Dee Murthy - How a Podcast Host Raised $95M

24:24Whatever it is, globally, we have filtered out all these different options where different buyers can potentially have access to that product. And is there internal account executives when there's kind of, you know, 20 ,000, 50 ,000, 100 ,000 units? Are they in cahoots and talking to the buyer of TJ Maxx or is this all online? Yeah, so it's very much more of a where you sit in the stack. So like our large column enterprise customers, they have an account manager that is walking them through deals on the platform every week. And we don't need to say the name of the brand, but from a context perspective, like how many units per quarter are they moving?

25:04A buyer or a seller? A seller. So you're a brand. Our biggest seller this year has sold over 2 million units with us. Oh my Jesus. Yeah. That's a single brand. the big thing that i want to really talk about is i feel like nobody has a damn clue about how big tj ross and burlington people now know it because of us especially the investment community when i was pitching the seed round um to a handful of investors in silicon valley they'd be like oh i didn't really know people shopped at tj maxx i was like what what the fuck are you talking about? And I'm like, you know, it's a$90 billion company.

25:49And they're like, really? This was whatever, three years ago, I think it's$150 billion now. They're opening stores. They're not closing stores. No, their business is on fire. By the way, so is Burlington. So is Ross. Every single discounter is absolutely on fire. And people did not realize that most people in America shop discount. They don't shop full price. I think people balance the high and the low too. I mean, there's upper middle class or even high class people that they might have a couple of nice pieces, but they're also buying their kids who grow out of stuff every six months. Yeah, exactly.

26:21It's like they have great brands in these retailers. Great brands. Like your favorite brand is probably selling at these places. Nordstrom Rack, Saks Off Fifth. There's unlimited places to move this product. But the secret to why Ghost is so successful is that we aggregated a bunch of small businesses that never had access to this supply. And the aggregate of those buyers is bigger than TJ Maxx, bigger than Burlington, bigger than Ross. Can you give us just a name? I'm just curious. What type of retail is that? Like a boutique retailer that has four or five locations? Imagine a power seller on Amazon, a power seller on StockX.

27:01So you're empowering these. It's almost like you can have a cool store and if you're a buyer, you can't get access to these brands, but now you're allowing anybody to get access to these brands. Yeah. For example, if you were to go and set up a beauty store somewhere in LA, it is so painfully hard to get an account with any of these brands. So you're going to grind it out and keep getting accounts and accounts and accounts. Or I could just come to Ghost. We have all the brands. We have all the supply. And if you fall into the criteria of the brand or the retailer that's liquidating it, you could get access to it.

27:38And so that democratization of access to supply. You need to highlight these people. I'm sure there's an 18-year-old kid. I have the best story. This is last November or October. People sign up every day. We vet them. We approve them. Two young guys started placing small orders. They're students at the University of Michigan. They place like a$50 ,000 order. Like, great. Good, nice, said order. Then they drop a quarter million dollar order. And I was like, I need to meet these guys because quarter million, it could be a red flag, could be fraud. I want to know what's going on. They're literally students at the University of Michigan and they have a resale business.

28:19They sell on all these different websites and marketplaces. Etsy, Amazon, stuff like that. Everything, wherever. And the most interesting thing about our business, Our buyer is not like, I have to buy sneakers or I have to buy beauty. What is the best arbitrage in the world? That's what I want to buy. So we sell everything because of that. Because if there's sudden rains in California, there's probably someone who will buy umbrellas and flip them because they need umbrellas in California. COVID mask season. I know how that is. Yeah, exactly. So it's literally like an opportunistic platform. So if you're a smart entrepreneurial person, You could be figuring out these arbitrages where some seller has mispriced something, but for your market, it's more valuable.

29:04And so our goal is to kind of pull the data and make it so that we're going to start sharing data with you to know that this item or this category is trending on these sites. You should buy this. I think also not enough people, and I want to talk about this and give people value here, is they don't understand kind of the hidden fees and structure of how it is to work with retail. You're talking about being able to buy a product, you buy it and you get it. You go into mall retailers, the Tillys, the Zumis, you go upstairs to Bloomingdale's, your Nordstrom's. There's stuff like net terms. There's, you know, you have to put marketing against it.

29:41I don't think people understand and know that to be able to just sell something and how quick do you get the money? If you're a seller? Yeah. I mean, yeah, we pay like on average a 30 % deposit when you pick up. Immediately. And then the rest you get when the goods are counted by the person who bought them. And as long as you shipped accurately, you get the rest right away. It could be as soon as seven days. Looking at like the Ross and the Burlington, the off price versus like, let's just say LVMH. Yeah. LVMH over the last six months, 12 months, they're down. And for contextually, for people listening, LVMH is, I would just say all the high fashion brands rolled up, probably one of the biggest - It's the biggest conglomerate of luxury brands in the world.

30:20Where do you see retail going over the next like five, 10 years? So it's a really exciting time for retail because a huge shift is happening. Timu and Sheen changed American retail. They're two of the fastest growing companies ever. Timu's not even two years old. I don't even know how those products are real. The prices are so low. And by the way, both those companies are profitable. They don't lose money. Wow. And so what would people need to realize is those websites have created a lot of opportunity. So Timu and Shein are marketplaces. Anyone can sell on those marketplaces. I didn't even know that.

30:59Yeah. And so it started off with Chinese factories. That's what they were aggregating at first. They were getting, hey, you make t-shirts, right? Why don't you capture a direct-to-consumer margin? And they're basically just white labeling. They don't really have any brand. There's no brand. Yeah. And so they basically started creating this accessibility to buyers for all these factories. because I remember 10 years ago, my production manager at 5-4, he's like, the day will be over when Chinese factories sell direct to American consumers. And I was like, that day is here. And I go, what's funny was a few years later, Sheen launched and we bought something just to see where was it coming from.

31:41And I remember the day it showed up at our office and it was from China, direct to consumer. I'm like, oh my God, this is fucked. and it came in like 10 days, which, you know, it sounds like a long time, but like direct from a factory to someone's home in 10 days. And so I was like, this is the future. So like retail is changing. Team Machine, these are gonna be power players in this new ecosystem. If you're a brand, you need to be everywhere. This is the biggest mistake Nike made. Nike said, oh, we're gonna shift from this aggressive wholesale strategy to a direct-to-consumer strategy. So they actually closed a lot of accounts.

32:24I heard about this. And they got out of Macy's. They got out of DSW and these types of places saying it's a bad look for the brand. They're like, people will come to our site and people will come to our stores. They didn't. We don't know where every consumer in the world is. So you need to be distributed everywhere to capture that. So Nike doesn't work with Amazon, but Amazon products are constantly, Amazon sells Nike products. Like, so I think like at the end of the day, you as a brand has to decide like, if distribution is important, which it is, you have to sell everywhere. At scale, I feel like it used to come down to you win on price or brands.

33:07And now I think the new meta is you only can win if it's brand with distribution. If you want to have scale, like you can't do that much just direct. Yeah, and the problem is from a direct-to-consumer side, there's a limit that you could do because customer acquisition costs are through the roof, right? So that, you know - That's a sore subject. I don't want to go there. But yeah, that iOS update in 2021, it took a lot of people down. Yeah, it took a lot of people down. And today it's like a little bit more normalized, but I don't think you could build a billion-dollar business easily direct-to-consumer today.

33:43I think it's really fucking hard. but I think you can build a billion dollar business. If you have your own digital native website, you sell on Amazon, you sell on maybe Sheen. You also have wholesale and you're selling retailers, full price and discount. These mega brands, the Ralph Lauren's, the Michael Kors of the world, Tommy Hilfiger, they sell everywhere. They're in every channel. They're at Costco. They're at Sam's club. They're at, you know, Amazon. You just have to be everywhere. One of the most upsetting days with Iconic was when we got into Costco's roadshow online. And I was just thinking grand thoughts in my head about all my buddies' companies doing 50,$60 million in Costco alone to later find out that Costco doesn't even have art in stores.

34:27So now looking back, like we'll get into, you know, what are the non-negotiables when starting a company? But like, you have to have big TAM and you have to be able to go everywhere. Yeah. Or else you're at the mercy of how much you could just scale on these single distribution channels. Exactly. And I think it's just people don't do that homework. early on because like, you know, you need that experience. You need that experience. Exactly. Cause like most people encourage people to start businesses, which I think is great, but like very few people encourage people to do like a feasibility study and say, what is the, the, the addressable market?

35:01Who are the customers? Is this a white space opportunity? People just start shit all day. I'm going to start a clothing brand. Okay, fine. I wouldn't recommend it, but in what industry, in what category, in what market, what's your distribution? No one thinks about that stuff. You just start shit. We started Iconic accidentally. And now, um, you know, this podcast is going to be more than the podcast. It's going to be a platform. And I'm just being so methodical and just checking off all of those non-negotiable boxes. Uh, I want to tie a bow on, uh, on ghosts and then really, really talk about this money raised?

35:33Yes. You raised$5 million,$7 million,$13 million,$30 million,$40 million, a total of$95 million. So we're going to get to that. For Ghost, the next five to 10 years, what does it look like? If it plays out the way that I obviously want it to play out, imagine you have an idea to make something. Where do you go today? You go to Alibaba. You can just type on Alibaba and say, hey, I want to make wallets. I want to start a wallet brand. And you can connect to a Chinese factory instantly. And that factory will make you a sample. You'll get a sample in a few weeks. You approve it. Payments is handled.

36:16It's custom cleared. It's freight booked. And you have wallets in your house to sell on the internet. When you want to sell on the internet, everyone just goes to Shopify now. They won. They're the market leader, right? And so with the flip of a switch, you can now sell to billions of people on the internet. Where we want to fill the gap is the next step. You've had success as a digitally native brand. Now you want global distribution. Flip the switch. You cannot flip a switch today and have global distribution, whether it's brick and mortar retailers, whether it's Amazon, whether it's international retailers.

36:51So the next five years, we're going to build the infrastructure for anyone to just plug into our ecosystem and launch their brand globally. That's the vision of Ghost. Very clear, clean vision. I see it. I could get behind that. So I want to go into each one of these rounds, starting with the seed. And this is, for me, I've technically only raised seed or series A a couple million dollars. I have no idea what it looks like past then. So I want to go into each round and understand and know where was the company at? How big was the team? Who was on the team? What are the key KPIs? and just kind of just walk through the strategy.

37:29So let's start with Seed. You have this idea because you see the whole of the market with your past companies. It's you and your business partner. I'll tell you the story of how it actually happened. Tell us everything. In the fall of 21, I was very frustrated. My business was struggling. I had two kids. I'm trying to figure out what to do. Like, do I continue putting my time and energy into this? Do I try something new? I had a serious conversation about my wife getting a job. I was like, maybe I should get a job. I can't see that, bro. I just can't see that. At that time, I was so bummed out.

38:07I don't want to say the word depressed, but I was bummed out. I actually lacked confidence. That was a better framing of it. I wasn't depressed. I lacked confidence. Because COVID really sucked the life out of our business. And so I lacked confidence that I could do anything well anymore. I was like, maybe I'm not meant to do this anymore. Why don't I just get a job? So fall of 21, I'm in New York for Fashion Week. And I talked about the podcast I was going to New York. And a listener of the podcast goes, hey, and I do this all the time. People DM me. I'm like, hey, if you're ever at five minutes or I'd love to meet up.

38:42So a guy, he's like, I'm a serial tech founder. I live in Soho. And I'm like, I'm actually in Soho right now. You want to come meet me? He's like, I'm like, I have an hour. He's like, cool, comes and meets me. He's like, why are you in New York? I'm like, oh, Fashion Week. He's like, what else are you doing? I don't even know why I said this, but I said, I'm starting something new. I just know, because he was an entrepreneur, maybe I just felt inclined to say that. He's like, oh, what are you working on? And we've been toying with this idea of something in excess inventory, but we didn't really have anything flushed out.

39:14And I said, oh, something in excess inventory. And he's like, oh, you're fundraising. I'm like, no, no, no, I'm not fundraising. He's like, then why are you in New York? I'm like, for Fashion Week. And he's like, who are you meeting in New York? I'm like, nobody. I'm literally, he's like, and he goes, are you meeting Nahal from ENIAC? I'm like, actually, I'm going for a run with him on Friday. And he goes, we're talking, we're talking. I'm not even joking. 10 minutes later, I get three text messages. Are you fundraising in New York? And you didn't call me? And I go, hey, hey, dude. And this is from a random podcast listener?

39:45Yes, who's now a very close friend and wrote one of the first checks into the business. And he goes, I told a few people you're fundraising. and I was like, why? He's like, you're not going to do it. I'm going to kickstart you. And I take one meeting the next day. He, cause one of, one of the guys I'm friends with, he goes, I took, I'm going to see you Friday anyways. It's Tuesday, whatever. And he's like, no, no, no, no, no. If you're fundraising tomorrow morning, breakfast, meet me, meet me in meatpacking. I'm like, okay. So at this point, did you have a plan or just knew that you're in a guest space.

40:20I had nothing, not a deck, not a name, nothing. I go to breakfast and he's like, what are you doing? And I go, I want to do something new. He's like, what about the last business? He's like, I think I'm ready to move on and I'll transition out of like full time, but I really need to do something new. In what space? I go, I think excess inventory. He's like, all right, I'm in. And I go, what do you mean? He's like, I'm in, we'll back you. I go, what does that mean? And he's like, how much are you raising? I go, 5 million. He goes, we're in for two. I'm like, that's it? He's like, I want you to meet all the other partners in the next 24 hours.

41:04Can you do it tomorrow? So I called Josh. Josh is my co-founder in Ghost. He worked for me. He ran our brand new Republic. It's our footwear brand. Sharp guy. Very smart guy. and I go, Josh, if I do something new, what do you want to do? Do you want to stay here? Do you want to come? He's like, no, I want to come. Did you tell him you had 2 million committed before you asked that or what? No, no, no, I didn't tell him that. I got to really know if he's down for the cause. I go, I think we got money. And he's like, for what? I'm like, I don't know, but we need to do a deck. And he's like, by when?

41:38I'm like, by tomorrow morning. So he's sitting at the office, putting together a deck. And we were like, should we do excess inventory? Should it be direct to consumer? So we actually picked originally a direct to consumer concept for excess inventory, kind of like disappearing flash sales. And so he puts together the deck. I go pitch it to the partners. And they're like, look, honestly, we don't know if this is a good idea or not, but we're betting on you, straight up. Wow. Wow. And I had chills because I was like so down and out where I was like, there's no one, who's going to give me money?

42:18I literally did not think I could raise money if I started a podcast. Yeah. Wow. And so 24 hours later, they go to investment committee. We get the commitment. Within a week, we had raised 2 million. We wanted to raise five. So I started talking to other investors and people in Silicon Valley, broadly speaking, did not get it because they don't understand this market. So we focused on funds in New York because they are at the intersection of tech and retail. And so we had a lot of good interest from New York funds. And when you mean good interest, was this introductions? Are you going on crunch base?

42:52Like how do people out there find VCs? Yeah. So we were very lucky. The podcast listener, his name's Kevin Weatherman, by the way. Good thing we shouted him out, Kevin Weatherman. shout out kevin weatherman has a has a lot to do with the origin stories of ghost kevin tweeted out does anyone want to back a founder with 20 years experience in the retail doing something intact blah blah blah people dm'd him and said yes yes i want to meet him i want to meet him big audience or not really no just good you know just medium yeah just like a thought leader in new york city as a founder and a bunch of vcs followed him and got dms he goes hey you you have three more meetings.

43:35Gave me the intros. I speak to a young woman. She's like, our founder wants to talk to you. Founder turns out, go to business school with Josh at Columbia. Wow. And he's like, who's your co-founder? I go, Josh Kaplan. And he's like, what? Josh Kaplan from Columbia Business School? I go, yes. He's like, I know him. Josh was on his honeymoon at this time. So I go, Josh, you need to leave. Yeah. No, what's funny is every fundraise, Josh is out of town. He always has weddings. He's at that age where everyone's getting married. So he's always at weddings. And I go, every time we fundraise, you need to be at a wedding because it's really good luck.

44:13So I meet Rick Zullo from Equal Ventures. He goes, we had a great first conversation. He's like, you know, we're really interested. We want to do this. I'm like, okay, cool. We're going to have a couple other meetings. He's like, no, no, no. I need to know right now. And I go, I need to have this call. He goes, what will it take? I'm like, come meet me. He's like, great. I'll be there tonight. Hopped on a plane. I was like, meet me at the nice guy in La Cienega. Sat down with me. We drank like for seven hours tequila. And he had a thesis in our space for years. He thought it was ripe for disruption, but never had met founders that knew the space and that would use technology to actually make it more efficient.

44:54So it was like God sent. And it turns out to be Josh's classmate from Columbia Business School. And so that was$4 million. He wrote a$2 million check. and the last million was all friends. I literally - And at that point, if you raised four or five, it's almost like a fear of loss. And check this out. I went to my friends, not asking them. I knew I could have raised the money. I could have gotten the money. At that point, we were oversubscribed, but I wanted my friend's money. Not for any other reason for the pressure because I'm not losing my friend's money. I love that. I was like, I need you guys.

45:30I'm like, no pressure, but would you guys be interested in write a$25 ,000 check if you can? I know people are all in different situations. Everyone said yes. I love that, man. And everyone's like, no, we're backing you. Let's do this. And so that was like, that was like, felt really good. Cause you just don't know how people view you. You know, especially for me, I've been doing this for 20. I started a new business at 41 years old, 41. Dude, when I was younger, 41 was dead, Dead to me. I'm not too far away from there. I was going to ask you at the end, horse or jockey, I think it's pretty clear that they're betting on the jockeys.

46:08They're betting on you guys. Yes. I have also something that always sticks in my head, and I'm basically rounding the corner for this, and it's where you are right now, is there's something to be said about that second-time founder that didn't hit a home run on the first. Yeah. Young enough, has the energy, smart enough, angry chip on their shoulder. They're out to kill. I've hired so many founders That work for us And people are like Why did you hire them? I was like Do you see the soul Sucked out of this guy? But you have to also understand too I know without knowing Because you're a competitive guy With a big vision Yeah Like you think 5 '4 I'm not going to say Was a failure Yeah But in your head It wasn't good enough The outside optics 99.999 % Yeah Huge success Which you were Yeah Let me tell you that You were Thank you But you had a bigger vision And I think that sometimes, quite frankly, for me, I forget that it was just as much a learning lesson and you're using that to fuel, you know, whatever's next.

47:07And, you know, it was really, really scary for me to move on. I was in my comfort zone doing that. And people say, oh, do you regret not leaving earlier? I was like, no, I had to go through that to do what I'm doing today. I would not be at the position where I'm at ghost if I did not have that full 20-year experience. I think experience is one of the most underestimated variables in business. I read a stat. First-time venture founders, 43 years old. So you were early. You were 41 as early. So I Googled that. You serious? When I went to have my first meeting, that breakfast that morning, I said, what is the average age of a venture founder?

47:47And I saw that stat. I was like, I got this. I look because I was like I felt so old you have young energy bro you're good I feel like I'm an age graceful I'm gonna be like a young 50s yeah yeah now like I feel like I'm I was out last night you know I'm having fun like I'm enjoying my life so you took venture money yeah you know four to five million was venture money um something I listened to one of your podcasts and I was very intrigued by this because I know nothing about it when you're raising money and it's framed from venture, you need to have a venture outcome. And that's completely different than a lifestyle business or a business that someone comes in at a$10 million valuation and then you sell for 40.

48:26That's a huge win. So I want to rewind to the seed and then we'll keep going with the venture. So you have the$5 million. It's you, your business partner. What happens next? We have to incorporate the company because we couldn't receive the money because we'd have a bank account. That happened with me with Iconic too. the first$3 million, me and Jeff technically weren't business partners because we were using my personal LLC's EIN number and we just kept going and going and going really fast. That's funny. So we finally got everything incorporated, got the money in like end of November, I think of 2021.

49:05And our early stage investors were incredibly important in helping us frame what is today Ghost. We were kind of obsessed with building something direct to consumer because that's what we knew. And Rick Zula at Equal Ventures was like, why do you care where it goes? I'm like, what do you mean? That's going back to the TAM. He wants it to go everywhere. Yeah, and he's like, don't you know all these people? Don't you know all these retailers? I go, yeah. He's like, sell it to everyone. I was like, fuck, that's a good idea. So instantly pivoted and said, we're a B2B marketplace. This is what we're going to do.

49:39But here's the thing. We don't have any tech yet. We don't have anything built out. Well, I mean, so you're technically like a jobber then. I mean, it's - Yeah. And by the way - You are what everything used to be. Yes. So you're still potentially ahead. Yeah. And what I said was, while Josh focuses on building - By the way, guys, a jobber are like basically people from like the Garmento district, which is like the fashion district. Yeah. And they just buy anything and sell it to flea markets and they sell it. Yeah. They're the best hustlers in the world. The discreet element of Ghost is everything.

50:06Exactly. And so what we decided was, Josh, you figured out how to build out the product. I'm just going to start selling shit. So I first, I just started calling brands that are my friend's brands. And I said, hey, do you have anything? Because yeah, how much you got? 3 ,000 pieces of what? T-shirt? Cool. Can I sell it for you? And he's like, cool. I called TJ Maxx, Burlington Ross. Hey, remember me? Can I get, I have this T-shirt. And I just started flipping shit just every day. And then all of a sudden we started flipping millions of dollars of stuff within months. Months. Months. because like I wasn't waiting for the product, meaning the digital product to be ready.

50:44Because you were doing what's being done in the market at that time anyway. And so what we had at that point was more like service market fit. We knew that the market needed this. And then word got out that like these guys wouldn't, it was just basically, we hired one person at that time, then a second person, maybe four people. And we were doing, you know, we had a million dollar month within four months of starting. and you guys make uh your revenue off of just taking a percentage yeah we take a take rate and it varies based on a lot of things and the take rate is on the seller not the buyer obviously yeah but i would imagine those buyers love you yes at this point yes yes and so we start our one of our investors goes you did this in like the first four months it's like yeah he's like you should raise again like what do you mean this is a horrible market you guys remember spring of 22, VC was dead.

51:34Dead. At the bottom of all bodies. It wouldn't spit on you, let alone give you money. God bless you guys if you're out there and you sold your company in 2017, 18, 19, or 20. Passed there. I'm sorry. Yeah, exactly. I was like, I don't know if we should fundraise. We have money. We're good. He's like, we have momentum. He's like, nobody's growing like this right now. We got advised to do a process and let's go do it. We put together a deck. We enhanced our vision. And we said, on this day, we're going to start taking fundraising meetings. And we could not believe how many people took a meeting with us.

52:09Like 30 firms came, said, we want to meet. Why? I think at that point, all of these VC-backed businesses were not growing anymore. And VCs need growth. They're betting on growth. If you cannot 100x, 10x, 50x, there's no point. They're okay being wrong 99 out of 100. That one, if it's SpaceX, it doesn't fucking matter. What would you say the shelf life is and the expected return for a W for venture? Three years, five years, 10 years, 10X, 20X? Yeah, I mean, I think like - The rule of thumb. Yeah, I think what I've seen just being an angel investor in my previous life, it takes about 10 years from the seed round on average.

52:59And what would you say success looks like? This is just a completely subjective answer, I guess. Oh, you say 10X? 10X, yeah. 10 years, 10X? None of them are underwriting that. They're underwriting 100X, all of them. They have to believe this is a 100X. But I mean, obviously in my eyes, 10X is great, but they're not viewing it like that. So you're going from C to round to series A. What is that core KPI that you pointed to? Was it just the revenue that you pointed to and the growth? Growth, and then people finally understood the opportunity. So I don't know if you've heard the clip of the Shopify founder where he said that when they were raising money for Shopify, he said there's only 20 ,000 websites in the world that were selling, I think total at that time.

53:49And they're like, okay, so what's the TAM? 20 ,000 websites? No, the TAM is everyone owns a business. Yes, and I think that what the TAM was is not underwritten for was that everyone was going to start a business because it was so easy to sell on the internet. And that thanks to Shopify. When you knew it was so easy to sell something on the internet, everyone just started starting businesses. And so you can't think of what the TAM is. And so when people started conceptualizing like, whoa, what if this is global? What if they do more than apparel? What if they do footwear and home and beauty and electronics?

54:24So people started getting excited about like the TAM, frankly. That's really what got people excited. And they saw the numbers. And then our customers, being in the industry, we had crazy, we never share who we work with, but our logos are nuts. People are like, you work with that brand? And at this point, were you just domestic and just apparel and you were selling on the international and the more product mediums? All we were doing is selling - Which that's basically limitless that you could sell any product. Yes. It's limitless. Limitless. I mean, we sold generators yesterday. Wow. So they come in in the Series A.

54:58One thing that I did find interesting, I looked at the list of your investors. A lot of people came back for seconds and thirds. Everyone has. Yeah. Important is it to have good investors, do you think? It's everything. It's not only important to have good investors. We have investors that are good people. You know how they invested in us because we were the right people? We invested in them because we thought they were really genuinely good people. Like I go, when I go to New York. It's a rare opportunity that you guys get to pick who comes to you. Yeah. Very. And you just have to feel the vibe.

55:32Like there were so many times in my previous business where I worked with people just because I thought it was such a good opportunity and I got fucked. And so now I'm so like, if the vibe's not right. Can't make a good deal with a bad person. You know that quote. Yeah. And it's so true. And I think we got very lucky with all good people around the table that I trust that are now my friends. And that has given us enormous, I know, you know, we're not, every month is not perfect. We fuck up all the time. We're, you know, we're, we're a growing company. Yeah. And they're so understanding. I can't even tell you, like, we'll just royally fuck up.

56:11And they're still like, they'll give us the lesson on what we should have learned and give us the freedom to continue to make mistakes, which is like very special. You've said no to a lot of people too. What would you say the red flags are when looking for investors?

56:27If they don't understand what you're doing, it's really tough because they may be - Simple but poetic. I mean, they just need to fundamentally understand and kind of leave you alone in a sense. Yeah, because like if you don't understand, because we're like a sexy, cool company. So you just want to invest in us to say you invest in us, but that doesn't mean you get what we're doing. And I think that's dangerous to take money from people that don't know what you're doing. And you want people to have like, you know, be subject matter expertise where they can come in and actually give you help. I value, yeah.

56:57Like, you know, it's interesting. So our series A was led by Union Square Ventures. It's probably one of the most successful funds ever. Of course. And Fred Wilson, who's a very famous person in investing, wrote a blog post in January of 22. my brother sends it to me and goes, you should read this. And in the blog post, he wrote, if I looked under the hood of every single company I invested in, I would never have gotten there. And he was referencing Coinbase and Twitter as one of the early investments where he believed in the opportunity and the founder and said, they will figure it out. and when we pitched Union Square Ventures, it was still like kind of COVID era.

57:48So people were not in the office and it was spring of 22. We had 40 people on Zoom. It was the worst pitch I've ever had in my life. Fred Wilson eviscerated us in the, before I even started pitching, he started asking questions. The call ended and Josh and I looked at each other. No chance they're investing. and they were the first with the term sheet. And the reason why is like, this is why like good investors or they're great investors are great as they knew we didn't have it all figured out, but we were honest. You know, we're very transparent in the way we think. And I think they just trusted us and weren't so concerned if every single number was perfect at that time.

58:39and that really created a lot of momentum in the business. I want to dive back into the money raise, but I want to just take a quick detour. What would you say the key things that you would look for if you were starting a business today? I think two of them you touched on, which is TAM and then ultimately the jockey. What would you say a couple other things are that are key? I think it's, can the jockey actually execute it, right? So a lot of people want, you want to go build a, you know, AI robotics company. What do you know about that? You know, do you have relationships in the industry? Do you have experience in it?

59:09Because a lot of people want to do stuff they have no background in, which I'm not against doing that, but that is even more of an uphill climb. So if you spent your career doing something or learning something, go do something in that space because they'll back you if you're an expert in some space, right? Like there's a lot of people who just get money like me. I got money because of my experience, not because of my idea. I didn't even have an idea, frankly. Everyone always laughs at my early investors like, oh, I got bamboozled. This is not what I invested in. I'm sure they're happy. So subject matter expertise, the jockey, the TAM.

59:43I would say for me, a huge one too is just LTV. I've seen so many businesses that they need to win on the first sale because they're not winning on the back end. I think you could get away with not knowing that in your seed, in your ideation phase. I think TAM is so underappreciated. I appreciate it so much more now. Me too. Like for example, I have been - I didn't know what the word Kager meant. Like as far as - Yeah, I didn't even know what TAM meant. Yeah. TAM guys is total addressable market. Yeah. And finding, I think finding a niche within the TAM is, you know, as you mentioned, same thing with the podcast is a good way to start.

1:00:20Yeah. I mean, dude, on the LTV for me with your business, it's so crazy because you can't even, I mean, now you're probably starting to be able to project, but - Yeah. I mean, these people are going to stay with you forever. Ever. Forever. Sellers and buyers. the buyers are a bit harder the sell that i feel like they're just always going to come to you yeah the seller so if you're discreet and quick and easy yeah i do think you could probably button up both sides completely but i mean it's an absolute no-brainer um what else give me give me one more and i think the the piece on the tam like for example i'll give you my experience when I started my business, I started a men's brand.

1:01:01The tam for men's fashion, if I just went one inch left and did women's, I might not have started Ghost. I may have had a billion dollar brand. The amount of effort and time I put into a men's wear brand, fucking men's. So for guys listening, that means you have to put a filter over that, how saturated it is. Yes. As well too. Everyone is trying to. But it's also like, just do the math. men don't buy clothes like women they just don't the consumption on the women i'm wearing a fucking two-year-old shirt i may never buy clothes again i'm a horrible customer to have and so it's like i think you people don't recognize it they do it because i'm a man i want to dress every guy i want to i want to create a brand because i want to dress like myself i was like well you bought clothes so you could just continue doing that go for the best opportunity right like people don't they want to do what they think but they don't actually go after the best opportunity the tamp piece like yes clothing as a tam is huge but if you do menswear streetwear at a high price there's a cap but you know how many kids i know that have started streetwear brands and then they've done such an amazing job of marketing and design and production but the tam is not big enough yeah then it's understanding what's the model behind it too is it direct to consumer is it subscription yeah is it behold to retail going up or down something could happen like COVID.

1:02:25So I want to dive back into the money race. So you got the seed, you got the series A, you guys are flying high with the grand vision, extending international, extending into more product mediums. The merchandising volume is obviously going up. Yeah. Are you profitable yet? Or do you guys need to be profitable yet? I don't need to. We have the cash to afford ourselves. We've always been very disciplined. For the size of business and growth we have, we are very conservative with spend. but it is not a requirement to be profitable. It is a requirement to have high growth, healthy gross margins, and a healthy, generally directionally healthy business.

1:03:06But if we lose money at the end of the year, like no one's going to care. So what's the expectation for when you turn the corner on that? I think the expectation is you have to have all the economics of your business showing that you can be profitable if you want to be. So you got to remember, remember Amazon was as a public company, I think they lost money for a decade. Yeah. But everyone who believed in Amazon knew that they could be. So it's about market share, quite frankly. This is a winner take all market, right? If we win the market, but we lose a bazillion dollars doing it, then the company is so valuable that there will be a monetization time where we can change the levers in the business to make it profitable.

1:03:57We saw this with Amazon. We saw this with Google. You know, like Google and Facebook actually were profitable very, very early. Uber just had their first fully profitable year. Okay, so these guys are coming back. They're investing, they're investing. I personally have bugged out in the past about understanding and knowing this is my daily burn. I have X amount of time left for runway. I'm going to run out of money. So are you guys operating under the notion that you are going to run out of money next time and you need to raise and be in cahoots with your investors to raise before them? So fundraising for us was always done in a position of strength.

1:04:33We never needed money when we were fundraised. And people knew that. And that was our alpha. That if we were going to have to take money, take dilution, you're going to have to up the ante on valuation and terms so that they're favorable. and that's a important part of fundraising is the timing of when you do it. If you do it when you're red hot, you should go fundraise. Not when you have one bad month. Momentum and leverage. Everything. Momentum's everything. And then the other bigger story is we felt that raising money and we've been very discreet about this business. Like this is the most information I've ever shared about Ghost.

1:05:15Like I do not - Hey, love to see it. I do not share information on the business. By the way, too, I didn't even know you were working on this. No one does. People are like, oh, you're still doing 5-4. To this day, so many friends do not know what I do for a living. I never post about it. They're going to wake up one day and no. Yeah, they'll know at the IPO. Yeah. But I think it was very important for me that when we were fundraising, we also took into consideration raising capital was also a sign. hey, stay the fuck out of our way. We're going to raise enough money that you can't catch up. And the amount of money you'll have to raise, it's a tactic that we had.

1:05:58It was important that people saw the quantum of capital that we raised in a space where no one was paying attention. You guys have clear first mover advantage, right? Yeah, we have first mover. We have the best investors in the space, and they're not going to invest anyone that's going to compete with us. so you know it's it was very important that we we we found people that were aligned with our vision and then look there's a lot of copycats now a lot globally every week someone tells me oh we're the ghost of you know saudi arabia whatever like people are doing stuff off our backs which is fine which is great it's it's it shows that it's being accepted but i think fundraising is very important to build awareness that hey these guys are doing something that people are obviously resonating with.

1:06:45And we always did it at a time that we didn't need the cash. Makes sense. You mentioned IPO. It's a big word. I heard through the grapevine that you told your wife when you started the company that you'd see her in five to 10 years. Yes. How big can Ghost be? I would say the best comp for our business is Alibaba, which is like... Say it slow. How big is Alibaba? It's a very undervalued business at 250 billion. It's very undervalued because they're a Chinese company. If it was an American company, it'd be worth a trillion. And contextually, how long do you think it would take you to get to somewhere like there?

1:07:2510 years. So you're looking at 15 years. Have you had that conversation with your wife yet? So I think part of the biggest thing, like, you know, when you're in a relationship or you're married, your significant other gives you a leash if they see the results. We get into relationship advice here too. I like this. Keep going. I'm soon to be engaged. I need to hear this. Yeah. It's just like, she's like, I don't mind that you're gone. I don't mind that you're working hard. I don't mind that you're missing things, but put forth energy into something that actually has results. Because your last thing, you know, at the end there, I was killing myself, but the results weren't there.

1:08:08There's clarity in the path now. Yeah. And so now she sees like, there's, there's a path here. So like when I jokingly said five years, I mean, it's going to get extended. It's not five, but like, but because I have, I have a little, like even freedom today, we're like, I get to do this podcast today and then pick up my kids to go play football. Like that's what we're doing. And you clearly do need to be doing podcasts on your own podcast because that's how you got the original money to even start this thing is through the Exactly. So like, you know, obviously like from a relationship, you have to have the right partner in business and the right partner in life.

1:08:43Otherwise you can't do all this. It's not possible. And so I have a very understanding wife that, I mean, I'm gone. Shout out wifey. Yeah. Big shout out. And like, I'm gone every week on a plane. I take a Sunday night red eye almost every week. I'm not there when the kids wake up to go to school most weeks. And so she's, has a lot of, you know, on her plate. But when I'm present, I'm like, oh, the FUD dad comes to plays and whatever. And she has to deal with all the hard shit. So. The support system and the people, people is everything. Yeah. How many employees you guys have now? We've got a hundred.

1:09:19I can't even imagine that. Yeah. I want to jump into real quick hiring. Yeah. I feel like a hundred is significantly more than you had in your past companies. No, 5-4 got to 150. Wow. Yeah. because it was 5 '4", Reckless. It was a lot of brands. So then you've seen a lot. Yeah. What would you say are the biggest tips you'd say when hiring? Man, I've learned a lot with hiring. I think the biggest thing is you actually have to have a pretty rigorous interview process and identify the personalities and traits and the type of people you want to work with. And it's not just what's on their resume. It's the type of person they are Are they a cultural fit?

1:10:02Are you a player coach? Are you a utility person? Can you pack the warehouse? And can you do a sales call, right? Like, so we were very fortunate to find people that were very malleable in what they did with us and were just down for the cause. That's everything, especially in the beginning. And I think, you know, and I'm not meaning this in an egotistical way at all, but like these people wanted to work with me and they were like proud to work with me. and I think that showed in their effort. Like they were excited about working at Ghost and as you get bigger, it's really hard to keep that. You know, that's something that we're talking about a lot is that like Josh and I hired everyone basically to this point.

1:10:44I feel like hiring is one of the few things that as you scale, like you need to still be heavily involved in that. I start sourcing that out to like an HR director, you're going to lose the pulse of the culture. I think I agree. And I think it's so important that you meet and you constantly refine the type of people you're looking for, what you're looking for. We do performance reviews every six months. It's a great check-in. One of the things that we talk about in our company is embracing radical candor and giving feedback right away. So I'll just give you an example. I saw an email that was written to one of the top luxury brands in the world today in my office.

1:11:24I walked over and I said, that is not the way you write that email. And in the past, I would have just, whatever, I'll deal with it later. But literally instant, instant feedback has changed our company because there's no like, even when you do the performance review, maybe one out of a hundred is there like a surprise. The self-evaluation is usually so spot on because they're getting the daily feedback on what they're doing well and what they're not doing well. and that I would always be afraid of confrontation because I'm just, I'm not a confrontational person at heart, but it has forced me in this business because I have everything riding on this.

1:12:02There's also a finite amount of buyers. I mean, these are, there's probably, I don't know, a cohort of like 200, 300 of the biggest buyers in the world. Like they can't mess up that relationship. That's huge. Yeah, exactly. And I think whether it's the relationship or they do something wrong or the way they talk to people, it's just important. Very few, you know, in regular life, like you don't get feedback. You know, like people will just stop talking to you. They don't tell you why they stopped talking to you. Or maybe you get mistreated at a restaurant. They don't tell you why you got mistreated at a restaurant.

1:12:31All I want is the feedback. Yeah. We already know in this itinerary right after this is done, I'm going to talk to my team and they're going to shit on me and tell me everything I could have done better in this podcast. You need that. Yeah, of course. And I think we created a really nice feedback loop internally where that is helping our team grow and have accountability and be proud. Like the culture we want to create is like, my North Star for the companies that I love are Walmart and Costco. When you walk into those offices, these people have been there for 40 fucking years, 30 years. The CEO of Walmart today, CEO of Costco and Walmart started - Yeah, at the bottom.

1:13:10At the bottom. Yeah, I saw that with Costco. Forklift driver, cashier. Costco, by the way, that's a business. Yeah, exactly. Oh my God. And that's my point is, but they're the best cultures. And so that's like my North star of like, I'm obsessed with like, how do I create that? I don't want people to come to Ghost to get it on their resume to go get another job. I want people to come to Ghost and their fucking kids work there. Like that would be the dream type of company to build. Since culture is so important to you, how do you avoid getting the wrong people on the ship? Do you guys hire people fractionally and do a test before they come on?

1:13:44Do you guys use recruiters? We have done that. We have, especially on positions we're like a little leery of. We've done the three month trial type situation. The main thing you have to do, and this is like from tech founders that have gotten incredible advice around, is hire fast, but fire fast. And I think if you're ultra transparent when you hire people and say, hey, this is the expectations. We're going to do a check in 30 days, 60 and 90. If you're not meeting these expectations, then we have to assume this isn't working. Wow, 90 days. I watched a very, very interesting interview with Patrick Bet-David from Valuetainment.

1:14:22And I had never done it. And I'm hiring someone right now. And I went through this process. He made them go through such a rigorous process because when he asked the head of HR, he said that 10 % of the people that I interviewed actually got hired. And he's like, that should be at 1%. He made them go through five different steps the first step, he made them read his book and do a book report on it. And every single person that just got to the fifth level was hired because you just saw people's grit, which ultimately is probably the most important thing is the grit and the culture. It was mind-blowing.

1:14:54That's amazing. This has been an amazing conversation. I want to go to a couple of segments at the end here. We're going to start with a lightning round. Ready? Carson Palmer or Matt Leiner? Matt Leiner. Best blank t-shirt company

1:15:14U.S. Standard Apparel What is that? I've never heard of it It's a guy named Jacob He's in downtown LA Jacob, you're getting a plug right now Made in USA Incredible Makes for everyone's favorite brands Incredible quality Knitted in the fabric is made in USA Five to nine bucks landed Where are we at? They have a premium product. It's almost like a$10 t-shirt blank, but it's like a luxury brand would use it. Makes sense. Best running brand? Hoka. Best brand, period. And you can't say Ghost or anything like that? Starbucks. That's my favorite brand. What do you think is going to happen with this new CEO?

1:15:57I think he's going to right the ship. It is the brand I have the closest relationship with. Wow, that's a bold statement. I use their app every day. Anywhere in the world, I want coffee. I'm in Paris. I'm in Milan. I'm in London. I go to Starbucks. I know what I'm - Take away the emotion from it, from an actual quality perspective. You're taking Starbucks over like a blue bottle or something like that. You know why? I don't want to go to a blue bottle and wait in line and some trendy barista waste my fucking time. I have a mobile app. I land at LAX every Friday morning. Before I got off the plane, I've ordered my latte and my breakfast.

1:16:39Yeah, and my breakfast. I have ordered. My shit is waiting. I pick it up and I go to my car. It's the best. It's my favorite brand. Strong cosine. Minimum margin you need as an apparel brand. 60. Most important quality in a CEO. Temperament. Most common mistake by a CEO. Focus. Lack of it. better podcaster drama or your brother

1:17:12my brother's a better arguer drama is a better podcaster favorite book or podcast and why and it can't be group pod i know that's the quote-unquote best podcast in the world um favorite book is uh shoe dog which is the story of phil knight That's a good one. Last segment is, we call it the weapons of choice. A couple key things that you need to perform as an entrepreneur. It could be slate milk. I drink this every single day. It could be an aura ring. Let's assume that you're breathing and you have internet and a computer. What are a couple things that you need in your life? Tequila. Tequila? Is it Lo Siento tequila?

1:17:53It's Lo Siento tequila. No, and I do not want to promote drinking, but being a founder is extremely stressful and everyone has different ways of coping. A little drink here once in a while helps me. It just, it calms my mind. It's either that or running. Like running to me is the actual drug of choice, but it's not realistic with my lifestyle. Not every day. So I'm going to assume you have Hoka running shoes. Let's say Hoka, let's say Los Cientos tequila. Yeah. A couple more. What else?

1:18:27a charged phone is very important valid people don't the amount of uh iphone chargers and headsets i have at any given time this is very important i hate how they keep changing the actual charger it's it's good people around like i think you got to enjoy the people you work with. Like I always, I have a thing called the LaGuardia test, which is if you got stuck at LaGuardia for five hours, could I hang with this person? And if I can't, I can't work with them. That's a good segment. And to the last question I'm going to ask you, what's an entrepreneur or a brand that you'd like to give some flowers to and why?

1:19:06Someone that people may or may not know. Good question. I think long and hard about this. You're putting them on right now. Okay, let me think.

1:19:20I have it. He's got it. Rich from Fashion Nova. Rich from Fashion Nova. He is so under the radar and I don't really see him out much. And through these waves of the iOS updates, which for everybody listening, we've mentioned it a couple of times. In 2021, there was an update to iOS Apple phones where if you were marketing on Facebook, if 60 or 70 % of the traffic was on Apple phones, they basically disguised your ability to target efficiently. So you were basically targeting in the dark. He survived that. Yep, and kept growing. And kept growing. And then Influencer, we all know, it was like huge and then it stopped.

1:20:00It's kind of coming back again. That's like the main thesis of his business. Kept going. And he witstead Shein. He witstead Timu. he withstood all of these copycat businesses. I don't know him. Do you know why? Do you know what that secret sauce is? He is extremely resilient. He owns 100 % of his business. 100%. He never raised money. This guy has grit. And he is just, and he's still hungrier than ever. I was like, why don't you just sell this? You're a billionaire. I've thought about that internally a couple of times with the iOS update, with the influencers. yourself. I was like, this guy taking chips off the table.

1:20:40He's just a profitable, healthy business. I mean, he's buying real estate. This is public. He's buying real estate all over LA. That's cat. You have to have cash to do that. You don't just banks just don't give you money, but very impressive what he's done. It's unbelievable what he's done. I'm so excited for you and your business. The second I heard about it, I knew that it was going to be a winner. I think that you're a guy in LA that everybody respects. And like I said, everyone knows you had to win on the first one. I think the second one is going to be absolutely enormous. So thank you so much for coming on.

1:21:08Where can people find you? I have Instagram, but I don't really post except if you like watching my kids play football or soccer, it's at DMurthy, D-E-E-M-U-R-T-H-Y. I'm on LinkedIn. If you want to connect with me, that's an easy place. And apparel brands, ghst.io. Yep. Go check that out too. If you guys liked the video, like, and subscribe. D, thank you so much. Thank you. Until next time.