James Beshara: How a Dangerous Problem Led to a Magical Solution

0:00With startups, so much of the time, especially first-time founders, can just be like, I'm going to confuse activity with achievement. We're moving so fast. We're working seven, eight. I only knew that this wasn't the way because I did it for six years, sent me to the ER with a heart condition. With Magic Mind, I was like, nope, we're pushing a boulder down the hill instead of pushing it up. Six years in, I want it to be getting bigger than six years in, being in an 18-month stupor, waking up, feeling like, how did I get into this position?

0:30Mike Maples, Jr.:That's the voice of James Beshera, founder of Magic Mind and Apt.AI. For most of his 20s, James tried to go big as a startup founder in a hot category, where he burned tons of money in hopes of getting big fast. Instead, he ended up with a heart condition and a fire sale. So he decided to radically rethink his approach and start with a problem that he actually had. Today, his mental performance drink Magic Mind does$50 million in revenue with 12 people. This is Mike Maples Jr. of Floodgate, and it's go time with James Beshera. This is Mike Maples Jr. and welcome to the Pattern Breakers podcast, where we explore why some founders radically change the future and how they stand apart.

1:15Mike Maples, Jr.:Together, we'll learn about the counterintuitive mindsets and actions behind their remarkable success. Brace yourself for a world where chaos is welcome, naysayers are often a positive signal, and movements galvanize misfits who transform the impossible to the inevitable.

1:43Mike Maples, Jr.:James Beshera began his journey with technology by fixing computers at age 14. His first big swing was Tilt, which eventually raised at a$385 million valuation at its peak. But as James puts it, they built a lot of things people liked but nothing anyone loved. Four years in, Tilt sold to Airbnb in a fire sale. Magic Mind is what happened when James inverted his approach. A heart condition that grew from his stress as a founder had forced him off of coffee, and he started asking what to do instead. With Magic Mind, he built the thing he needed for himself, and it turned out a lot of other people needed it too.

2:23Mike Maples, Jr.:The number one reason startups fail is they solve a problem that only exists in the founders' minds. But when you scratch your own itch, you already know the problem exists in the first place. And you are already a domain expert. You already know where the other solutions fall flat. and you are likely to find yourself inside a like-minded community of people with the same problem. James shows us how the path to something people actually love usually starts much closer to home. Let's talk to him.

3:03All right, well, James, welcome to the podcast. Mike, you know, they say never, never meet your heroes. And I will say, if I could be effusive for 60 straight seconds to kick this off with, with this is real talk too, because you've backed me twice and you were just as supportive in a company that you didn't back and you still found time to meet with me, but being from Texas, seeing you as the OG seed investor that kind of created the whole category and, and best in class, uh, venture investor. I was like, I got to get that guy from Texas too. on board with what I'm doing. It took a couple different attempts a couple years before that happened.

3:44But man, as a hero of mine, you are 10 times better as an investor and as a mentor and friend than any of all of the amazing praise that you get. It is a true honor to be able to do this with you.

4:00Mike Maples, Jr.:Well, you're going to get me all misty-eyed before we even get started. So, you know, somehow we didn't intersect in your first company, Tilt, right? But I remember us meeting one time and thinking, man, it'd be fun to work with this guy someday. And, you know, you never know what's going to happen. And then I remember there was some article, maybe it was in TechCrunch or something that announced the acquisition of Tilt by Airbnb. Oh, wasn't the best assessment of things? No, it was basically Airbnb got this amazing discount. And, you know, my 20s was just filled with failure after failure after failure.

4:39So you're seeing me on my third tour of failure with Tilde. In some ways, everyone was like a failing forward. My 20s, I was like, what is the biggest startup I could possibly start? And if Facebook is the biggest startup of the day, then a social network around money. Yeah, that would be even bigger. So aim to build that with this obsession on a solution without the obsession on a real problem. And we built a handful of lukewarm-liked things, but never anything loved. And then got to a$400 million or$385 million valuation two years in. And then four years later, fire sale, skin of our teeth, we were able to get an acquisition over the line with Airbnb.

5:20And rightfully so. We got a lot of bad press for just not achieving what anyone thought we had a chance to do, but certainly not achieving what my co-founder, Kayla, and I set out to do. And you are so gracious on the other side of that.

5:35Mike Maples, Jr.:Well, and I remember at the time seeing the article and feeling that it was pretty unfair. And so I think I think I dashed off like an email. Like I do this every now and then. Like, I'm like, man, this guy is probably feeling like crap right now. And, you know, but for gusts of wind, sometimes these things work or don't work. And so I think I dashed off some email that said something like, don't don't, you know, ignore these ignoramuses. They don't know what they're talking about. You'll be back someday. No, I'll tell you exactly what you said. You wrote me an email and said, James, there's greatness inside of you.

6:12I can't wait for the world to see it. I think I was starting Airbnb within the next few days. And this absolute low of the low for probably 18 months had been waking up, putting both my feet on the ground of the carpet. I still remember the carpet, still remember how it felt when I'd get out of bed for those last 18 months feeling like I was in a nightmare of my own making. It was so clear, man, I made all these decisions and they have not gone the way that we thought it would. And then to get some reprieve of just like, okay, well, we found a home for part of what we're building. And it's not the dream, but it's not nothing.

6:56And it's Airbnb. be. It's the best startup on the planet that we get to go join forces with and start and begin a new chapter. I mean, I still had to take a two-hour nap every afternoon. I would find a room at Airbnb, try to take it to out for about six or seven months after acquisition because I was so burnt out. Had no idea until after that, maybe month eight when I no longer needed a two-hour nap, that was a pretty good sign of like, oh, wow, James, you are really burnt out and depressed. But in the middle of all of that, there was a note from you, a note from Naval, a note from Jeff Jordan.

7:37The three of you all wrote me notes and a handful of other friends along the way. My co-founder, Kayla, and I, we had each other's backs. We still do till the day we die. But man, out of all of it, I will elevate yours, rightfully so. That was so meaningful just for someone to believe me in the midst of chaos where I didn't think anyone would ever again.

8:00Mike Maples, Jr.:Well, you know, you've had a pretty good run since then. So, you know, maybe we should shift gears a little bit to Magic Mind. So you're at Airbnb for a little while. What was the setup for why you started to think about doing Magic Mind? You know, you'd invested in some direct-to-consumer ideas. You know, you definitely had a thesis for what you were trying to do, but what, you know, what, what drove it at the time? The thing that I noticed was that when founders call it concepting, when they sit down and concept out, like, here's this trend and I should build on this trend, or here is this huge space that, I mean, if I built something in that space, it'd be really valuable.

8:43And that's what I did with Tilt. So I was thinking through these two different ideas. One was a concepting idea of like, this would be a really big idea and I could see it opportunistically. And then there was this other idea in my last endeavor. I had gotten, I was drinking six to seven cups of coffee a day, sends me to the ER with a heart condition. My doctor tells me, you know, with your condition, James, you really can't have more than 80 milligrams of caffeine a day. And I was like, it's like 26 at the time. I was like, what is that? Two cups, three cups. He's like, no, that's a half a cup of coffee.

9:14And I was like, there's no effing way I can get through a day on half a cup of coffee. And so he said this one thing to me, he said, have you ever tried green tea? It has this compound in it called L-theanine that extends the body's absorption of caffeine over a longer period of time, which is great. But it also dials down the body's stress response to consuming caffeine. I was like, wait, consuming caffeine spikes your stress response. And I'm stressed out all the time. Maybe this is kind of related and wait, there's this L-thea stuff that I could So my engineering brain just went crazy down the rabbit hole of all of the things that I could add to that 80 milligram, that half a cup of coffee to make it last all day.

9:53And I'd been doing this for years. And when we started chatting, I was 32 and had become the nootropics, adaptogens, functional mushroom guy. And lo and behold, I was like, how is there no direct to consumer energy drink? And I know e-commerce like the back of my hand. So it was kind of a understanding of what I was really great at. and really knew and loved. I knew about building consumer brands. I love building consumer brands. It's what I'm wired for. So I was like, this is probably maybe a small Shopify project, but I'm going to scratch my own itch. And I've already tried the concepting thing.

10:30I think there's daylight here. What's so beautiful about building, scratching your own itch, as the phrase goes, is that you already are a domain expert. You know what solutions are out there and what aren't great. I'd love to hear your view on this, on why solving your own problem is so powerful.

10:47Mike Maples, Jr.:Yeah, and you and I are both fans of Paul Graham, obviously. One of the ways he puts it really resonates with me is that the number one reason startups fail is they solve a problem nobody actually has in the real world. So they have their idea of what a solution ought to be, and they have their idea of what a problem is, but it exists in their mind and not reality. And so they've got a mental model for how the world should be that it just isn't true for how the world is about to be. Whereas if you're if you're solving your own problem, if you're scratching your own itch, you don't know how big it's going to be necessarily.

11:23Mike Maples, Jr.:But one thing you do know is that you're solving a problem that exists, which kind of puts you at the top decile of ideas. you know exactly and you're an inherent domain expert there's so many it's like three powerful reasons why i tell founders you will hedge yourself so much more by solving a problem you have because one you're going to be a domain expert to know what else is out there by definition two you're going to know where the other solutions fall flat and you're already going to be obsessed obsessed over the problem because it's a problem you have and then three you're already going to be plugged into the community of all the other people that have that problem so you're going to to be able to get the feedback cycles, they're going to be so good for you.

12:02With Tilt, we had that a little bit and we took it far. It was a fast growing app within college campuses and we got to amass the smartest group of team members around us. It's like, yeah, that's kind of a problem. All right, I'll try that out. But as soon as we tried to charge any money for it, 2%, 5%, people are like, it's not that big of a problem for me. I'll just switch. Yeah, we'll switch to the free solution. So with, with magic mind, anybody that's almost by definition obsessed with coffee is underserved by the solution. Coffee is supposed to give you. If you love coffee to where you have three cups, four cups a day, then by definition, that first cup isn't doing its job of giving you the energy you want throughout the day.

12:40It'd be like, I love cars because everyone I buy dies within three months. I got to get another one and another one and another one. Um, and it's funny when it comes to coffee, people are just like, oh yeah, it's, uh, it gives me three hours and that's it versus what is possible. And, and again, you, with magic mind, you don't have to replace your morning coffee, but if you take alongside your morning coffee, you might find out that it gives you energy that lasts, that makes that, that first cup last all day.

13:05Mike Maples, Jr.:So then I remember, uh, seeing you and you were, you were just about to leave Airbnb and you were thinking about this. So like, what, what was that like from your perspective? So I remember I was trying, I was actually trying to convince you to raise money, I think for a little while, uh, because you were very resistant to raising money. I was still at Airbnb. I had like two days left and you were like, I will, I want to write you a 500 K checkout, whatever you start next. I want to, I want to back it. And here's this idea that, that we both are kind of circuit circling around of if you can make magic mind work um as a first entry into this space of direct to consumer version you know at a improved distribution model and improved product you got to have both it can't be like take colgate and then you know sell the toothpaste on ddc but if it's a better toothpaste and and magic mind is a better energy shot than anything else out there And then you combine great direct distribution to consumers, get feedback, iterate to the 50th iteration and make sure it's super dialed in.

14:15You got product market fit. Then you go into retail. Then you have this huge brand awareness that carries over into retail. Then you go get the shelf space and you do it again and again with other brands. And we both love that idea and that combination of a better product with better distribution. one of the things that we both saw is if you could do this once you could do it again and again because of the same back office what made you want to write and i remember you texting me and i was like i never in a million years thought i would be turning down half a million dollars from my my favorite legendary investor wanting to back me but i think one i was at a point of just not a whole lot of confidence in myself i was just like i don't want to lose anybody's money ever again That was so painful.

15:01Real quick, I want to just open up and ask you, what was your strategy, thought, doubts around that?

15:09Mike Maples, Jr.:So normally, direct-to-consumer types of ideas just terrify me. I think most of them don't work. And even the ones that get a lot of attention usually don't work. They kind of go up on the way to going down. there were ideas about your premise with the magic mind that I thought, well, people like this. It's going to be a daily habit. It's a continuous revenue stream and you don't have to reacquire the customer and you get high margins. And you were describing this drink and you're describing what it costs to create one unit of it. I was like, man, you know, at the limit, this is almost like SAS margins.

15:47Mike Maples, Jr.:And so one way I like to think about situations like that is to say, okay, what's the minimum amount of money and time that we could spend to either prove that the biggest risk is not a risk, that we've crushed it, we've solved it, or we say, you know what, we falsified the idea, but we didn't spend much money or time on it. We'll know within six to nine months if there's a business here. And then the other thing is, when I looked at you as a person, I was like, James is going to be the first guy to tell me that. I'm not going to have to, like, if we're six months in and there's nothing here, I'm not going to have to be like, well, can I have the rest of my money back?

16:29Mike Maples, Jr.:You're going to, it's going to be a badge of courage for you to make the most of that 500 or say, hey, you know, I'm 200 ,000 in and I don't want to do this anymore. It's not a business. If you go into a situation saying, look, we're both grownups here. This is not, this is a no harm, no foul kind of thing. This is something where it might work. It might not work, but we can't know unless we try. And if we prove that it doesn't work, you and I are no worse off. We get our time back. We'll live to find another day. We'll find the next one. And if my memory serves me, I think you even ended up putting some money into the round, right?

17:02Mike Maples, Jr.:I said like now that you, yeah, you were like, now that you put it that way, why don't I put some in too? Yeah. I put 500K of my own capital in as well, but knowing exactly what you said of like, okay, well, I want this to be here in case we are, it's so easy to make a call on a Tuesday after a lot of data, this isn't working and return the capital. But if it's working, then I also wanted to have the right runway to seize the opportunity. I wanted to see that the world didn't want this because I had just spent six years pushing a boulder up a hill, like I said, for something that people lukewarm liked.

17:38There was a lot of people that really liked Tilt, but then you try I charge them 5%. You're like, I don't like it that much. So I wanted to make sure that the world really wanted this, that people really wanted this. So for the first two years, and I always think about the most important skill that an elite running back has is their patience while the gap opens up. And you see elite athletes that can carry a ball, not become elite running backs because they punch the gap too early. And then you see the elite running backs that have that elite athleticism. They wait. Like you're like, wait, why is Emmitt Smith growing up as a Dallas Cowboys fan?

18:23And Emmitt Smith was he was the goat at this. He'd get it. And just it was almost like a cartoon where his legs are spinning, but he wasn't going forward yet until it opened up. Boom, he would bust through the gap. And I think with startups so much of the time, especially first time founders can just be like, I'm going to confuse activity with achievement and we're moving so fast. We're working seven, eight. And this, this, I only knew that this wasn't the way because I did it for six years, sent me to the ER with a heart condition. We were doing everything quote unquote, the right way. Uh, we're doing it right.

18:56Pouring every time we move four different cities for it. Um, we, we raised from all of the best investors. We've got everything around the table and it was like the elite athleticism, but then every step of the way is like, we got to go faster instead of the very beginning. Do people really love this? Do they really want this? And do we have the right business model or do we have a very fast, viral growing consumer product? And with Magic Mind, I was like, nope, I'm going to make sure that this can be built in a healthy way. And that we were pushing a boulder down the hill instead of pushing it up in six years.

19:25And I want it to be gathering more momentum, going faster than ever getting bigger than six years in being in an 18 months, super waking up feeling like, how did I get into this position?

19:36Mike Maples, Jr.:You know, maybe it's useful to talk about MagicMind today for just a minute, because like the company's doing pretty well, right? I remember backing it thinking, okay, we'll see. What's the current state of play at MagicMind? There are the fruits, the top line metrics, and then there are the roots that at least in my experience have created MagicMind and won't apply to some companies and might apply to others. And And those roots, when you have a founder, when you're a part of the executive team, you're really just thinking about the roots. Like you know that the fruits are a function of every bit of attention paid to the underlying systems, the people, processes, the investment in the product.

20:19With Magic Mind, it's like, how do we make the product better and better and better? And that's part of the roots. That's part of just how our core values, one of them is all the hard things the right way. So we're just constantly chewing on the hardest possible problems we could chew on and doing it the right way, just knowing this is going to suck for a little bit or this is going to be a little bit of poison. But then we'll be inoculated from the poison once we're immune to it by chewing on it a little bit each day. And so I could say things like$50 million in revenue with only 10 employees.

20:54Right now, maybe we just hired two, so maybe we're about 12. becoming the number one hell shot in the country in the natural channel, which is, uh, you know, whole foods, sprouts, uh, natural grocers. And it might be easier to take this to our stated goal internally is 10 billion in revenue. So we got a ways to go. Take this to 10 billion in revenue. Um, uh, Red Bull did 10 billion last, last year. And, and Red Bull is a brand that it's, it's not a brand that, you know, that many people are proud to, you don't walk around the office proud that you're drinking a Red Bull. So I think in the opportunity we talked about shifting consumer behavior, 35, 36 grams of sugar, it's not what people are craving these days.

21:38So I look at that, I'm like, man, we could have 10 billion in revenue. It might take us 30 years to get there, but let's outline that as a goal. And I looked at, okay, should we launch other brands? Or even when we're at 10 million revenue, you and I had this conversation, we're maybe at six or seven and it was and it was just so many signs of product market fit that i was like i think actually mike we might be better served by building um one billion dollar revenue brand with magic mind then trying to create 10 100 million dollar brands yeah that would ultimately lead to the same uh the same network value the same and maybe even less network value because an acquirer would say man get into a billion yeah that's or even 100 million that's that's far more exciting to us with that one category, then, oh, wait, we're acquiring this portfolio of four different products, six different products in six different areas of the grocery store versus that might all have 100 million revenue or acquiring one that has 600 million in revenue in one super simple to understand slot to fit into an acquire strategy.

22:46So that was kind of our part of those roots was focus and focus is power. And yeah, previous lives had taught me that if you diversify too early and you can miss out on the massive win, if you are just extremely ruthless with your focus, that's why Magic Mind had one product for five years.

23:06Mike Maples, Jr.:And I mean, there's a lot of things that you've done that I think people would be interested in, right? You've got basically no meetings to speak of. You've got a fully asynchronous team. You've got, you know, I've heard you talk in terms of flow over FaceTime and you're doing some AI things that help you build the organization. So like, what are you, you know, what are some of the first principle tenets of how you're thinking about this? And I know you've written about it online as well. So people can learn about it that way as well. Yeah. I, well, this, I love this part of the conversation. I can't talk about this subject and then not talk about the core values.