How Magic Mind Turned a Spreadsheet Into National Retail Domination

20:37Yes. Yeah. Listen to their problems and like, you gotta figure out what to do. Let them pull it out of you as opposed to you. The hard thing has, you know, the founder, the co-founder, it's like, you know, I had this really good instinct that was right for the first product. So I need to listen to my gut. But I think at a certain point, you also, you have to take customer data and research and put that above your own gut, particularly for big decisions like

20:57Matt Bertulli:product releases and yeah it's really i've not met a lot of we've talked to a lot of people in the space in consumer i haven't met too many founder operators who who have like just a gut instinct for product it doesn't matter what they do like they their hit rate is just weirdly good and it's typically like a it's it the pattern there is almost always they are the customer so they know exactly what they would buy you know and then they happen to be a customer that is like there's just a lot of them in the world right like i think sean's a good example of this he's really good at picking product categories he's just picking stuff for himself right like and and oh there's just a lot of 25 to 30 year old dudes out there that like the same thing yeah you know like it's he it just it's a natural thing i think katie does a good job of this like i do think there are some people who can like take product shots with high hit rate i think in your category it's actually it's like the level of difficulty is really high because your everything you guys build everything I've looked at, it's like the education required is much higher lift than just like, I sell a thing and it's obvious what the thing is.

21:59Matt Bertulli:Like, I know what a water bottle is. There's no education here. Totally. You know, like insulated, still drinkware. Like there's just, there's a great big market. I've said this before, but I think the job of a CEO, CEO founder type is to be self-confident enough that often, even if your judgment contradicts that of others, you're willing to trust in it, but knowing when to trust other people's judgment over yourself, if that makes sense. It's like 80 % of the time I should stick to my guns. I've been here the longest, you know, I've built the company. I have the best. That's right. I have the most context.

22:31You know, I think about it that way in an AI era. It's like no one will ever have as much context about the business or our customers as I do, but there's 15 or 20 % of the time where I'm just wrong. And having the ability to discern between those two, because if you fall off into either ditch, obviously if it's like, I'm always right. You know, like we do what I, what I say here, like that's hubris. And that definitely goes a bad way. But if you're spineless and you just let other people who didn't build the company, try and tell you what's best, you know, that's, that's a, yeah, exactly. Yeah.

23:03You slowly down and you get risk averse. I think that's the other thing. Like founders are supposed to push the pace and they're supposed to embrace the risk. And if you own the largest percentage of your company. You are not being realistic with yourself if you expect anybody else to have the risk tolerance that you have or to be willing to go as fast as you're willing to go. And that's really where I've messed up. Sometimes I've had great people, like these are people that could be CEOs, but like they are never going to think exactly as me because they have a different number of shares and their incentives are aligned differently.

23:34And so being able to like understand that, I think 11 years in, I'm getting better at the role as I'm understanding that balance. Do you, I got a question because like you're, you came out of sort of come out of school, you go into banking and kind of, I want to connect two things here.

23:49Matt Bertulli:So like, do you guys, do you think that the difficulty or the quality of revenue part of consumer, right? So like banking and the whole finance industry does not love consumer companies. Right. And usually it's because like the consumer is just really hard to peg down. Do you, as you guys are building Magic Mind, do you think about this? Like, how do we actually, this takes so long to figure out who the customer is, that the quality of revenue is never quite there. Like it's, it's a moving target. It's not like the, this idea of product market fit in B2B. You right away, you're like, oh, I sell accounting software.

24:22Matt Bertulli:I know exactly what you need. Whereas this is like - So that's turning up for them right now though. It's not so easy. Yeah. Yeah. I just, I wonder like how, how we actually get around this as an industry, right? Cause like it does take a long damn time to build these brands. Like you guys have been around for how long now? Six years. Right. Yeah. That's so young. I think it's the case that, you know, like, I forget what it's called, you know, things that exist for a long time are likely to exist longer. There's this momentum in life to brands as they exist. And I think that is the attractiveness of consumer.

24:52I mean, whether it's Coca-Cola or Wrigley's gum, like these brands have been around for a very long time. And you can't look at many industries or companies that have that kind of staying power. And that's true of tech in particular, you could say. So I think consumer has always served the purpose of kind of the steady return on capital once you establish a true brand and distribution model.

25:15Matt Bertulli:I think that's a great perspective. The trade-off is they're harder to do, but their endurance is much longer. enduring and valuable over time is why it's hard to break through. But we're going through this huge customer perception, customer need shift through the rise of kind of wellness and food as medicine. And that's been driving this whole space and innovation that we've seen for over two decades. And I think we're still kind of in the middle of it. To take that further, if we really do get some of the medical advances that it looks like we might get, that makes consumer more valuable in a lot of ways.

25:50Oh, I completely agree. If I, you know, become brand loyal to something at 35 now, it's like, well, what's the greatest potential discounted cash flow of that, like 30 years, 40 years. But if lifespans really do start to extend, it's like what that means is I can buy Coca-Cola for 50 years or 70 years, maybe not Coke. I think in general, like longevity is kicking off like three distinct trends that are still very early. And one of them is cognition and mental performance where we play. But I think it's the same. It's related to the big boom in protein we've seen. It's like, you know, musculature and the importance of maintaining strength as you age, you know, that's driving protein.

26:25But I think there's also this kind of like very early one around inflammation and data coming out about heart disease that's actually driven by inflammation, like inflammation, sort of the meta problem behind so many dysfunctions in our body. And I think that's like a fertile space for innovation.

26:39Matt Bertulli:What I want to know is, did you jump from finance to consumer thinking about the longevity of consumer? And this is a great place to be. Or was it just no? Yeah, I got lucky. I mean, I was miserable in banking. I learned a lot. I learned how to work really hard. I learned how to whip around spreadsheets. But I knew that I wasn't making any impact. And I remember the moment I went, I was on two, staffed on two deals at the same time. And one was like super intense. The other was this small meeting that I finally got invited to go to. So I flew to Evansville, Indiana, went to this bank meeting. And the deck that I'd worked on didn't even get pulled out of the briefcase.

27:15And I was like, what am I doing? This is crazy. Like I've sacrificed. I was going bald. My dad gave me Rogaine for my 25th birthday. And I was like, this is like not good. Hey, congrats. It looks like you've made a real comeback from those days. Shout out Finasteride. But I was truly miserable and I needed a change. I wanted to operate something. I really just had this sense that there were skill sets that I had around leadership. and I'm the fifth of six kids. I kind of stand as the bridge between two families within that. My dad remarried and I have four older half brothers, but they're full brothers in every sense of the word.

27:50But I've kind of stood on that bridge and my dad's youngest son, but a middle child with my mom's oldest and kind of like, oh my God, had this kind of Freudian cocktail and superpower for cohesiveness and consensus creation. And anyways, I led to some leadership skills. I really had no ability to flex in a junior level banking role. And I wanted to have just a tangible impact on something in the world. So I just reached out to my network. I was like, I want to be in operations somewhere. I don't care what I'm going to do, but I want to change my career path. And it was fortunate that my roommate had just joined Aaron, the founder of Brahmi, as his co-founder.

28:25And they needed an ops first hire and someone to join the founding team there. And I did that and was at Bromley for five years, but I went from Times Square, Barclays, wearing a suit to taking the Greyhound bus from Manhattan to Philadelphia on Monday morning at 5 a.m., coming back Thursday evening and living in Sharon Hill, which is not a great neighborhood in Philadelphia. But I loved it. It was amazing. I was wearing jorts and driving forklifts and making an impact. And I was like, this is the path. And I kind of just felt that peace within me that told me I was on the right track and I just wanted to follow that.

28:59Do you think it's a

28:59Matt Bertulli:tangible thing of consumer like that we're like you're dealing in the world of like stuff and I can hold it I can move it around and whereas banking to me has always been what do you do? I think it is a much easier way for our monkey brains to see impact. I think impact is what kind of matters at the end of the day and once you're high up enough in the world of finance you are kind of world moving and doing cool stuff. But, um, I think at the junior level stage, you're really not making that much of a difference. And even just bringing a product to life and putting it on a shelf, you know, that's something that's so easy to just have physical proof in the world that you've done something for the last six months and here's the result.

29:38Matt Bertulli:Yeah. Do you, uh, I got a question on school cause I'm, I'm a dropout, so I don't actually know what happens in university um you went to princeton yeah does the the jump from like university to uh finance is that like are you are you groomed to do that is that a thing like where you're in school and you're like look this is just the best place to go get a job you should go and finance or was there something else that drew you to finance so there's let me try to think about that the way when i says yes and no so first of all i kind of wanted to do finance just because i wasn't educated in anything specific.

30:14Princeton's a liberal arts school. I didn't know anything useful. I knew how to think. I knew how to write. What a ringing endorsement. Yeah. How much was that not particularly useful set of knowledge? I don't want to know. But it was a very useful set of knowledge, I think, actually, more and more so in the world that we're entering into. But to critically think, to read, to collaborate with classmates and to work really hard. And that's not true for all those types of schools. You actually had to work really hard at Princeton. But, you know, I wanted to do something that was quantitatively useful and like actually develop a skill set.

30:47So that was a big draw for me into banking. And, you know, four brothers, as I mentioned, and two of them had already gone down that path. And I'd always wanted to live in New York and do the whole thing. So it was very groomed for me, I would say. But, you know, my classmates did a bunch of different stuff. And a lot of them ended up in New York or D.C. or San Francisco.

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32:14Matt Bertulli:When I was reading the brief for today, the thing I actually connected the most with at the very beginning of the brief was your story of like joining the company, not as the person who created the product or the company, but like you're clearly running the joint. you've got a partner. I was the same. Like I came into Pila as the first investor. I wasn't even supposed to run the thing. I had another company. I'm like, I'm going to write a check, right? I'll help you get it going. But like product guy, it's yours. Turns out product guy wasn't a great CEO. So when I sold my last, my first company, I just immediately became the CEO of this one.

32:46Matt Bertulli:And it wasn't part of the plan. So can you tell us like, how did you guys meet? How did you decide to like go from, I'm selling, is it beans? Yeah. Yeah. So like beans in Philly to, you know, magic mind. For sure. Give us that little bit at the beginning. Yeah. So I think the Brahmi story is important. Like I joined as the third member of the founding team and it was a good friend of mine named Dylan and we were both kind of the co-founders to Aaron's founder journey and he's still on that journey. He's doing amazing, by the way. They've innovated around protein pasta and are absolutely kicking butt.

33:22It's one of the best stories of persistence and like longevity in our space. It's really awesome. but we were and you said earlier about kind of markets that are well-defined and i've never had that experience i've always been doing a lot of consumer education and with brahmi it was a lot of education we were going after what we considered a big market in salty snacks and we had a product that was the highest protein and fiber density crop on the planet like the healthiest snack you can have at the end of the day it was a pickled bean in a bag so you know when you say it like that sign me out it's a wet snack and it's really healthy i find it to be delicious but pretty different a lot of education there yeah everyone's always like why is it wet was our number one question like well it's how it's prepared in Italy and around the Mediterranean it's traditional it's you know we're adding flavor to it and um you know I'm still a huge fan of that product personally but it was just never going to be a huge product and I think um you know Aaron realized that and started innovating around other ways to incorporate this super food into uh into Italian food to make it more healthy and approachable and he's he's done that with pasta but the the Brahmi years were an interesting case study in leadership style.

34:26And Aaron and I are still very close and I feel like I've told him this directly, but I learned kind of what not to do and how I was managed there versus the experience I've had with James. At Brahmi, it was the three of us were kind of the three-headed decision-making machine for everything. And everything would go to committee and big decisions would be discussed and then we'd make them and then we maybe rediscussed them. And it just got to the point where I realized that I would never be making the final decision and it would kind of be relitigated by Aaron. And so I kind of mentally passed that responsibility off.

35:00And Brahmi was not what I was thinking about at 2 a.m. when I woke up to go to the bathroom in the middle of the night. Whereas when I went to Magic Mind, it was James's company, but he was a software guy. And he said, you're the consumer guy. You've got the experience. Here are the keys. Good luck. We're driving the car. And I was like, okay, you know, this is my opportunity and this is a great opportunity. I love the category, love the products see so many opportunities here um like i'm gonna make the most of it and i had that sense of ownership from day one because of the lack of micromanaging and um and just the full responsibility and ownership i was given so i think that is the key thing and and if you don't have that ownership i would encourage you to seek it out if you were in my position like i feel like i've grown so much infinitely more by having that ownership and fundraising myself and getting my friends and family to invest in the product and putting my name behind it.

35:49So, you know, it's been a huge learning experience for me, but it's really been about ownership and it's changed how I manage people. Like I've taken this to heart for how I manage everyone in my company. Do you, uh, you,

36:01Matt Bertulli:you're, so you guys have actually raised money. Yes. We don't talk to a lot of people like you. Yeah. That have investors, you've got a board, I'm assuming. So it's like you're this cap table. Uh, can you tell us a little bit about how you guys went out and at what point did you guys go raise money? Had you already proved this whole product market fit things? Like you ran some tests, it's working, it's selling, then you raised money? Or did you guys start out raising money? I asked because your partner is a software guy from the Bay Area. Yeah. To explain some of it. There's a lot of patterns.

36:27I mean, he's coming from a culture where that's what you do, right? Yeah. Early on, you go and you raise money. Yeah. Yeah. Yeah. And actually the kind of impetus he had to start the company was Floodgate and Mike Maples, a great Texan investor, who's a mentor to James, wrote him a check and said, hey, go do this. Imagine my thing. I love the product. You should make a brand around this. And so we were funded from the jump and there was this kind of pre-seed angel round where, you know, capital is put in the business. James put capital in the business. I put capital in the business. And then that kind of got us to a seed round.

36:58And I think there's that, this is like the great filter in our space. There's kind of like certain times where you can raise and you sort of should, and there's these different, like almost hurdles you got to get through, but it's pretty easy to get the angel stuff done, relatively speaking. It's still hard, but if you have a great brand design and a good story and a really good product, you can usually scramble together$500 ,000 to$2 million and get it off the ground. It's like getting that next round done where there's just a huge gap in the market. Once you make it past product market fit and there's a pathway to profitability, Series A is what you're talking about.

37:34There's a lot of folks there too, but there's this huge gap at the seed level. That's where we had to take a lot of persistence to get that round done. But we were able to, and it really helped us continue to grow.

37:47Matt Bertulli:So, okay, raising money. I want to hear about the experience of this from you. How many people did you guys actually have to pitch to get the Series A done? The seed was the long journey, and that was about 67 different firms that we spoke to. Yeah, and ended up being one of the first ones that we talked to, ended up giving us the term sheet at the end. But, you know, there's just a lot of lessons learned in that process, a difficult time to raise money. We did have traction, actually. The story we were hearing was, you know, you're too early, too early, too early. And the thing that made the Series A so much easier after that was just keeping those relationships.

38:27Everyone who said I was too early, they got on my investor updates list. And I talked to them quarterly. And I would ask them, hey, what would you like to see this business look like in a year? And then when it was the next year and we were above that, I'd say, hey, we'd kind of be what you said. Like, what do you think would be like really exciting for us? And for me, the advice that James gave me that was great, and he's raised a ton of money on his own, in his tech life as well, and Magic Mind early days. But when you ask for advice, you get money. When you ask for money, you get advice. And that's a trope, but it's so true.

38:56And so, you know, hey, I'm thinking about around, you know, what would you consider a business like me to be worth when I'm talking to other firms? I know you guys said we're too early for you guys. You can't keep product in stock. What would you do if you were me? If you can't keep... But I mean, it's actually one of the things you said that I think is so wise is that people tend to buy into trend lines and not data points. And so this is true not just for raising money, but as an example, if you're trying to recruit an executive, it is so much easier to recruit an executive over 18 months or two years than it is to go to them with a job offer today.

39:30And so I think the idea of creating relationships and continually updating them and keeping them informed about what's going on, it's applicable to a much wider range than just raising money. And it's definitely a habit I would encourage everybody to do. It's actually a big part of the job at this stage is having those conversations that don't feel like you're really moving the needle today, but you're teeing up a relationship that might be highly influential. You should talk about that. People have this misconception that being a CEO is primarily about telling people what to do, or it's primarily an internally focused role.

40:06But a lot of being a CEO is about actually being the chief communicator for the organization, both internally and externally. How have you seen that during your time with Magic Mind? Yeah, it's been interesting because as the first hire, kind of first GM that became president, became CEO, I was the only full-time employee for over two years. So I was doing literally everything and loved it. And I think that's made me a better manager and being able to scale to the position I've gotten to. but there has been this journey of, you know, some days I'm like, I'm feeling useless. Like I haven't done anything to the business.

40:40But you're right. It's about telling stories internally. You know, it's internal communication as much as it is external. And it gets back to the kind of micromanagement point I made about like giving ownership to people. And we're like, my job is really just to set the goal and the strategy in conversation with my team and the leaders on that team and then ask what resources they need to get that job done. And then that frees me up to spend time externally building relationships with future talent, future investors, future strategics, and just smart people who can tell me how they're thinking about the world.

41:11It may inform my viewpoint and may inform my decision-making for important things that we're thinking about at MagicMind. And I always like to say a good CEO is thinking six months out. You're not thinking about the next six hours, you're ideally thinking six weeks to six months out. And getting out of the weeds has allowed me to do that. There's a new muscle that I'm building and I'm still trying to build.

41:31Matt Bertulli:How much time do you spend external versus internal then? As having a cap table, having a board, thinking towards like all this stuff. Yeah, that's a good question. In general, we are a weird company. We try to really limit meetings. We have no slack. We don't believe in messaging at all. We have no meetings on Wednesdays that are recurring, at least some slip through and no meetings on Fridays. So my Mondays, Tuesdays and Thursdays end up being pretty packed with calls. I'd say, you know, one of those days is typically mostly external. So almost a third of my time is on external stakeholder calls.

42:05You made a point, and I think it's worth emphasizing that it takes a tremendous, you called it a muscle. It takes a tremendous amount of mental discipline to actually do the CEO role because it requires you to say the same messages and the same stories over and over and over again. You know, company mission and vision is all about saying the same thing over and over again until people know what you're going to say before you say it. And especially when you're somebody who is intellectually gifted, that is very difficult because you're like, I want to tell new stories. I want to do new things. I want to show how smart I am.

42:42I want to have a diversity of things, but that's actually not what the company needs from you. I remember reading a story about Bezos and they were talking about one of the things that set him apart is that he had a ridiculous amount of discipline about message. Like you could just follow him around for a day and he's just talking about the same things over and over and over again. But we really discount how hard that is to do, right? And how deliberate you have to be in terms of being successful and actually being that consistent in what you say.

43:11Matt Bertulli:I mean, what Will is saying is like he spends a third of his time on external, which means he spends two thirds internal. And I suspect just like watching you in some of our, in a, especially on this one text group that we're in, you're, you're still fairly in the weeds and a lot of things. Yeah. Right. So like, I actually think that what you're raising is the hardest part of the job that you do, which is like external zoom out. I have to cast this vision, especially to investors. It's like, where are we going? What's the next thing that we're going to do internal? Uh, here's how the day to day of this business is actually going.

43:40Matt Bertulli:And I need to be able to like turn dials with you. Yeah, I think once you build that muscle, though, becomes a superpower, because to your point around context window as a CEO, like that's where it comes from, is you've been telling the high level story for one day out of your week. And in my case, and, you know, that gets you very accustomed to understand exactly where this is going in five years, if we succeed. So that's really clarifying for what matters today. And let's not get caught up in these five different things. Let's focus on this one thing now, and let's get it right. um so i i think it becomes a superpower to be able to zoom way out and then go into the details yeah uh we've had one version of your product today how many different so when you started was it one skew and then how many different iterations and how many different products are you guys selling today yeah so it was one skew it's now called the original mental performance shot um and that particular product has gone through over a hundred iterations itself um And if you tried Magic Mind six years ago, I'd encourage you to try it again because it tastes way better.

44:40We started using great technology called nanoencapsulation that not only helps mask flavors of these powerful herbs we use, but also helps with the absorption. The bioavailability is higher. The strength is more potent. But about a year, it's always been a one size fits all solution to our customers needs, which is the challenge with a shot versus a pill or a powder in particular. You can sort of titrate for yourself. But we launched Max and Free as sort of the Papa Bear and Baby Bear. to the Mama Bear of original last year in April. So there's like three main products. There's three main daytime mental performance products and we have a sleep performance shot.

45:14Very cool. Yeah. Shoplift is a CRO platform built for e-commerce operators and the only one that's Shopify Plus certified. We're using them for the new brand the operators ourselves are launching. They've built a free CRO resource hub at shoplift.ai slash operators. Real conversion benchmarks by category the seasonal patterns most tools hide, and practical CRO for how you actually run your store. Two ways in, get your free benchmarks or start a free trial at Shoplift. Go to shoplift.ai slash operators. How long is this shelf stable for? This product is our online product. So it's shelf stable for 18 months.

45:57Oh, wow. And there's one interesting thing about the business is pretty in the weeds that most people don't know about, but we actually have two different liquids for each SKU. So our retail product is natural, it has no preservatives, and it requires refrigeration. We did that intentionally to play in the natural channel. We thought the natural shopper would be the best fit for us as we built the brand in grocery. And we knew that a refrigeration required product would end up in the cold case, and we wanted to be in the perimeter of the store. So we've intentionally gone that route, and I think it's served us really well as we've launched retail.

46:29Matt Bertulli:When you did the seed, so give me a timeline. you guys had your seed done in what year 23 and then when did you do with the a last summer 25 okay 25 yeah and uh you started out d2c yes selling a shot can you talk a little bit about how you guys launched the product into d2c yeah so the initial vision was sort of the first d2c energy drink okay and that's why it was the shot form factor um james had this data on bioavailability and absorption of liquid vitamins versus pills and powders. And so we felt very strongly that it should be a liquid. But obviously you can't ship 12 ounce things around the country.

47:11So it ended up being a shot. That's sort of the happy accident of how we ended up becoming a shot. So that was the model we launched in March of 2020. By necessity, it became very much a DTC only thing after lockdown and COVID, like right after the launch. But we started trying to get it into cafes in LA and small taste maker accounts pretty early on and just learn. And we learned, And, you know, packaging wasn't right for retail. We kind of knew that. The product wasn't fully there on taste for mass market appeal. We didn't have that opportunity to tell the story to the customer, as we talked about earlier in D2C.

47:41And so we knew we had work to do. And we just focused on D2C, focused on building a big subscriber base. I think the one thing we really nailed early on was the habituation that we kind of instilled in our customer behavior. And, you know, 50 % of our customers drink MagicBind every day. Whoa. And 92 % drink it three days a week or more.

47:58Matt Bertulli:Are you a subscription first D2C channel? Yes. Is that kind of what you guys really push? Yeah. I mean, last year, new customer acquisition was over 90 % subscription. And did it start that way? Like, did you know come out of the gate? And again, this is the Silicon Valley, like Bay Area thing where they love recurring revenue. Yeah. I think it was always an early focus. I think we were at about 50-50 for the first couple of years. And then we honestly just increased our one-time pricing. Okay. Yeah, that's what I was going to ask. Tactically, how much have you leaned in? This is something that we're seeing.

48:27is like our subscription product was 395 the one time was 495 i jacked up to 595 on a whim no ap test i was just like we need more subscription let's do this and it ended up a lot more subscription i think now it's a little more complicated now that we are available in retail now that we are available on amazon so we've kind of brought it back and for higher volume cases and funnily enough i don't always love subscribing to stuff so i understand the friction with subscription. And I want to offer people a bulk offer on one time where they can just buy up on something they love. So that stuff's constantly changing now.

49:01But in the beginning, it was very simple. One product, two prices, subscription or non-subscription. And we were able to build a subscription business that really sustained us until launching retail and continues to grow today. So you said something really interesting there about no A-B test, just did it off of conviction. when do you think a ceo should make decisions that are rigorously kind of analytically and data backed versus strong kind of value conviction based decisions how do you think about that i think about it in the kind of one-way two-way door framework if it's easy to switch back go for it and don't be afraid to break some glass on the way to to building this thing um but also depends on your stage too i mean i was that was back when i was a one-man shop i wasn't gonna I had the debate in my head in about 10 seconds and I kind of knew which side I was on.

49:52And so that was the way we were going to go. And I needed to do it quickly because I had to address all these other purchase orders. And there's a ton of stuff to do. So it's just kind of about moving really, really fast. I think you need to move extremely fast to survive early on. So I think now that we're bigger, there's kind of more to lose. And there's also more to gain by being just that extra bit more precise in how you're deploying your decisions that you've made. So it is worth a bit more of our time and deliberation and data.

50:20Matt Bertulli:Can you apply that to the jump from DTC to Amazon? Is that the sequence you went in, DTC, Amazon, retail? Yeah, we launched Amazon in May of 23 and retail officially in distribution with Sprouts in November of 23. Okay. And was the jump from DTC to Amazon, was that just a gut feel thing? We felt very strongly that we wanted to know our long-term cohort sizes and how they behaved. and a lot of better customer. But once we launched Amazon, that didn't really change a whole lot. So you didn't see any cannibalization from DTC to Amazon? Hard to say. I mean, okay. To this day, I think there is cannibalization, but there's also net deal.

50:56And we see Amazon, our Amazon business, we could do a better job with it. Frankly, we're not finding around organic growth with keywords that are growing. We're really seeing Amazon performance track digital spend. And so it's - It's your second website. Your second website. it's an extra sale to capture the wind that helps the boat go forward and um i'm glad we have it up i wish i did it probably a year sooner okay um but we talk about this all the time people people are too slow to do it and it's just like there's people there looking for your product even if you're not doing the organic discovery like you need to be there harvesting i think it's very much product dependent category dependent like with the subscription products um you know i think it's worth really honing in on what is that messaging that really deserves this product to be something that's ingrained in your customer's life because you're trying to get that to happen on Amazon too and use it far less time.

51:44So like build a story on D2C, build the tactics there and then take it to Amazon. But if it's a kind of one-time purchase item or I think like Simple Moderns, I've heard you talk about this. It's like, yeah, you gotta be on Amazon for sure. I mean, your LTVs have to be crazy. I'm doing math in my head and I'm like, okay, if 90 % of people are subscribe and save on the website and if they're taking it daily and it's$3, like that's, those are gonna be really big numbers. yeah they're strong they're i mean it's north of 400 gross and then profit ltv is north of 200

52:14Matt Bertulli:yeah can you are you willing to talk about um uh retention in in your category because i'm curious how you guys like did you have expectations around like what would like a one-year cohort look like and then kind of where did you land relative to your expectations and then where are you relative to the industry yeah i think we went from caring about kind of overall churn to really drilling in on the individual M1 through M24 cohorts and really caring a lot about that revenue retention by cohort. And I built like a model that was very helpful that we still use to this day to like help track that over time and make decisions as a business.

52:52But, you know, no matter what we've done through email, through packaging, like there's not a whole lot that has moved that needle more than product improvements. It's product, yeah. It's all product after, that's well said. Yeah. Retention is at least 80 % product. I think more specifically the value of that product. And so how do you communicate that value? How do you pass on savings to your customer? Like you can't just, you know, can't just jack up your prices. You got to like, you know, incentivize your subscribers long-term. And so there has to be real value there on both sides of the coin of dollars and cents and things you're actually delivering to that customer.

53:29But yeah, we've only been able to move the needle on retention really with products. making the quality of the product better or in how you sell the products at the front end quality of the products better and um just passing savings along to the customer which is very counterintuitive to the way many people in ddc would think what you're really saying is that once somebody really is locked in on magic mind you actually want to make the value proposition get better and better over time and that ties into like something we've never done is like messed around with the SMS. Like we have SMS notifications that you can sign up for after the first, like first story, you can change your order, cancel it right away.

54:06We don't require refunds. Like we're just, we're optimizing for that long-term subscriber relationship. And we've got, you know, several thousand people, over 10 % of our subscribers have been around for over like two years. Like, oh wow. Yeah. So they're just extremely valuable customers. Well, that's what drives the entire business. I mean, like everything is driven by that top one to 5%. And I think everything's power laws, basically. Like, I've been very interested at how true that is even for people like Coca-Cola. But I would assume that it's true for even them, that your top 5 % of people are buying 30 % of your Coke or 50 % of your Coke or some kind of crazy amount.

54:42John Daly's gotta be like - Yeah, exactly. So like, but it's actually a very interesting thing is that it will always be a very small percentage of people that dictate whether or not your brand is successful. So - That was the alcohol thing that you raised at some point, right?

54:57Matt Bertulli:It's like a certain very small percentage of alcohol drinkers drink like all the alcohol. And you would think it's more some industries than others, but I still haven't found an industry where it's not true. Yeah. And the sort of promise of a subscription business is that you're creating this annuity machine. But the reality is, unless you have those people who are true super fans committed using it for life, that asymptote doesn't exist. And it's going to zero. So if you turn off the ad spend, the revenue will go to zero. So I think if you can create whatever level the asymptote is, the important thing is that you create it.

55:24And so you asked about like, what's good retention, I think it is highly dependent on the price. So we aim for 20 % dollar retention at 12 months. Which I've heard is actually best in class. And some VCs will say, that's pretty low. I've seen this toy subscription box company that's selling a$15 monthly time. I'm like, yeah, it's$15 a month. It's completely different. Yeah. So it's all about optimizing the first few months of that experience though. And really, it's about the product, as we said. How do you think about LTV to CAC? yeah i mean we think about payback period is yeah what what is your payback period you're aiming for yeah um so we have two metrics that we look at we look at ad spend uh payback and then full working marketing like all the variable costs of the business that that matter and that's that's the one that i'm keyed in on like on a strategic level and i think the ad spend one is more makes sense i mean your p &l ultimately is a result of that yeah yeah yeah and so we can kind of play with that and understand how our cashflow ultimately looks and our profitability ultimately looks.

56:24And that kind of dictates how aggressive we can be based on how much cash we have, how much revenue we're getting from retail, how much scale there is there. And so that number moves. And last year, I'd say we'd target kind of six month payback on the full working marketing number and three to four on ad spend. As retail has grown for our business, those numbers have gone out and have allowed us to spend more. And it's a good thing to have because our tax have gone up. We've had a, you know, there's been some headwinds for us on online for the last 12 months.

56:53Matt Bertulli:Do you, do you, um, on this topic of like these, this like small cohort of customers that is like the most valuable, right? They stick with you for 24 months. Do you then try to go out and find just those people on the front end of the business? Or are you more of a, like, we're just gonna have to acquire everybody because we can't really choose and that they'll filter themselves down and then we'll let the product do the work. Yeah. Probably the latter. I mean, we have done like deep customer interviews and try to do insights work with those customers and like what kind of podcasts you listen to and then go do that stuff.

57:22And then it just turns out they're like pretty high value customers. They tend to have higher income. You know, they're expensive people to acquire and you just hope you acquire some of them through your media spend. Well, that's sort of the relationship

57:31Matt Bertulli:between like this front end CAC number. And if it goes up over time, does that just mean that you're actually getting the customer that you really want? Because higher value customer costs more to require. Hopefully. I don't think so. That's the theory. We hope. That's what the marketing guy tells you. Well, you know, CEO and kind of sounds like the original marketing guy. So you got to ask. I was also the original CFO guy too. So I got the devil and the angel. That's right. Do your investors influence how far out you'll go? Like, do you ever get, do you think about it through that lens? I try to think about it through, you know, my North Star goal for the business is profitable growth.

58:06And, you know, how do we get there in a way that's sustainable on both metrics? I want to be kind of maxed out on growth and showing increasing profitability over time in a way that tells a really good story in five years. Let's get back to five-year, 10-year thinking. So I want to be profitable so that dictates what the payback can be. And I think the investors have bought in on that story and that North Star goal. But when headwinds happen and we lose profitability for a few months, they're not freaking out because they know every reason why and here's what we're doing to try to fix it. So I'd say the decisions and targets are mine.

58:40And it kind of gets reviewed in board meetings and occasional catch-up calls, and there's a chance for them to give input. But it's really in my team's decision. It goes back to communication. I mean, what really will go poorly is if you go to a board meeting and it's like, oh, hey, we've got a surprise loss for the quarter because we were more aggressive on growth. Any surprise in general. Investors can handle bad news. They cannot handle surprises. so anytime there's and anytime there's like a change in strategy that you're considering like you better pre-sell you better have pre-conversations and get folks on board so that in the board meeting when it happens you spend all this time setting the table and then it's like yeah let's do it you already gave your good reasons like next thing yeah um that's the goal

59:19Matt Bertulli:um your you mentioned that in the last 12 months it's like cac has gone up it's got like there's headwinds right uh do is there any relationship between channel expansion and some of that what you're seeing in ddc it's a great question honestly so we have like eight hypotheses and like what's going on yeah doing stuff against all of them and that's one of them honestly the data doesn't support that we've had a very regional uh like there's been regional density to our retail rollout so we're we launched publics in july of last year which is like 80 of florida and shop at publics and there was like a day we were not there and a day we were there so there's a huge geo test yeah huge huge geo test and like didn't see cac and that market change didn't see ad spend volume didn't see new customer dollar volume really change.

59:59So I don't think it's been that. But, you know, it's, it's, and then our most dense ACV retail region is Southern California. And that's our best region online still. Yeah. So that's where we've like built the brand.

1:00:11Matt Bertulli:So I actually think per capita basis, it's like Southern California. Yeah, maybe not on per capita. I actually think it would be. We've done per capita for MSAs in Los Angeles and West LA in particular is still like our strongest market where we built the brand. And so I think retail can actually lead to increased brand awareness and hopefully increase success online eventually as people want to opt into the best pricing they can get, which is going to be a monthly subscription commitment. Did you guys go after those geographies with retailers because of what you could see in the DEC numbers? That definitely helped inform.

1:00:42I think there's a multilayered analysis of like what retailer is right for us now and where is their interest and where are we also seeing signal in our digital business that this is a market that could work for us. so there's multiple several dimensions to that but generally yes yeah yeah i think geography uh is

1:01:00Matt Bertulli:an underplayed uh variable for a lot of consumer brands they don't think about like mark like in the u.s like the u.s uh is not one country right like there's a lot of them well and even like if you take walmart for example and you start to subdivide walmart's uh 3600 doors into groups for us, you would be shocked at the difference in performance between different subsets of those stores. You have some very rural stores that behave one way. You have others that are in high income urban areas. You have, I mean, you just kind of have like when you're as big as Walmart is, it's like you get basically a standard distribution of things.

1:01:40And so that's one of the ways that we've gotten smarter is that sometimes you go into a situation, it tends to be like, Like, oh yeah, we want to be full chain. We want as many doors as we possibly have. But some of our products don't really make sense full chain. It's like, hey, these 900 doors, they'll do great. If you put them in these 900 doors, you might not get through your initial fill in a year. You know, like nobody will buy it. I think in food and beverage in particular, there is a playbook to launching retail. And I think that too many people go way too wide too quickly. It's like the canonical advice that you get in food and beverage that you kind of ad nauseum here.

1:02:13But like you don't get it on shows like these enough, I think. So, you know, the temptation is you build a big D2C business. And if you happen to be a food and beverage, you see your kind of apparel peers going chain wide and target that can work. But I think there's going to be a lot of brands that blow up with what target's doing, bringing new innovation to market. And it's really hard to build retail sell through. And in food and beverage in particular, there's this really gnarly merchandising battle that you have to fight in the store. I think the secret to our omni-channel success has been the fact that we do have this omni-channel flywheel machine that's the likes of overnight oats or magic spoon but in this fast turning beverage category that's actually refrigerated in the store but it's also that we go in in the store and do the hard old school stuff that i learned at brahmi with a backpack on taking the subway up and down new york knocking on doors stocking out shelves like that's what you have to do you have to be literally merchandising every key account you launch for the first 90 days at least and then doing you know pulsed on check-ins are you sending people into these stores then to do that merchandising.

1:03:14Tell us about why though, because I'm very familiar with this, but if you haven't sold into retail, you might not be familiar with all the reasons. And I think your category is specifically challenging because every single one of your competitors has people in store and they probably are not averse to moving your product around as well. Like, I mean, you don't think about this, but like the opportunity. I'm not above that. So talk about how, why is it so important to be a part of actively merchandising your product? So if you think about like the shelf square footage if you get like a hanger full of shirts you know that's gonna basically stay in one spot but with loose cans and bottles and packages like that had really high sell-through rates And there's just a simple issue of the product not being stocked on the shelf that exists at all times.

1:03:56There's probably right now the 5 ,000 stores were in at least 150, 250 that don't have magic on the shelf just because someone forgot to reorder it or sitting in the back or it's kind of on top of the shelf. It doesn't even move in the back room. Yeah. And you're getting judged by the merchant on your sell through divided by the store account. And they don't care about excuses of, hey, your employees didn't pack it out. Their model is actually built to have the support of brands come in and put product on the shelves. This is so key and people don't think about it. Like, I mean, the entire kind of brokerage industry, I think, is in some ways an extended arm of the retailers.

1:04:34They don't work for the retailers. They're not on their P &L, but like they're a gating mechanism. and one of the reasons that they have access is because they perform a function for the retailers. And in the same way, like you're saying, hypothetically, it's their responsibility to merchandise their shelves, but realistically, they understand, and it's kind of like a wink-wink, that you're going to have to invest resources in that. And it makes sense. Retailers run at very thin margins. Yeah, especially grocery. That's right. So anywhere that they can potentially find ways to offset or offload costs, they're going to do it.

1:05:06And this is one of the classic ones. So I think it's very getting back to the kind of rollout strategy. Like it's very important to have a region where you can do that yourself and have either yourself or someone on your team in the stores, building relationships, sampling with the manager of your section, getting them on your side. Because those people help shoppers find items. And if you get the store to become even two people to become daily users of Magic Mind, that's 10 units per store per week. And that's a pretty damn good number right there. So you try to like convince the staff to love the product.

1:05:36you sell people on it. There's this whole demo thing you can do. I'm actually anti-demo. I think it's not sustainable long-term. It's really hard.

1:05:44Matt Bertulli:What does that mean, demo? You see the little table in the store. People are giving us some examples. Costco is one thing. You got to do it there. And I think certain Whole Foods, it works. But generally speaking, if you're having to demo, you're in trouble in a retailer. So it needs to work with merchandising. The best thing you can do to drive velocity is spend your dollars as close to the register as possible with sales. and then putting the product as many places as possible near the register or around the store to where people happen to run into your product. So we spend a lot of our budget and our retail P &L on just that.

1:06:14Matt Bertulli:Where do you find... So what I'm listening to you talk, and I actually, I'm wondering, just as an outsider, does your form factor help you or hurt you in retail and where it can sit inside the store? So like at register, is it better at like near point of sale? Or is it like refrigeration? So like if I look at refrigeration, I was in a, I forget what grocery store. We're here in Austin. There was like, it's some store here. Beautiful store. No, not H-E-B. It was another one. Central market. Yes. Beautiful store. Looking at the whole like refrigerated beverage thing. Dude, that's noisy. Noisy. But it's a destination and the perimeter is shopped at a much higher volume than center of store.

1:06:51Okay. And the reality is it's hard to get a permanent planogram placement by the register. You're typically winning that store by store. And I don't think that's a sustainable strategy. I think you you to be able to sell well in your planogram position and then layer in additional placements to boost your velocities and strategic accounts that you're really focused on. And then from there, your promotions do the rest of them.

1:07:10Matt Bertulli:But if everything's, I was looking yesterday, everything is sort of like the same profile of canned. Yeah. And then there's you guys. In that way, the form factor being next to the big stuff. Yeah. It's hard. I mean, on the one hand, it's harder to find, harder to communicate our messaging, but this wellness shot space is exploding and the spins data is growing at 30 % year over year. two years ago last year was 28 it's carrying all the growth for refrigerated beverage right now as olipop exits that cooler and the reason is because two things retailers are waking up to the fact that this is one of the highest dollar per square inch productive items you can put in your store and second the category is expanding and becoming the bridge between vitamins and supplements and functional beverage in the wellness shot space you can get so much more absorption and efficacy for all the form fact all the use cases you have for vitamins and supplements but in a way that you wouldn't necessarily drink in a 12 ounce beverage.

1:08:01You're not going to drink a 12 ounce beverage for heart health necessarily. You're not going to drink a 12 ounce beverage for protein. Maybe you will. People are trying to do a lot of that sparkling stuff, but I think like shots will see a lot more protein innovation. I think you'll see it was built as a category built on immunity and digestion. Really the first one's bringing a focus to this mental performance and cognition. Our sleep shot is hitting the retail market this month, actually in the central market. It's going to be really interesting to see how that works. It's very different from what's been in the set before, but I think you'll see the wellness shot continue to expand.

1:08:29And then it's about like, how do you become noticed within those brands? And you got to have great retail packaging that creates a brand block and a story that you tell consistently back to our first point outside of the store. So that when people see your messaging on your case in store, it resonates and they recognize it. This episode is brought to you by Sorol. You're practically renting attention on meta ads and rent only goes one direction, up. Influencer marketing done as one-off campaigns is just another form of rent. The fix is a system. Seed products at scale, convert the winners into affiliates, put your best performers on long-term retainers.

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1:09:35Matt Bertulli:Did you guys go into retail? I'm curious how you weight the two, but did you go into retail with the mind of, I want to improve overall economics in the business, it'll help support ETC? Or did you go into it from a, the category should just be in retail because this is where the customer buys most of this stuff? The latter. I mean, when we launched, shortly after launching the business, we knew that the goal would be to build an omni-channel business. And food and beverage, I think total GDP is 23 % online. I think food and beverage is 10 % or 12%. I think beverage is less than 10%, something like 8%.

1:10:07So the market is overwhelmingly in stores. And so that's just where you have to be. But I think that's where you create real value in the food and beverage consumer world, at least, is like, you got to be able to sell on store shelves. And if you can't, then your moat is your latest creative drop and meta, and that stuff's fickle and tough. And so you need both. And I think having distribution and earning that space through years of success and buyers continually vetting your product and saying it deserves to be there, gives strategic acquirers a lot more faith that this asset's going to have real lasting value.

1:10:42I've said this before, but the way that I've come to think about wholesale physical retail is very predictable affiliates. And so if you think about it in a digital sense, what we typically do is we go to Meta and we say, hey, I want to hit this ROAS. And so they're kind of like an affiliate. The problem is that they are more of a fickle affiliate. Sometimes it works, sometimes it doesn't. Sometimes the ROAS that they're willing to work for changes. And wholesale relationships are kind of like the opposite. It's like, hey, I am going to pay you X and I'm going to pay you X every single time. And you're going to extremely reliably be able to deliver customers day after day after day in very similar amounts at these kind of economics.

1:11:23And the predictability of that relationship is what I think makes it so good. So, like, I think that in general, like, your business can't thrive. What you're saying, in other words, is your business can't thrive unless you can consistently, profitably acquire customers. And wholesale makes that so much more predictably achievable because of the relationship with the retailers, because they have all this foot traffic that they generate.

1:11:49Matt Bertulli:But then contrast that with what Will said earlier, which is that it's very difficult to drive sell through a retailer. It is. That's why. I mean, because it's so competitive. Everybody wants the relationships with those. I mean, he said something else I think is good, which is that like the profit per square inch. Yeah, yeah. The way to think about wholesale is it's basically real estate and your product is a tenant and they want the tenants that pay the most per inch they take up, you know. And so you've got to be really thinking about how do I make my tenant the most attractive tenant? Because there's 10 ,000 people that want to live in this apartment building where there's 800 rooms, you know.

1:12:22And like you said, they're going to like Target, for example, is bringing in a lot of digital challenger brands. but for every new brand you see in target somebody else went out you know there's a ton of churn it's fixing out it's kind of like la we've talked about this with la like something like 30 of la turns over every single year and it's it's crazy because it's like people come and take their shot and then they leave or i'm sure new york and and new york city is the same way but it's like that's retail and to your point about like hard to drive sell through it is and that's exactly why it's valuable because once you've proven that you can do that and you have the staying power that is what it How do you guys do that?

1:12:57It's the same answer as retention. It's product. I mean, there's a lot of what you can do on the edges and there's merchandising and there's ways you have to introduce the product to customers in retail settings like promotions and building displays. And that stuff is all totally required and sort of the corollary of customer acquisition. But you're trying to find loyal repeat customers that are buying your product in the same store, putting it on their grocery list every week. And so the biggest way to move that needle is product quality and price.

1:13:23Matt Bertulli:I'm happy you said that because I think there's actually a, it is a fallacy to think that ad spend will drive retail sell through. It'll drive trial. Yeah. And the reason for that is that we're actually relatively not spending that much money. Like DTC brands are really not spending that much money. Like if you're watching. Also because you're spending it, you're spending it trying to acquire people digitally. So they've already bought from you. Yeah. And the algorithm is basically. Like if you convert me and I just bought whatever, three months of Magic Mind online, which I'm probably going to do after this.

1:13:51then it's like when I see it in, you know, a Sprouts or something, it's like, that's great for them. But like, I've already got my supply. And so I, I, I think packaging is a huge part of it, honestly, like, and this goes back to what we were saying, like the packaging has to very clearly and very quickly grab my attention and tell me the job that it does. And, uh, and then, you know, obviously like the things like price and promotion and stuff like that, where you're located, like, I actually think you having a different form factor in that location would make me notice you, you know, like that's one way to stand out.

1:14:23I think it could actually be a

1:14:25Matt Bertulli:superpower. It's like you are just a completely different form factor. But it's a great example of strategic positioning. There's a there's a similar, you know, I'm aware of the protein brand space, have several friends in it, but there's a protein bar brand that in Costco, they decided we're going to put ours in the refrigerated section. And nobody was doing that. And they were able to win space because you've really got to think about it from the retailer's perspective, I think in general, we talk about this, but it's like the way you make more money is by figuring out how to help other people make more money.

1:14:53And a lot of people go on to wholesale saying, how can I use this wholesaler to make me more money, which is basically the inverse of the way you have to think. You have to think, how do I help them make more money? Because if they make more money, they're now incentivized to sell my stuff and help me make money. They're incentivized to merchandise my things. They're incentivized to put it in more places in the store. They're incentivized to take it to more stores. But people don't tend to think about that. They think about their needs first. And I think that that's the reason why a lot of times they approach the fault.

1:15:19There's two things we put in our retail sales deck that really resonated. So we're going to bring more shoppers to your store and more shoppers to your category. And within that category, we're not going to cannibalize your other products. We have data on that because we're not selling the 10th immunity shot. We're selling this whole new thing. And we saw some data for numerator and Publix, 50 % of the people buying Magic Mind have never shopped a Publix wellness shot set before at all. And once they shop the set, they're actually spending money on on Vive and Sujo, these other shop brands and adding money to that category.

1:15:49And that buyer is getting bonus on how much did your category grow this year? And so they are always trying to look for the tenant who's going to pay the most, but who's also not going to contribute and drag down the others around it. So incrementality is really the name of the game. That is the word that we hear all the time. And it's interesting what you just said, because again, people don't think about this. Too often we don't think about the economics of the people that we're working with, and that makes us worse at our job. Like, if I'm the buyer in that section of Publix, I, yes, I work for Publix.

1:16:20And in some ways, every Publix customer is my customer. But practically, 80 % of Publix customers buy nothing from my section. And so, my job is actually acquiring customers just like our job is acquiring customers. Like, how do I convince people who are coming here and just getting suntan lotion and, you know, stuff from whatever. Tactically, how do you guys do that though?

1:16:40Matt Bertulli:I guess this is where I hear you. Yeah. Makes perfect sense for me. But if I'm Magic Mind and I'm going into a Publix, how am I as a brand going to impact the people walking through the store? And how do I get them over to this section that they've never been in before? Yeah. So the one thing out of store, so we have three buckets internally, bucket one, two, and three for how we support retailers. Bucket one is trade spend and like truly reducing the price of the product. and merchandising and online merchandising is two. So I include retail marketing spend in that bucket too of like ways that directly affect sales.

1:17:14And then bucket three is everything outside of the store. We've tried a bunch of stuff. There's ways to move the needle temporarily, but the only thing that correlates for us long-term is overall growth of media spend. And we see velocity go up across our geographies as we grow national level media spend. And there's a reason that Coca-Cola can spend billions of dollars a year. it's because they've got hundreds of thousands of points of distribution and you're staying top of mind to them and you're seeing billboards everywhere you walk of their little cans and you buy them. And so we are focused on doing everything we can in buckets one and two to give us trial and then everything we can do to have a successful online business that allows us to continually grow our ad spend year over year, month over month to be able to grow that trial even further from that kind of bucket three of outside of store stuff.

1:18:02So we have the advantage of having an omni-channel strategy in a set that doesn't typically have that. If you're a cold-pressed juice shot, you can't sell DTC. If you're a 12-ounce can, you can't sell DTC. And so that's been our leg up. But you only get that trial through everything you're doing outside of the store. It's about back again to repeat retention and product to maintain that over time.

1:18:23Matt Bertulli:This must tie back then to the geography piece that we were talking about earlier. It's like when you go into a California, into a retailer, that's like highly dense in California, like high density, you can spend more dollars per person in that region, media dollars. Yeah, it might just not all show up meta. And then at the same time, you're having people who are having discovery moments in retail, falling in love, telling their friends about it. Sure. And so it kind of works both ways and the flywheel can hopefully spin both ways. Have you had to shift your media mix over time as you open more retail points of sale?

1:18:53They're probably going to be more top of funnel, right? We are trying to get more and more top of funnel. I don't think we've been able to execute on that yet. candidly so we're currently working with some great tv production agencies to do some long form content that will be on connected and linear tv starting in the fall um we've done some tests with connected and we've done more stuff with youtube more stuff with meta reach um it's really hard to attribute this stuff so we're actually doing our yes we're doing our first national level holdout uh to see at the retail level what happens when we turn off media spends and that's one thing we're trying to be really smart about.

1:19:27We want to be like the smartest about how do our digital dollars flow through the registers at retail? Because we can figure out all the stuff online. That's the piece where it's really difficult. And we want to do it. It's so hard. I mean, national holdout terrifies me. It's a little terrifying.

1:19:40Matt Bertulli:Yeah. Especially in the phase of CAC headwinds. Yeah, I know. CAC's going up. You know what we're going to do? Turn off half the country. Sounds so intuitive. Yeah. We're in the middle of it right now. As you become more omni-channel, I think going up the funnel is the right way to do it. And in some ways, you kind of said it, the dream is to eventually be a almost exclusively top of funnel outside of trade spend the way that Coca-Cola or Gatorade has gotten. Three spends wide. They're doing that. Yes. But it's hard. I think that that's the ultimate is to be able to have that kind of allocation of your media dollars where you're like, I've used this analogy before, but like top of funnel is like rain, but you can only do it if you have like a big amount of kind of surface area to soak up that rain.

1:20:27If you've just got a little can, it's not going to make any sense. And so, um, but yeah, like, I think we think about it the same way that like where you want to get is you want to get where the Yetis and the Coca-Colas have gotten where you can go all the way to the top and just have a really big awareness. But that is like the kind of God tier achievement for a brand. The level of difficulty to stair-step your way up there. Well, it's orders of magnitude more difficult than profitably growing on meta is pretty much what I've come to. But it's infinitely more durable. Exactly. And that's where I think, like we mentioned with consumer, VCs don't really want to have anything to do with consumer because what they've realized is the percentage chance of you turning into a brand with durable cash flows is very low.

1:21:12but like you know buffett is the classic i only want to buy things if i went away for 30 years and i came back and people were still using it and he's investing in things like coke because yeah like you could pretty much bet that three decades from now i i have more confidence that coke will be positioned the way they are three decades from now than i do in nvidia or google you know you mentioned technology like so when you can get to that highest level of awareness with consumer, it is probably the most durable types of cash flows. It's just incredibly hard to do. I do think the pendulum has swung a little bit back from an investor perspective on just general kind of DTC.

1:21:49From what I'm hearing from both strategics and investors, it's like quality EBITDA is quality EBITDA. And it's just like, it's a little bit maybe more valuable to have retail heavy stuff because it's more durable. But if you build and establish a track record of consistently profiting from your digital business i think that's now valued at pretty much the same

1:22:08Matt Bertulli:multiple i think it's also swinging back because they just had to like the living shit skater out of them with ai and all these companies well sass looks horrible yeah it's a sass doesn't look so durable anymore right yeah and i i think the investor community like particularly vcs nobody talks out of both sides of their mouth more than that cohort of humans right so like on one hand they're like we're we're we're swinging for the fences we're looking for the next apple the next Googled or whatever. I'm like, bullshit. You are making investments in SaaS companies going after like a little 10Xer, right?

1:22:40Matt Bertulli:Because if you actually wanted an out, like a genuine outlier, you probably would go try to find the next Coca-Cola because consumer brands, historically, they are the oldest companies in the world. Well, the question is - There's no 100X in consumer. Yeah. Is it possible even to find the next Coca-Cola or is some of this like, there was a moment in time where a lot of these brands, kind of like the West being settled, where like there was going to be a soft drink company that was going to emerge and it was going to get to scale and and coca-cola like there's a great acquired podcast episode about this where like one of their big getting to scale moments was world war ii they and they were like they called it like the world's best uh like sampling program of all time or whatever the military was paying them to send coke everywhere and get people to sample it but so there are some questions about like, can you recreate some of the things that led to some of the behemoths today?

1:23:30Yeah, yeah. That answer is definitely yes. I think the answer too is like the consumer investor is different from the tech investor because they have to be. Yeah. I said no 100Xs, there are definitely 100Xs in consumer. There's no 10 ,000Xs in the same way there are.

1:23:39Matt Bertulli:Yeah. No, yeah. I guess in tech, like you can put a little bit amount of money in and get like a ridiculous. Yeah. So people in consumer need to be very focused on protecting their downside, which is why I think you've seen a lot of capital accumulate at the post-product market fit stage where there's a lot of bidders on marquee assets and a lot of people now just offering founders secondary shares sales to get in on those companies that don't even need money to be raised which is actually probably smart strategy but yeah I think in consumer it's it's more durable but harder to get there and there's probably a lower ceiling on what's possible there I mean Coca-Cola is a cool I think the answer to your question is like can you look at history and pattern match to it i'm like didn't coca-cola invent the modern day vision of santa claus yeah like isn't that actually like when we look at like what do we think santa claus looks like prior to coke it was like a very different visual of what santa was and then post coke it's like we all have the exact same this is what santa looks like right and most people most consumers don't know that right why would you you need to be a nerd for this stuff to know that but all my daughter found out santa claus wasn't real by the way come on somebody was like you know coke and ben at santa class, right?

1:24:46She's like, what? Why did you tell that to a child? She's eight years old.

1:24:50Matt Bertulli:I'm judging that person right now, whoever that is. So yes, Magic Mind, make a Santa and you're going to be fine. Maybe you can take the Easter Bunny or something. Just like hop the Easter Bunny. So we haven't hit on this yet. What is the scale of the company at this point? How many employees? Give us some of the top line kind of ideas. Yeah, so we've got around 30 ,000 subscribers on our website, a little over 5 ,000 retail doors. The team has been historically very lean, maybe to a fault. We're now at 18, which feels right for our current scale full-time employees in the U.S., another four around the world that are full-time and another couple of part-time folks that help out.

1:25:31and yeah we're fully remote of a weird culture as I talked a little bit about no slack no messaging apps allowed we have this really cool remote virtual office software called Rome that I'm a huge fan of that makes our virtual life actually work and the remote life really work everyone's got their own little office and you can pop in knock on someone's door and we have a lot of audio conversations if there's ever an emergency you pick up the phone and call someone emails are expected to be read and responded to 24 hours later so anything urgent pick up the phone I feel like we've lost that muscle.

1:26:02But we want to create as much opportunity as we can for our employees to have deep blocks of time to work and think. And so everything's sort of optimized around that. Makes sense for a company focused on mental performance.

1:26:15Matt Bertulli:Well, this thing that you do, which is this philosophy you have, this approach you have around trailing 90-day average devotions. What the hell is that? It's probably the top advice I give founders who are starting up who I talk to. and it's really about the mentality and the approach to entrepreneurship. There's just so many ups and downs that you have that are so extreme when you're bringing something to life or managing something like a company that you will truly just get worn out if you follow those ups and downs to their full extent. There could be actual days or even hours where within that same hour, you will simultaneously have the thought, oh my God, this is a unicorn.

1:26:52I'm going to be so successful. And then 20 minutes later, holy shit, we're going bankrupt for sure. This is over. and you cannot follow those ups and downs and survive it for the decade plus that it takes to really build an enduring business. So I tell people have a 90-day trailing average emotion when it relates to how you're feeling about your company. If things are trending now for 90 days, you should use that as motivation and you should start to panic and you should use that as fuel. And if it's going up into the right for 90 days, let yourself enjoy that because those periods happen, but there's really regularly intersplice with much more choppy waters and it really serves you well to soak that in so it just plays out as like not letting good news gets you too excited or bad news gets you too down but like if things are really going well you could let yourself just feel that and actually you know enjoy that enjoy that feeling of pride and happiness that comes with that performance and if it's going the opposite direction like let it motivate you

1:27:47Matt Bertulli:so then on that on the whole up and down thing like what would be uh a big down like what's the let me put this in a way like what's a very expensive mistake that you've made that would have been like a oh god yeah i think anytime you're looking at your cash forecast and it's going negative that's the moments that keep you up at night um and you know we've had our first year as we um hit profitability last year but there was five years of not running out of profit and um always kind of looking at runway and um and understanding how much time we have to hit certain goals before raising more capital or changing our growth strategy um but yeah i remember one mistake it was really a stupid mistake uh and from the finance guy probably a fire will look fast i actually offered my resignation to my partner i know this happened yeah i was running the company model which is still the model we use today it's a badass interconnected google sheets thing that does inventory and like love life all this stuff it's great i'll show it to you someday but i had a very dumb error on how we we had taken on debt which is probably the first mistake i mean and you know now i won't touch debt until we're very from new profitable and it's like a retainer a revolver type line of credit for working capital funding but um you know we had taken debt at this time and i had just totally botched the way that the spreadsheet connected into my model and it was uh adding cash and sort of subtracting as we were paying interest so very stupid my model was built on the negatives being this way and it being sums and this one was built on subtraction and it being a public and so stupid mistake and i i caught it i came back from my honeymoon and i caught it i realized that we had less than three months of cash in the bank thinking that we had more like nine to twelve and uh that was a big oh shit moment and i think the thing i took from it was one like obviously attention to detail you can't for big things you gotta and you know secondarily to that like following your gut and like the envelope math trusting that more than the spreadsheet i think has been an important lesson I've come to learn.

1:29:48But the bigger one was like, I was the only guy at that point, really running the company. And I needed help. I was just in kind of over my head with the size that we'd grown to. I think we had one full-time person with me who was head of customer service and a bunch of agencies. And I was managing the full op stack and finance myself. And I still hung on to that. We were in 30 different components into a bottle, a case of MagicBine. I was managing that entire supply chain on top of everything else. And I just didn't have time to spend the quality time needed on really important stuff. So that was pretty bad.

1:30:21And you, as an operator,

1:30:23Matt Bertulli:it's like you've built a team up now, you've got 18 people. Have there been things in the business then that you've, like that sounds like, that's just an awesome thing. So let's just first say that. Like that happens. But then have there been things as the guy running the place that you've invested in where you're like, you're looking back and you're like, I don't know why we invested so much money in this or like why we put so much. Yeah, I mean, dozens of things. Yeah. Is writing the sands out to like, we did it this way for so long that like, I don't know. Like I look back now, I'm like, well, that was stupid.

1:30:49Yeah. I think we, I mean, we try to do the kind of fire bullets before cannonballs approach where you keep your bets small and then you put money behind it when it starts to work. Um, and we've had some weird explorations. We hired two full-time B2B sales people to sell corporate subscriptions to offices like software and spent about nine months until we realized that was not going to work. Um, but you know, we never invested too much capital. And for the most part, I think we've, uh, we've been pretty measured and responsible in that regard. Um, you know, our influencer marketing strategy has changed in the last year.

1:31:21And that was a really big area of investment and one that no longer is being invested in the same way. But I'm, you know, I think there, there were probably ways I could have transitioned away from our previous strategy better. And so we actually had a full team based in Eastern Europe, we had 30 full time employees working on Magic Mind's behalf, signing direct deals with YouTubers and podcasters primarily. So we were pumping out 500 deals per month. Average deal size was$300. They were all highly negotiated, even though they were small dollar value. And we got a ton of, you know, ton of sponsored content deals on YouTube out of that.

1:32:00It was very hard to attribute. The team got quite expensive. You know, it was over$75 ,000 a month for team costs, including the only Magic Minds office in the world was in Romania. There was an office they were paying for it. Go over there and it was awesome to be in an office. But yeah, it was just very expensive. We were spending on top of that, you know, 100K plus on the actual deals themselves. And it just didn't attribute. And like, it was hard to know, is this for sure working? Seems like when you looked at that total working marketing payback figure, like that was getting blown out the bigger that team got, even though, you know, the business was achieving more scale.

1:32:37And, you know, I sort of made decisions. Like if I can't see it, I've got to kind of limit this investment. but you know part of the decision as well was was this really something that we could see ourselves 5xing is this team of 30 going to go to 150 and you know i don't think it was going to so for the long-term strategy the business like we need to find scale on other avenues so we kind of brought that team uh way down and it's actually uh virtually gone today but i think that was the mistake at what what i've realized is they were providing a huge boon of outside traffic off meta coming onto our site.

1:33:10And even if they weren't using the discount code to buy and the attribute revenue wasn't great, it was teaching Meta who to target, giving it lifeblood. Yeah. And I think the regret is I wish that I had foreseen that and replaced it with different source of top of funnel traffic, non-correlated to Meta, as we kind of limited the investment. How are you thinking about creator or influencer today?

1:33:30Matt Bertulli:This is like a major topic right now. Yeah. In consumers. Yeah. The evolution of creator over time. And now we're in this, like the TikTok shop, the vacation of creators. Like everything's going affiliate. You know, whereas it started out more what you were doing. So how are you thinking about this as a brand? Ship Heroes Horizon Summit is coming and Titans listeners are eligible for free VIP access. Horizon Summit is taking place in Las Vegas, September 16th through 18th. This is where the industry's leading operators get real about how they're optimizing fulfillment. What's working, what's not, and what's next.

1:34:04VIP passes include an exclusive tour of a state-of-the-art warehouse so that you can see these ideas in action, not just hear about them. Space is limited. Head to shiphero.com slash titans and request your VIP pass before they're gone. Like many others, listen to the Hudson episode and I was like, man, I had the whole infrastructure.

1:34:24Matt Bertulli:Yeah, I gotta go over 40 ,000 girls. I could have just turned that team to be focused on TikTok and affiliate. It probably would have been really compelling. So that's maybe another regret that I have. But we are sort of rebuilding from scratch. We think it's also important to like really own the relationship with these people internally. And that's one area where we were falling short in Eastern Europe. These people were great, diligent, you know, great folks to represent the brand for us. But externally, it didn't really represent us super well. English was their second language. And kind of as you moved up the ladder of creators, it was like not serving us to have them managing those relationships.

1:34:58So I want to kind of restart it from first principles in the U S using more technology that allows us to scale our, um, kind of creator management efforts and be managed by fewer people, but kind of higher cultural affinity people in the U S.

1:35:11Matt Bertulli:The allure of the AI thing right now is like, can I, can we use AI to do a lot more communication in like our tone of voice? Yeah. Right. So like, cause the thing that Hudson does is insane. Like the volume of people you're talking to is just mental. How, I got a question on this. that you had a thing that was like scaled up. So you had a team of 37 people in Romania. You pull it all the way down. How do you communicate internally? Like, how are you leading the rest of the company through some kind of transition like that? How that, like, that can kind of be a little demoralizing. Like, I've done it.

1:35:43I just want to know how you deal. Yeah, I think, unfortunately, we've got a lot of other exciting things going on in the business, but it really is just being honest of like, you know, our goal is not change. It's profitable growth. Yeah, we feel that this strategy is not serving that goal. And so we're going to wind it down, decrease our investment and pivot the strategy. Here's what we're going to focus on. Here's why we think this is the right move. And let me know if you disagree. Let's talk about it. But this is where I'm coming from as the leader. And obviously, that's been sort of pre discussed with the leadership team.

1:36:12And you have like constructive strategic conversations there. But once we made our minds up, we just told the truth and the team understood. And, you know, just have a lot of gratitude for that team. in romania there's you know the guy who ran in particular sebastian shout out to him is awesome guy super hard working and um you know he did a pretty herculean effort to stand up a team of 30 yeah over there and um just it was sad for me to wind it down because you know he's become as a friend and yeah you guys have all the part ways with people you care about and it's probably my you know doesn't first summer that's happened but you just got to be honest and stick to the needs

1:36:47Matt Bertulli:of the business so as you guys have gone from sort of like startup raising c capital you're building the company, has there been a stage of growth or a new thing that you've done that has been just like shockingly more difficult than others? It's a good question. I think they've all felt difficult in their own way and maybe in different ways. Like I think the first months of the company, you're just trying to figure out who you are, what your message is and how to really do it, how to get customers, how to acquire them, how to keep them around. But then in retrospect, actually like, man, that was pretty, pretty nice back then.

1:37:19We could just put statics out and it worked. So I think it changes. I think the stage we're at now where we have to appeal to a much broader set of people, and it's not just a niche audience that's going to contribute to our growth. We kind of have to overlap our concentric circle of personas into a wider, bigger audience, and then kind of refactor that messaging. It's proven challenging, but I'm sure we'll look back on it and say, you know, that was pretty straightforward. Um, I think just the, the boss battles get bigger as you go through the video game and you just got to fall in love with the, the grind and like the battle itself.

1:37:53So that's what we're doing. I love it. Okay. What's the number one way you've changed as a person as a result of being the CEO of this company? Uh, so it's interesting. I actually took the, um, Enneagram personality tests as I started off leading Magic Mind. I took it again recently and it actually changed. And it was still pretty heavy type two. And I just thought it was interesting. I think I was sort of in fake it till I make it mode. And then I feel like I've done that long enough to where it feels natural. And I have true kind of inner confidence in what I'm doing. And for a while, I've been in this kind of startup food and beverage world for over 10 years now.

1:38:34I was worried I made a mistake. I left this high paying finance career and I see my friends who stuck on that track achieving, you know, from a salary perspective, plenty of success. And I'm working in warehouses and doing odd jobs to keep businesses going. And it started to question if I had made a mistake, but I'd always stayed true to what brought me the most peace. And that always was the way I kind of navigated towards my path. And I'm fortunate that it feels like it's worked out in the regard of, I wake up every day excited to do what I'm doing.

1:39:05Matt Bertulli:So William, I want to finish on the Titan 10. We do this thing at the end of every episode. Basically, it's a bunch of random questions. Well, not random. We plan them. But they are questions that get at the root of how you run the company and how you think about things. I want you to answer them as like gut feel as you can. Cool. Cool. All right. So you get to a desert island. You have to manage your business. All I give you is a piece of paper with three numbers on them. I give them to you every week. What are the three numbers? So that's impossible, but fun question. Yeah. Okay, I'd say net revenue, CAC payback period, and net profit.

1:39:39Matt Bertulli:Okay. You also get to take a book, but the book can't be about business. Could I take a Grateful Dead album instead? Yeah, 100%. I'll do that. Yeah. Great answer. That's a burst. What is a contrarian belief that you have about business that you think other CEOs or other founders might disagree with you? I think that gripping too tightly to a desired outcome can blind you in decision making and make that outcome less likely. So I think that the kind of wanting it trope can work against you. And if you release yourself from outcome and treat the whole thing as an exploration of enjoyable play, then you're going to be able to play the game longer and you're more likely to win.

1:40:24Matt Bertulli:It was very Rick Rubin of you. I like it. These like the mental performance, like that's who we need. Yeah, yeah. Right. That's the, that's who we want, but that's who we need. What is the single most important word in leadership? Service. Single most important word in business. Persistence. Best meal of the day and why? Dinner because of the people you share it with. Dude, the answer is breakfast because you start with that magic mind. I got magic mind sleep at night. What is your favorite meal? Wrong. It's breakfast. Take magic mind. what is your favorite color i'm trying to make ads for magic mine here he's bought it by big breakfast okay so right now most overrated growth tactic in consumer i think product seeding without the proper strategy behind it and communication just giving away product to influencers okay so what's the proper strategy you gotta write down that I think you need to have real communication behind it.

1:41:25I mean, you can burn product really quickly if you're just sending it out blindly, but like I'd much rather take a more targeted approach and have communication and follow up and just the product costs add up quickly. Just because it's in an inventory doesn't mean it's not cash on your balance sheet. Okay, then most underrated tactic?

1:41:42Matt Bertulli:Investment in product. Love it. Dude, that is it. I think that's the pod. This was awesome. Cool. I appreciate everything, man. And this is, I learned a lot. Good to get you to know y 'all. That's great. Have fun.