Brian Lee: Pioneering Disruptive Businesses

0:00So what are you looking at? What has you excited? What are the things that you invested in the company recently? but what more kind of more things that you know, are you looking at other things? What should we be doing? I mean, if we were going to model ourselves, because a lot of the folks here, they're adding an e-com component to it, or they're launching, or they're thinking about pivoting, you know, their business maybe just a little bit. What direction would you suggest we take if we wanted to appeal to someone like yourself? You know, it's interesting. It's like every time you think everything's been done, it hasn't, right?

0:29You wake up every day and you're like, gosh, there's no more opportunity and then something pops up, right? So I have a firm believer that things are always being innovated on and new bottles will always be created. How much more successful would you be if you had lunch once a week with insanely successful entrepreneurs who shared their biggest secrets on how they think and achieve success? Grab your seat at the table because this is Business Lunch with Roland Frazier and Ryan Dice.

1:00Welcome to another episode of Business Lunch. And today's a snackable episode with Roland where he's going to get into some more tactical strategies that you can start using to live a rich and happy life. If this is the first snackable episode you're hearing, I'd encourage you to go back and listen to some of the other episodes that Roland has put out. And if you want to get notified every time we release a new episode, go to the new businesslunchpodcast.com website and we'll send you detailed notes along with every episode. That's businesslunchpodcast.com, www.businesslunchpodcast.com, and you can sign up for the free email newsletter where you'll be able to get all the highlights and resources from the episodes.

1:36Welcome Mr. Brian Lee with us this afternoon. Let's give him a big hand. We're going to have a fireside chat with Julian and Ryan, as well as with Brian. Welcome to Brian Lee. I feel like that was like the old Gilligan's Island one where it's Brian Lee and the rest. Mean Roland. So, uh, thanks again for flying all the way, taking the red eye from Los Angeles. Thank you for having me. There's a lot of other Californians out here, so they are, I think, uh, uh, yeah, woo! All right, California! In the house! Um, the things for you and like tens of millions of other people. But thank you again for coming all the way out here.

2:25I know everybody here appreciates it, given all of the success that you've had with starting commerce companies and building. Really, I think without realizing it, without knowing that you were doing it, building kind of some model content and commerce type company. So it's fun for us just to get a chance to chat with you and let these fine folks listen in. Awesome. Thank you. So you've done quite a few diverse things in LegalZoom. So legal, which then leads to shoes. Obviously, I can see the connection there. Lawyers wear shoes. Lawyers wear shoes. And then honest with baby things and going into other things.

3:05I know that legal and shoe were your ideas, right, originally? Right. How do you come up with these things and start them? Yeah. So I think, like many of you, I think I was just born to be an entrepreneur. I always had it in me to start something. Like ever since I was in grade school, I would be like, you know, I would make my own little mazes and try to sell them to the other kids for 10 cents, you know, all that kind of stuff. And I think for LegalZoom, you know, I ended up going to law school and working at a pretty nice firm, but it wasn't that fulfilling to me. And so I kind of wanted to get back to starting a company.

3:47And I remember one of my partners asked me to form a corporation for them, for a client. And I formed it and took 10 minutes, right, because it's just a check-the-box form. And then when the billing came, you know, you had to approve your billing rates and everything. And it was$2 ,000 next to it. And I told the partner, I go, you know, I think it only took me 10 minutes, but it has$2 ,000. And he's like, that's our standard fee for incorporating. I used to love it. Wow, that's a lot of margin in law. I started to say, wow, a lawyer with a conscience. But you were like, this is wrong. You're like, margin.

4:25And so I realized pretty quickly that you could probably automate. This is when the internet was first started, that you could automate a lot of this process and put it online, very similar to what QuickBooks was doing with accounting, as well as what TurboTax was doing with tax software, that you could automate a lot of these very simple legal procedures. And that's the genesis of LegalZoom. And we started that company, gosh, believe it or not, like 16 years ago. So it's been a while. I formed my very first company, Real Soft Niche Solutions, which is no longer in business because it didn't actually ever do anything.

5:01But I formed my very first company on LegalZoom. Thank you. No joke. I'll give you a discount on your next one. Thank you. Thank you. I appreciate it. Has anybody else, did you form your company on LegalZoom? Yeah, it really was. It was great for entrepreneurs, right? That big aspect, it leveled that playing field. So thank you for doing that for the entrepreneurial community as well. Thank you. So one of the questions we get from a lot of the folks here is I'm an entrepreneur, I have an idea, or I am the only person in the business right now, and I don't know, I want to automate legal, let's say, or something, but I don't know how to do that myself.

5:36How do you go about finding the people that can do the stuff so that you're not having to learn how to program in Ruby on Rails and things like that? Yeah, you know, for LegalZoom, we kind of got fortunate because a good friend of mine was working in a company called Sapient back in the day, and he was building websites, and we were talking to him about the idea because we knew we needed someone to actually build a site, and he joined us as a co-founder. Okay. So that's how we started with LegalZoom on the coding side. But looking back at all the companies that I've started, it really does come down to knowing what you're capable of and understanding how to buttress your abilities, right?

6:18So for every company, we've vet every person that we're bringing in, understanding what the structure of the company should be moving forward. I tend not to hire a year in advance. I usually tend to hire like, you know, five days late. Truthfully, it's kind of like putting the most out of your talent and then hiring only when you need. Do you think about that? I don't mean to interrupt, but I think that's what a lot of, that's what we've done also more as a function of need, right? You don't always have the funding there to do that. So, I mean, in a lot of your ventures, you have had the funding there, but so has that been a conscious thing?

6:56Do you feel like that's the right way to approach hiring and growing the team and getting the people like like Roland talked about, waiting until you've utilized all the resources you have? Yeah, yeah, I think so. I mean, you could definitely, if you have enough funding, you could definitely hire a little bit ahead of the curve so you're not constantly battling from behind. But in terms of growth versus profitability, right, you want to hire as few people as possible to get to profitability, but you also want that growth. And for me, it really all depends on, number one, the company, right? But number two, the macro economic situation of funding and venture capital, right?

7:42So if funding is readily available, then I'm looking for growth, right? When funding is not there, then you're looking for profitability. but even when you seek growth, you always want to have in your head a clear path to profitability because at some point, to be a great business, you've got to be profitable. We all know that, right? But what is that level? I mean, can you get to, you know, can you be Amazon? Can you get to 20 billion in revenue and not be profitable and no one cares, right? Or even Facebook or Google, none of these companies were profitable until they got to scale and then you turn on, you know, the spigot and you start making money.

8:19So it all depends on the type of business, the funding environment, but always with the eye towards how do we get profitable. And as far as kind of keeping tabs on that, what are the KPIs, what are the key performance indicators that you look at to see if, like, what do you watch on a daily basis? What's important to you to see, to know kind of how the business is doing? A lot of it is marketing, right, which is why you're all here. so for me we pay very close attention to cost for acquisitions what we call cpns which is a cost per day subscriber because a lot of my businesses are subscription based we look at ltvs we look at which is lifetime value oh ltvs okay yeah lifetime value it's ltb it was like yeah i don't even know what that is yeah so we're fancy i feel so stupid yeah so we're looking at lot of that type of KPI or those KPIs.

9:15We use a lot of different tools, digital tools to help us manage that. So we're working with like Sprinklr to manage social. We work with Domo for our dashboards, Boost CTR. We work with Optimizely to optimize the site. A lot of great digital tools out there and we're constantly and the the trick to growth is as you guys know it's always testing the new products i mean we're always testing everything um we spy on uh on you your company and and all the other fast growing companies uh with a tool called built with that tells us the tech stack and um we found a tool that you're using called retention science which we promptly contacted them and went out to santa monica and talked with them and and it's been And really cool.

10:08So it's so important, I think, to us to stay on top of that and find the things that work. And they said that that one in particular for you guys increased your six email welcome sequence by three times the conversion, which is crazy. I mean, there's some great tools out there that you could use even as a startup. And then as you start to scale further, once you start hitting tens of millions of hundreds of millions of revenue, then you start bringing more of that in-house, of course. Right. So right now we're very focused on diving pretty deep into data analytics and building tools off of what we're finding.

10:43So, for example, like our data team did this great analysis of customer segmentation of our own customers, like where we're getting them and then basically scoring them on their likelihood to churn. Right. And so we have a customer service team that get a lot of calls of cancellations or where's my order or can I add something to my order? And basically, even as they call, now our CS reps have lights. Like if they're calling to cancel their subscription, we have lights that have red, yellow, or green now. Because now we know this person calling looks very similar to all these other customers that are low value to us.

11:24So just basically cancel them and move on to the next call. Yellow, they have a certain amount of sets to offer them. Green is save them no matter what. So you're not trying to save everybody. You're like, if you're not our ideal customer, we just assume part ways and kind of focus more on getting green light people, right? That's correct. That's a good point of optimization. So if you were to look back, whether it's honest or it's shoe dazzle or even going all the way back to LegalZoom, what were some of the things that you did that you recall or that was done by your team that really moved the needle that made a big difference?

11:55Because the problem with optimization is a lot of things that we try, just they don't do anything. It wasn't good or bad. It just made no difference. So what were some of those needle movers if you look back? You know, it's interesting you say that because most of the stuff that you do test doesn't move the needle, right? But it's really like those little nuggets that you find that all add up. But there are no silver bullets, right? Everything is kind of built on each other and you start optimizing 0.01 % at a time. And when you look back, you're like, it worked, right? And so initially your gut instinct would be like, oh, it'd only be with a needle by this much.

12:33But if you keep doing it, if you keep doing it, it starts to make a real impact. It's funny you say that because we have been talking a lot lately in our company about it's not, for us, it's not death by a thousand cuts. It's life by a thousand lifts. And it is. It's just those little wins. But, yeah, I like Ryan's question. If you have anything, like any moments that you found those needle movers, if you can say. It's totally cool. Especially early on, when you think about early on, you're testing and you're trying so many things. And I know we're continually surprised. Was there anything with Honest early on or did you just nail it right out of the gate?

13:10I think Honest was a little bit different because I had learned so much really at LegalZoom and what works and what doesn't work and SheDazzle. I always like to say, you can make a mistake once and you'll probably make it again. If you make it twice. That's on you. Yeah, exactly. Yeah. So Honest Company was a little more efficient, if you will, in terms of... So what did you learn from Shoe Dazzle that you were able to apply, you know, over at Honest and aspect of the model? I think, well, the number one thing was understanding, you know, churn levels, right? So how fast a customer churns out of a subscription and understanding the points of churn and anticipating that ahead of time to keep that customer longer.

13:55And that's something that's just been invaluable to us. So, for example, I was talking about data analytics and how we're putting the yellow, green, and red. We do the same with this is the type of customer that on average after four and a half months are likely to churn. and so at the four month period we send them an offer and say guess what next month you're going to get a free tote bag with your order it keeps them on just a little bit longer and you keep doing that for for for every churn metric you know that you have in your in your in your database very was honest um and i'm a little confused because i've read different things was honest already going jessica had started it and then kind of came to you and said hey i got this thing but i really need some help growing it or no no actually um Jessica Alba came to me about like nine years ago I know her husband Cash Warren from around town and he was in in in e-commerce so um sat down with Jessica about nine years ago and she came to me and said I have this great idea I want to start this organic lifestyle brand and I said well that that sounds awesome um I don't have time to do it.

15:07It's exhausting. Because at that time, I was running LegalZoom. I was just starting to shoot Azzle. And I introduced her to some friends. And then about five years ago now, she came back to me again and said, I'm still thinking about this idea. Really want you to help me start it. And at that time, I had my first child, Davis. And I saw how my wife started changing her buying behavior. right she started shopping at whole foods and making organic purees for the for the baby um started buying you know eco-friendly diapers and so forth and so i thought well maybe jessica's onto something here right so i i sat down with her again and and basically you know she was so passionate about this and i came to this this awakening moment too that that now if i'm going going to do anything with my career, I want to have an impact.

16:01Right. And, and if I could, you know, build this business and, and even help make this world a little bit more non-toxic and safer and healthier, then why not? Right. This, this will give me fulfillment. And so, so we started the company almost five years ago now. So when you had that meeting and said, okay, let's do it what happens next like what was it is it first go get money is it first go get team and and how do you do what are the steps like yeah so so for us it was definitely first go get team right and so we brought on Christopher Gabby and and Sean Kane so Christopher Gabby comes from this non-toxic world if you will so he was former CEO of healthy child health of world and he basically We built all of our initial products.

16:53And so then Sean Cain was an operator in town. He used to be a price grabber and some other companies out in Los Angeles. And so the four of us were the co-founders. Then we raised capital to start the company. And then it was off to races from there. What are your thoughts? I mean, in every business you've done, you've talked about having these co-founders that were doing this. Obviously, the upside of that is help and expertise that you don't have. The downside is you don't have the whole thing anymore. Has that ever bugged you? Because I know as entrepreneurs, we struggle with that a little bit, right?

17:28Anybody who's starting something, do I want to divide up the pie? Am I okay with a small piece of a bigger pie? So how do you – has that ever been an issue with you? It's never been an issue for me because I just figure if you get the pie big enough, there's enough pie for everybody, right? it. And so even with LegalZoom, I kind of fell into working with a celebrity. It was more a need, right? It was when we started LegalZoom back in 99, 2000, when we started working on it, trust was a big issue online. I'm not sure how many of you, you guys all look pretty young, but for those of you my age or older, I mean, you realize that a lot of people are even scared to put their credit card information online, let alone to give us their social security number, their kids names and bank account.

18:18I figured to make a living trust online. So, so trust was an immediate factor. And, and although I was working in a great firm and my partner was, no one had ever heard of these firms, right? So that's when we contacted Robert Shapiro to kind of be the face of, of LegalZoom and our, our, our third co-founder, um, because we wanted people to instantly recognize, okay, well, at least I know this attorney, right? And I can trust the site. Um, So that's how it happened. But then what happened was that Robert Shapiro started going on to talk shows and talking about legal scene. And every time we did that, we would get more orders.

18:53I was like, wow, there's something to this. We don't have to spend any marketing dollars and we're getting all these orders. So that's when I realized the power of influencers and celebrities. So you cold called Robert Shapiro at like 530 at night or something like that. Just didn't know him or anything. And he happened to pick up the phone, right? Yeah. So that was incredibly serendipitous. And then Jessica, you met through somebody that you already knew. And Kim, I think you met, Karsh Ashian, you met through Robert Shapiro, right? So for those of us who do not have the stars aligned quite so well to have that kind of luck, if we want to attach a celebrity, how would you go about approaching that?

19:35I would go about approaching it kind of the summer. Well, number one, you got to think of any, you know, potential partner is a potential business partner, even if it's a celebrity. Right. So, so a lot of people ask me like, well, what's it like? And this and that, it's like, Jessica's not, you know, Jessica Alba, the actress in the office. Now she's our, our business partner. Right. And so unless you approach it in that manner and understand that this is your partner. This is not going to just be a face to the brand. Look, you could always pay someone to be a face of a brand or, you know, go out there and talk about something, but to, to truly have a partner, that's, that's a decision you have to make in terms of, you know, equity splits and, and how much involvement and everything else.

20:18So, you know, they're just like everyone else in terms of, you know, potential business partners, but how, how I would approach it. If I didn't know these people directly, the first thing you want to do is try to reach them directly, right? Because it's very difficult to go through, you know, talent managers and agents and so forth. And on top of that, talent managers, I mean, their jobs are to say no, right? It's like, no, not interested. So try to use your network as best as you can to see if you could get to that person directly, as opposed to through a talent manager or an agent. And if you have to go through a talent manager or agent, there are definitely some agents and talent managers who are definitely more advert or more um active in terms of seeking out opportunities for their clients and so you know you just kind of have to to meet enough of those people in in hollywood to to understand who's who so we we've had reasonable success by sending what we call a firm offer so we will go direct because agents we find are very challenging and we'll just send a contract that says, if you sign this, then we'll pay you this much and kind of go from there.

21:29Once you have that initial contact, how do you decide equity splits and comp and stuff like that? Where do you start with that? You know, it's when it comes to - Without revealing the equity position of your business. Yeah, for sure. Just generally. Yeah. How much she got? Like, go ahead. How much money does she make? Yeah. So in terms of equity splits, it's really the wild, wild west. That's when I find out. I don't know where to start, though. There's no standard. No one says, you know, if you're a C-level actress or a C-level singer, you get this much. There's no formula. Yeah. Right. And so it's, you know, again, it's all negotiation.

22:14Where do you start? Just because I know everybody has this challenge. Yeah. So where do you start? Do you say 50-50 or do you say 6 %? I mean, it's just, it's so, yeah. How do you do it? It really is. It really is. I think a lot of it depends on how big the influencer is too. Yeah. Right. I mean, is Gary Coleman still alive? I don't know why that name popped up. Gary Coleman is not, but it's an amazing reference. So keep going. So if it was like Gary Coleman, because so I could. He would get less because he's dead. But it's like you're going to give Garrett Coleman less than you would give Brad Pitt, right?

22:51It's just there's a scale of - Unless Brad Pitt was willing to accept what we would give Garrett Coleman. That's true. But yeah, I mean, I've seen deals get done for half a percent. I've seen deals get done for 80%, which is kind of crazy. But it's all across the board, depending on how much involvement that celebrity is going to have. That's the most important. Like if you're ever going to work with a celebrity as a partner, like a lot of these celebrities have a lot of other responsibilities and things that they're working on. So you have to make sure that you're going to get the appropriate amount of time and effort from them.

23:30And I think the perspective that you had is a good one. They're a business partner. So I think you would almost have to approach it in the same manner that you would any other business partner you had that had a full-time job. That's right. So you're approaching and saying, this is going to be my whole thing. I'm all in. You're going to be part-time. Don't get me wrong. You're a big deal. And that's great. But I'm all in on this. This is all I'm doing. You're going to be part-time on this. And then when your agent calls and you've got a big movie and you've got a fluid toboggan off to Hawaii to shoot for a couple of months, you're not going to be here and I am.

24:03So I think maybe that's how you would have that conversation. At least that's probably what I would have, how I would do it. And I think also thinking through, because I don't know if it was discussed ahead of time when you're talking to, you know, a Kim Kardashian, like, is it just we want to use your name or are you going to be actively promoting it on a daily, weekly, monthly, yearly basis? Or is it just you got some association and it's kind of more just a brand deal. I'm guessing that factors into it as well, right? Absolutely. Absolutely. So it's kind of tough because I've seen contracts done for celebrities that say, you know what, every month you have to tweet five times.

24:44You have to post 20 messages on Instagram or whatnot. That tends not to work. Seriously. And it's kind of like if you were forcing any partner, like this is what you have to do, right? It's a partnership. A partnership is a relationship. It's not transactional. Yeah. And if you can't see eye to eye with with a potential partner, then you shouldn't be their potential. You shouldn't be partners. Right. And so that's that's what I see. It's you're either in it or you're not. Right. Tell me, tell me, tell me how much you want to work on this. And let's go from there. How about team non-celebrity, the other team members?

25:21How do you think about bringing them in? Do you offer equity, stock option plans, those kinds of things? Not in a bigger company like Honest has become, but like when you're kind of getting started out. Yeah, I think that's one of the greatest tools any entrepreneur can have are stock options. So at all three companies, I think every employee has stock options. Okay. And of course, the earliest employees get bigger stock option grants. But you use them, you know, as you start growing, the grants become smaller and smaller. You have a VC fund or a startup, an incubator. What is BAM Ventures? Yeah, yeah.

26:03So I've been angel investing for a long time. So for over 10 years, probably invested in about 70 companies in the Los Angeles area. and so just about two years ago I finally put some structure to all my crazy investments all your harebrained schemes you brought all your crazy ideas under one roof exactly what could go wrong so we kind of form I have a partner named Richard John and we formed BAM Ventures and basically we're investing out of that now so we love backing entrepreneurs especially in Los Angeles although we invest in other cities as well What are you looking at today? I mean, you're, so most VCs and angel investors, they have money, but they don't know what the heck's going on.

26:52And so there is, and I know I've got, and I say this to my friends, like really good friends that are out there. And they ask me, like, what should I be investing? And I was like, dude, that's not good, man. This is like your job.

27:07You're doing it. You're a practitioner, right? You're not someone who made it, now you're done. Like you're working, you're living this stuff, had multiple, you know, startups, you know, yourself, many of them exiting. So I would assume that you would know more than at least a lot of the people that I know who are in the VC and angel space. I know some pretty smart big guys. But so what are you looking at? What has you excited? What are the things that you invested in a company recently? But what more kind of more things that you know? Are you looking at other things? What should we be doing? I mean, if we were going to model ourselves, because a lot of the folks here, they're adding an e-com component to it or they're launching or they're thinking about pivoting.