LARQ: From reinventing the water bottle to being acquired by BRITA

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29:40that's freedom to be use as directed are there any kind of rituals that you have before a big event like that to maybe just get in the zone you know like you see things like michael phelps before he goes out to the pool he'll have his headphones on and he's like in the zone like is there anything that you like to do before you go out and pitch to investors i do a little meditation uh i like to work out so you know getting a good workout in beforehand uh the other thing is i i I have a very close relationship with my, uh, with my wife and, you know, actually talked to her quite a bit about, you know, big events and big, uh, big pitches or, you know, shark tank.

30:18She was my practice judge, uh, and, you know, just going through that with her and getting, you know, so I think that's part of my ritual as well as talking to people I trust. I think having a group of people that you trust and respect, it could be a partner, it could be, you know, people just your friends. I think that's also very important. And how did you work to keep costs as low as possible throughout these early stages? Because I imagine that was a priority, especially in the beginning. You know, we wanted to deliver a good product, a quality product. So obviously keeping costs at a reasonable amount helps with the addressable market size.

31:01So it was more important that we found a manufacturing partner that could do it or that could do it to our quality and specifications than it was to absolutely keep the lowest cost. So there was always a little bit of a balance between those two things. Right. Because it's a premium product as well. It's not like something you want to skimp. Exactly. Let's talk about retail and distribution because you are in Best Buy Canada and I've seen your product on Williams-Sonoma. You recently expanded into Target and are looking to launch on Apple.com. Dream partners for entrepreneurs. How did you manage to secure these collaborations?

31:37Can you kind of talk us through the process broadly? We started on DTC, right? So that's the typical playbook now. You start online. And then we went to trade shows to talk to buyers. And in the beginning, we worked with more boutique buyers. We're in New York, MoMA, as one of our earliest partners on the retail side. And really through that process, you kind of learn what works in retail, what doesn't work in retail. Because retail is very taxing, both in terms of the people that you need, in terms of supply chain and inventory you have to keep. So I think we learned a lot over the years to be ready for a partner like a Target, like a Best Buy and Apple.

32:21What kind of things do you feel like you need to have in place? I think knowing what kind of product resonates with what partner, you know, and not every product is right for every partner. You know, so we only have certain products at an Apple that may not be at a target and that buyers and that consumer is a little bit different. Right. So just because a big name partner comes along, I don't think you should always say yes very early. I think you should be ready for that partnership as an organization as well, right? So because the supply chain terms, the inventory terms, the margin terms are all going to be taxing on the organization, right?

33:04More inventory margins are different and you don't control the whole experience like you do on D2C. So you have to have a field team going to target and literally check every store. Are they in stock? And they're always not always in stock, right? So all of this requires a team of people. So oftentimes I've seen brands get just decimated by going to retail too early because it is a more complex process that you have to manage. So having a field team in place is one of your suggestions for anyone looking to go into retail. And are there any other things that you really felt like gave you that leg up when you were pitching these retailers and distributors?

33:46Yeah, I think we had a natural advantage in that we have innovative products in a category that was often growing for our partners. So I think fundamentally, if you have an innovative product that people weren't, we didn't have many other products in this category. that was very helpful in pitching to our partners. And I think also building the brand to a certain size in D2C and your own community to a certain size, I think is also helpful in that you're ready for a thousand doors with someone by the time that opportunity comes along. It sounds like that's also one really key piece of advice that's underpinned your journey, is ensuring that you're truly ready.

34:32and not going too fast because it's tempting obviously to try to go after all the big guys as soon as you've got a product and you see that people like it right yeah um but it sounds like you are really conscious about pacing yourself and being prepared yeah i think that experience probably comes a little bit from being an investor at one point and seeing uh some investments you know especially venture-backed consumer investments can lose sight of their margins lose sight of their you know efficiency as an organization uh and overstress themselves to go after every single opportunity um so i think we've seen some very famous consumer brands um have a very you know hot start and burnout so i think it's good to know that at the end of the day you know it's uh i would say it's a marathon and not a sprint what does it really take to succeed in retail even after you've landed these channels because i often hear founders complain that not enough people talk about that that they see that they've landed it and then they think that's the end but obviously it's not yeah i think it's all about your connection with your consumer and sell through right and that's a different way of saying once you're on the shelf are you moving with enough velocity to make your buyer happy to make that category happy uh and ultimately i think that is a question whether or not you could make your consumer happy if you have a good product market fit for that not only with your ddc customers but for the customer that a retail partner have right so i think that's very important what category or how you're presented we turned down a lot of opportunities that it was going to be oh we'll put your shelf we'll put your product on you know the bottom shelf or uh on this random location uh even though it was a big maybe buy-in opportunity we knew that our product required a little more education a little more understanding of what the product is doing so at the end of the day we only decided to partner with people that would give us that visual space to be able to be successful yeah so you actually even walked away from some of these opportunities.

36:47Yeah, absolutely. You have to be discerning. I think you also have to know, you know, exactly that product market fit with that partner, with that space. Is that going to do the thing that you think it will do? And it's a little bit of art, obviously. That's a great advice, you know, to other entrepreneurs who might be looking to avoid any kind of pitfalls, right? Yeah. You shared one of the toughest challenges you faced as a founder during COVID and what you learned from it. But I was also going to ask about tariffs. Obviously, that has been roiling the global economy recently. What has that experience been like for you dealing with tariffs?

37:24I've learned that the supply chain is very complex. To put together our product, there's probably over 50 pieces coming from 30 different suppliers across 10 plus countries. And as a relatively small, I would still consider myself a small mediums as business we're not an apple right we don't really get to dictate if a manufacturing partner is located uh in asia or in mexico or in the u.s we are usually a taker of volumes as in a taker of uh you know the capacity of a factory and sometimes i might mean 10 percent of the factories 15 percent of the factory's capacity we don't get to say oh we are just going to build a factory from day one uh in the u.s or in mexico or wherever else so what we cared about in the beginning is quality uh the ability to deliver an innovative product on time and at a reasonable cost so we could begin to build sort of a new market right we have that vision for this sustainable and healthier hydration future and it requires new products so i think what people don't realize is that small businesses are especially hurt with tariffs that are to plan.

38:49And I think it will have an impact on innovation and things like this as well. Yeah, absolutely. I mean, one of the things that I've covered recently is, you know, the ways that small businesses try to scramble here in LA to get around tariffs, like front loading, moving up their product orders. did you have to employ some of those kind of tactics as well or were you kind of also in a bit of a crisis mode as a lot of other businesses were? Yeah, I think this is probably our fourth crisis mode. So at some point it just doesn't become a crisis. It's just the norm. The norm. So we felt very confident going to it that we had, again, we had the team that has been through COVID, has been through fundraisings, has been through various external shocks, price shocks to everything else that we felt like, okay, well, this is not a great experience, but we'll find a way to navigate it.

39:46So we are in the process of diversifying our supply chain from today we're 100 % sourcing from China to more broad-based sourcing strategy, actually with some of it even coming back to the U.S. as well. Oh, wow. Yeah. Well, that's music to some people's ears, I think. What was one of the best days in the history of the company for you? I think there was only four or five people on the team at the time. And we were in the process of launching a crowdfunding campaign. And people were just in the office. We were going to start the campaign at like 7 a.m. People were in the office at 5 in the morning, just getting things ready.

40:25And then there was this moment where everyone had a cup of coffee in front of them. It's how people were tired from having stayed up the night before and getting everything ready. but at the same time people were super energized right there was this sense of calm before the storm that people were excited that there was a buzz of uh possibility yeah for the future uh and then a few hours later we had you know thousands of orders come in you know and raced over obviously one of the biggest crowdfunding campaigns and and that that morning from that calm before the storm to that crazy kind of out-of-the-gay experience.

41:04I think that was one of the best experiences. Yeah. I was going to say I could name a few other great days for your company for you, but that's a really lovely one. During those kind of so-called crisis periods that you mentioned, did you ever consider throwing in the towel and going back to corporate life? Because I have to say, it's so striking, right? Because you came from the investment world, this kind of high-flying white-collar job, and, you know, also the luxury space with LVMH. Did you at any point sitting there, you know, you have to be really scrappy. There's not anyone else to do some of the things that maybe you don't want to do in startup life.

41:41It couldn't be more different, I think. Think about, you know, maybe this isn't for me or did you absolutely love it? I think I loved the totality I experienced, but I certainly didn't love every moment. And I would be lying if I said I was always confident that this is the right choice. The truth is there were those moments where you question yourself, right? Is my career moving the right way? Was this the right choice? But I think at the end of the day, you have to gather yourself up and take another step. Like I said earlier, the next step is the most important. So I think it's fine to have those moments of doubt.

42:20And we're only human for having it. but I think the important thing is after that moment of doubt, can you take the next step? What is the single biggest pain point or challenge you're working on right now? Would it be the tariff situation? I think so. I think the tariff is certainly up there. Is it 50 % right now on you guys or no? What's the rate that you're dealing with? It's in the range of 30 to about 55%. Yeah, it's in the range of that. LARC has a fairly lean team of 50 employees. What do you value most when it comes to building a team? Is there anything you particularly like to ask, let's say, when hiring?

42:57It's very important to hire people who are compatible with the startup experience. I think oftentimes startups are kind of glorified, I think, in media or with people's perception, right? I want to work for a startup that is growing at 1 ,000%. What people don't know is that 99 % of the startups fail. And oftentimes it's a grind. So I think you have to find people who are there for the right reasons and who can have longevity with the company. So I actually like to ask a question like, well, I like to turn around on people and have them ask me really anything they want. Maybe what is the worst part of the company?

43:41And I try to be very transparent. And I talked about the hard days and sometimes the tough hours, but I also give them the good side, which is you really do have this sense of accomplishment, all this sense of camaraderie with your team. And if you want to get something done, you join a startup. So I think fit is a two-way street. And so we're not only looking for, oh, are you the right fit for our organization? I also want to make sure our organization is the right fit for the candidate or the team member that is joining. Because oftentimes an interview feels like a very one-way conversation.

44:21but they're pitching you on them. I want to make sure that they have all the information to make the right choice. I'd rather have them drop out of the process than realize they were in the wrong place six months, nine months, 12 months later. Right. It sounds like you think long-term quite a lot. I really think that's like your investor side coming out. Maybe. Lark has been applauded for walking the walk when it comes to doing business for good. You guys are known for devoting 1 % of revenue to your charity partner, 1 % for the planet. Can you talk us through the decision to make that commitment?

44:54Because I'm curious if you got any pushback from stakeholders and if it was tough to make that call. No, I don't think it was tough to make that call. From the very beginning, we were a very mission-driven company, both in our product but also in the space that we're trying to tackle. So for us, it made a lot of sense to partner up with some of our charity partners that you mentioned, along with many others over the years to do something positive, right? And whether that was to build wells with well-aware in places in East Africa or with Charity Water. We really tried to have a mentality of like we're kind of in this together and the product only does so much that if we could build an organization that can also sponsor some great initiatives, that's what we also want to do.

45:56So I am a Reddit lurker, and I've seen that you personally answer questions from time to time from some of your customers on the Larkvuddle subreddit. Is that right? Is that actually you? That is actually me, actually. I am a lurker as well. Yeah, I want to start doing that. And how have you found the experience? To be honest, that's maybe the most public forum. But in the early days, I was actually answering tickets on our customer care email as well. They may not have known it was me, but I like reading. I still read every review that gets posted. I still go through tickets. I still look at Reddit or Twitter or social media comments.

46:41I really like the fact that in this day and age as the CEO of a company you could still have ground truth right and for me there's nothing more important than ground truth and that comes from the customer right so I'll take every opportunity that where I could speak with a customer directly or understand their pain point more directly I think it doesn't get any better than that in terms of having to buy information to make decisions for your organization right so what is ground truth right that's also talking to people who may not directly report into you so we try to have a flat organization as well and i think that is uh and that also means all the way down to the customer so uh for me that's sometimes jumping on reddit or on twitter or on you know social media yeah to understand what's really happening yeah i imagine it also gives you a good gauge of demand and like ideas for features and things like that yeah when you say also talking to people that don't report directly to you do you mean like you also will try to just do listening sessions internally with folks that might not have access to you all the time it's not a huge organization so so it's still easy to do that but anyone could email me anyone could slack me and schedule a time to chat yeah you know and so it's it's probably a little more uh it's pretty fluid given that we're not a big organization it's not very structured so just we just have a culture where everyone can yeah it's very approachable well justin it's been just over a year since lark was acquired by brita a huge milestone in its journey so big congrats yeah this is a bucket list tick for many founders how did the deal come together and how do you see the brand changing under its ownership yeah we felt very fortunate uh to have partner up with brita But like all good relationships, including my co-founder, it just started out from an email, random email we got from their corporate development team to just chat.

48:36and then from that very first meeting in Germany we realized that even though the organizations are of very different size coming from different countries we had a very similar vision for the future which is to make hydration better, better for the planet, better for people from a sustainability, from a health perspective so we really spoke the same language and it was very apparent that there would be a lot of synergies a lot of opportunities right uh in this space to work on something together so over the course of a long uh long journey that took almost a year you know we ended up closing a deal uh and you know we were purchased by uh brita se and uh you know we've been there for a couple years now and it's then a really great journey.

49:35And I feel like that has really provided a foundation for the next chapter for LARC, even allowing us to think about things even further out. BRITA is a family business, a multi-generational family business. And I think that suits us very well in terms of our longer term goals and in years and decades rather than in the next quarterly report, right? So I think I really appreciate that about that approach. I think I would have been happy to keep running Lark, but having an opportunity to partner with someone that could bring so much more resources and distribution and technology to the table, I think really advances our vision for the future.

50:17And, you know, I'm really excited for Lark's next 10 years. I think it will be even more exciting than the first. Whatever your thing, it could be anything. Canva helps you make that thing a thing. Canva is a simple online tool thing. It's a way to design with our magic AI tool things. You can social media your thing, generate images or videos of your thing, make decks for presentations to show your thing. Whatever needs to be done for your thing, Canva can make it an even better and bigger thing. Canva, the thing that makes anything a thing. If we were to sit down again in 10 years, where would you want to see yourself and Lark?

51:02I think in 10 years, we have a vision for LARC where we are the go-to brand and product line. If you're thinking about healthy and sustainable hydration, and that might spam from something on the go, something in the kitchen or a house. I have this obsession that we shouldn't ship water around the world in plastic containers. so i'm also hoping that we've made uh that we've taken the next step in that journey uh of you know kind of making the world see that as well and by providing products that make that journey easier as well so i think we still have a long way to go uh but i think in 10 years we'll we'll be much further along that goal you give a hint as to what more of what that vision entails I think the bottle form factor or the pitcher form factor, that's a couple of ways to reach that customer.

52:04But what we've learned over the years is that people drink water and hydrate in many different ways. So we want to meet that consumer. That's our general strategy. We want to meet the consumer where they have a need rather than say, oh, wag our fingers at them and say, you shouldn't do this or you shouldn't do that. We believe the product should come through the consumer. We should develop a product that makes things easier and makes things more straightforward. So whether that's something that's installed into your sink or in your fridge or in your home, we're on the go. Maybe lark taps, lark pulses, lark drinking fountains, whatever it may be.

52:51So that decision becomes second nature. I'd like to ask briefly about competition. A lot of people don't know this, but Brita here in the U.S. is actually run by a different company than the one that you're owned by, Clorox. Because Brita SE, the German company that came up with the eponymous water filter, as we all know today, actually sold the rights to the Brita brand in North and South America. to Clorox in 1988. Given that dynamic, how does this impact Lark's strategy and operations within these markets? Because it's essentially Brita versus Brita, right? And you're right there. First, I think Brita is a great brand.

53:30Even in the U.S. with,

53:35under Clorox, I think they are, they provide a great product. I think Lark's vision goes beyond a countertop picture. We're innovative by nature. We're now owned by Brita Germany, Brita SE. Obviously, there's some overlap in the products that we do and everything. But at the end of the day, I think our vision is much more using innovative technology and new product designs and new feature designs to continue to bridge that gap between what people get out of single use and what people don't get out of more sustainable, reasonable options. So our goal is to keep bridging that gap with technology and innovation.

54:22And I think Brita is a very important step in that direction. But I think we see a lot more opportunities to innovate. So we don't really see Brita as, oh, we have to take market share. I think the market share that we're trying to go after is this half a trillion dollar single use water bottle market globally. And that market is the size of you know, that's about the GDP of Thailand. Right. Or something like this. Yeah. That's very mission driven of you, obviously, to say. It's also been seen that you know, LARC, this acquisition could be obviously a key way for Brita SE to really dominate the North American market.

55:07And, you know, you're a key weapon in that arsenal. So I don't know if you see that as well. Just, you know, talking roadmap in the near to midterm, anything you can tease in regard to potential expansions geographically or product roadmap or things like that? We're looking at, so Red ASC has a very interesting set of, they were the original innovators of this space, right? Right. So I think if for the non-North American listener, you probably are more familiar with their under the sink filters, with their with their bottles, with other types of filtration technology that they have. They are actually in cafes and they have a B2B business as well.

55:49so looking at that innovation portfolio that goes deep in filtration that goes deep into some of these spaces uh i think our product team and our engineering team is having you know a really good time going through that and seeing okay we could build upon that foundation the set of patents and technology and laboratory work and be able to productize all of these technologies for the North American market, adaptive for the North American market. So that's one thing that we're just super excited about is access to this wealth of R &D and knowledge, you know, and team that we didn't have or didn't have the scale for before.

56:32I think the other thing that there's a lot of synergies and you'll see this coming along this year is that, you know, they haven't done too much in the bottle space. So I think Lark is acting as a little bit of a bottle innovation hub. globally for Brita SE, where in this kind of space, on-the-go space, we have a lot more experience in the D2C space. We have a lot more experience. So I think we'll see that being leveraged into the Brita brand and Brita family of products more and more in the future as well. And just to follow up on something you said earlier, you said that this whole deal came together through a simple cold email, was it?

57:11Yeah. From whose side? From yours or from theirs? We got an email from Hans Michael, their head of corporate development, back in December of 2022. Yeah, 2022. So shout out to Hans Michael. Thanks for sending us that email. Wow, that must have been a dream come true. You know, but we did get, you know, emails from different investors or other corporate partners from time to time. So that's actually AcquireU. or we're just interested to have a chat so you know you never know where these conversations go uh but obviously we're going to take it because because it was brito yeah uh i think is what happens after that first conversation the the the the fit the vision for the future the strategic fit into the company um you know their lack of presence in north america as you mentioned before uh i think those things really clicked after the first conversation yeah yeah i saw also So the online to offline retail mix as well is very complimentary.

58:17It is very complimentary. All right. This brings me to a segment we are calling What It Takes, where an audience member and fellow entrepreneur gets to ask for advice and hear more on what it takes to get where you are. So today, Isabella, a CPG founder based in San Francisco, asks, Lark's acquisition by Brita is a major milestone. What were some of the important lessons you learned navigating this process from initial conversations to closing the deal and what advice would you give to founders thinking long term about strategic exits it's good to have that the outcome in mind when you start right you know your vision board or your vision for the future because i think having that north star whatever it is for you as an entrepreneur is very important because i think it will impact all the little things that you don't think about every day but at the same time i think people sometimes get lost about oh i need to get to an exit i need to have an ipo i need to um and that becomes all consuming where i need to build it this way so this this potential customer might come in or this potential acquirer might come so as well it's good to have that in for the future i think what's more important is that you should build a company that you're proud of you should build a company that's sustainable um because there's nothing more attractive in my opinion uh in terms of building yourself as a acquisition target and building a company that is sustainable that is uh building a company that doesn't need to be acquired right so uh i think it's important to not get lost in that as well it's like exactly how do i build this so this company will buy it right so i think building a sustainable company that you feel like is addressing the problems in your segment and just putting one foot in front of the other and then one day i think you'll what you'll see is that you've built something hopefully incredible that many people will want to acquire and that's not necessarily a function of trying to be something that you're not right so i think you have to be true to your strategy, your vision, and your execution.

1:00:34And that stuff will come, in my opinion. So stick to the core fundamentals and don't try too hard. Don't try too hard. Yeah. I feel like this is also another big thing for you as well, that you've really stayed true to, sounds like, throughout your journey. All right, we're going to do a quick rapid fire round just to wrap up. It's just two minutes. And just say whatever comes to mind. Don't think. Okay. What is your pet peeve in the workplace? You should bring your full self to work. That's like the new parent in you speaking, I feel like. That's like the parent in you speaking. How many hours of sleep do you get every night?

1:01:10At least seven. What's something you do to manage stress? Working out, you know, talking to my wife. If you go back and give yourself advice in your 20s, what would you tell yourself? Stay true to your dreams. Things will work out. Justin, thank you so much for being here for this conversation. I've really enjoyed it. Thank you so much, Michelle. Thanks for having me. Thanks for joining us on Behind the Business. For more stories on business and leadership, follow our show on Apple Podcasts, Spotify, YouTube, or wherever you get your podcasts. See you next week.