that, you know, you have to kind of trust your gut, you have to make strong decisions that you know, that that are right for the business, you have to, you know, set people up for success and help them. And that book was a really good guiding kind of principles for me to, to think about how to lead the company, especially as we scale.
38:22
Well, fantastic. You know, we really appreciate your advice and bootstrapping and the guidance for young founders and building teams and hopefully they can reach where you are at this point with swag up but you know, fingers crossed for them. Thank you so much. We’re so happy to have you on the podcast, Michael.
38:41
Yep. Thanks for having me on. Appreciate it.
