Bootstrap, Scale, Repeat: Inside Cozy Earth’s Patient Path to Scale

0:28The content that we make is a product. on that subject. Tyler is here to reveal how a personal problem can spark your next major business idea and what it takes to future-proof your brand using cutting-edge AI tools. Tyler, welcome. Thank you so much. It's great to be here. Good to see you. So does this really start with night sweats? Yeah, I mean, for me, it's kind of a combination of two things. One is when I was a kid, I was 11 years old. My mom was like, what do you want for your birthday? And I said, honestly, I want the softest sheets we can find. And she was nice enough to drive me all over town and feel all these different bedding that was out there.

1:03Even as an 11-year-old, I was like, there's not anything different about each one of these. They all kind of feel the same. Maybe one would be like a different thread count, but it didn't feel like markedly different. I thought if I was going to waste my birthday present on something, I wanted it to be something that really made a difference in my life. And I'd always been that way with clothing and everything. It was either not soft enough or it was scratchy or whatever. And so I'd always been really tactile. And also, you know, when I first got married, my wife was having hot flashes. So I kind of really set the table as I was working with fabrics and looking at different things.

1:34I found bamboo and then I realized that it had all these amazing qualities to it. It was exponentially softer than anything else I'd ever felt. And it felt at better temperature when I slept. And so that really kind of got the ball rolling where I thought, hey, if I could accomplish was just for myself and my own family. Maybe other people would jump on too. But the entrepreneurial journey is pretty colored. So you start in hardwood flooring, you're then into hair extensions. Yep, for a minute. At some point, compressed natural gas comes into the mix, body shops. Yep, auto shop, yep. What's the through line here?

2:09I don't mind change and I don't mind figuring out new things and I like to learn on the fly. And so when I first started, I just took whatever I had. Starting out, I was early on, I was like a sophomore in college still. And so I didn't have a lot of experience resume wise, but I had some unique talents or abilities. I think one was I learned Mandarin Chinese, which is super valuable. And I said, well, that's my like one thing. Maybe I can use that to my advantage in some way. You know, I was just having conversations with people and they told me that, you know, there was a desire for me to like, see if I could find hardwood flooring that was interesting and eco-friendly and well-made.

2:45And I was like, well, I could, I could do that. I could speak the language and maybe kind of get further in the supply chain. And so I started doing that. That's how I started to get going with manufacturers and factories. And I realized early on that, you know, it wasn't so cut and dry. Like most of the, most of the people who are buying things overseas are importing them or buying them through middlemen and trade companies. And they've got a lot of kind of things that are in the way. And I was like, well, let me cut through that and use that language and my knowledge of the culture and understanding of kind of what they're doing to get further back in the supply chain, understand how things are made and then make like real change and make things better.

3:19And so the through line for me was really just quality, craftsmanship, and like transparency. Those were things that like kind of connected all of these things that I'd worked in. I worked with another company that was working in hair extensions and I helped them for a little bit just on the business side of things of what they were doing and could kind of observe how they were doing things and see if there's some changes that I wanted to make. And then, you know, 2008 housing crisis came down, building wasn't really happening. So hardwood flooring wasn't going to happen either. So I'd moved over to compressed natural gas for cars, which has zero emissions.

3:50It's better for the environment. It's probably another through line, the stuff that we work on more eco-friendly. And so I just worked on something for a year there, trying to see if there's a way we could create something. We did that, but there's a lot of regulatory, you know, things around that industry. And they were really favoring electric, which is now, you know, taken over. After that, I had no job, nothing worked there. It was like, these are things that kind of look promising and then didn't really work out. And in that process, I met a mechanic, a really cool blue collar guy that became a good friend of mine named Eric.

4:22And I said, sure, we'll start an auto shop. So we did. It's still going today. It's got like 10 bays and it's been a great shop. But during that process, I got back to my roots of making products and I started Cozy Earth during that period of time. Are you going overseas and sourcing product from manufacturers? Yeah. And that was chapter one of this. Yeah. Chapter one of it was just cutting through all the middlemen to get to the actual finishing factories of each part of the supply chain. And it started in China. Now we're in cozy earth is making in 10 or 12 countries with different products.

4:55Where we go is wherever the best technology is, wherever we can get something unique that's just for us. And it's really bespoke for what we make. So, yeah, to get started, it was like, how do we go beyond what's kind of everybody else is doing and make something really unique for just us? So your first six years, though, in the business, it's just you. Yes. Right? You are the founder. Yeah. To do this for six years, you had to have had some kind of conviction right around what you wanted out of this company. What was the mission? You know, for me, I tried the product and I knew it was life changing.

5:32I know it sounds like hyperbole, but it really did change my life. I told you since a kid, I was searching for something that was better and I'd found it. And so for me, it was just trying to figure out how to broadcast that to the masses. I don't know that starting at that time was the perfect time to start as a DSC company. But what it did for me is it created some disciplines. I attended trade shows and I worked like hand in hand with interior designers, high end interior designers who had very exacting specifications of what they wanted to see. And it helped me make the product better, refine it, and then also refine kind of our business model of how we'd work and kept us disciplined to make a profit and to build a really strong business.

6:08My understanding was you were chasing these interior designers all over the U.S., going various conferences, pitching them on the product, getting them bought in before scaling up, so to speak. That's not typical of a go-to-market strategy, you would say. Most people would think, let me test broad. Let me see if there's a market for this. Instead, you go very niche, right? You're going after designers, making sure they're bought in. So what was the thinking around that? Yeah, I think it was necessity, right? There's no VC companies funding my type of company at that time. For me, I was like, let's find a customer who would have a very high standard, help me make the product better.

6:48And that you would give me their, you know, honest opinion about what they had. And interior designers were perfect for that. They still are. They're still a part of what we do. They still put our products in houses all over the world. So they were just really good for me to work through that. And, and, and it was quick, you know, immediate feedback on what we were doing. And then also just like, you know, they became a microcosm for the actual customer that was going to use our product. They kind of gave us that feedback that we needed early on. What was the first cohort of customers? Like, do you remember that moment that you thought, okay, I've got the interior designers bought in.

7:22I really trust the quality, the attention to detail around this brand, around this product, around this idea. Now let me go to market. What did that look like? The interior designers got us to our first real cohort of customers, which was very wealthy people, right? One of them was Oprah. She used our product and loved it. And a lot of other people who could afford to hire interior designers kind of did that too. And so they actually started to find us online, which was kind of fun. And they did it organically. And I thought, wow, this is really good. If we could run ads, we could kind of connect more to these types of people.

7:55Then I think more people will jump in and try it out. When your product lands on Oprah's favorite things. What impact does that actually have to revenue, to your audience, to your customer base, to your e-commerce site? What happens? She's one of the biggest influencers ever. Before even social media came around, she validates the product, but she's very authentic. One thing I was skeptical before we got on Oprah's list the first time, I was like, I don't know, maybe they're making money somehow, or maybe you got to pay someone to get in there or find a certain PR person. No, it's like she uses the products.

8:32If she likes them, she'll put them on her list. And she doesn't ask for anything in return, which I thought was really cool. And she's helped launch a ton of small businesses. But a big part of it is your product has to stand up, right? You need to be able to do that. Two, the customer service has to be there. And three, you have to have more good ideas. You can't just have one product because it's going to flame out and go down. And I think it's a great validation for the product. It helps people feel comfortable to try it. They trust her, you know? And I think also for us, we were able to just kind of use it as a strength and a platform to really get our message out and really push it even further, which took a lot of extra work.

9:09So you really have to be able to execute just like you would if you got a great celebrity or great influencer to back it up. You have to execute, you know, the next steps to it. How are you capitalizing this business early on? Are you bootstrapping? Did you raise a friends and family around? We had a family member that, you know, really enjoyed the product that we had. And he had used something similar with a comforter, him and his wife, and said, we'd like to give it as a gift. Do you think there's a business here? And I said, well, let me do research. And I said, I think so. And then he asked me, he said, how much do you think you're going to need to get this thing started?

9:40And he started naming off all these numbers. And I was like, wow. I mean, he's like, is it a hundred thousand? Is it a 500, a million? And I should have said a million. I should have said more actually. I want to impress him and show them that, you know, I had the kind of fortitude to really work it and make it work. And so I said, I just kind of looked at what the inventory costs in the first buy. And I said that number, which is 60 grand. And so I took a 60 grand check and then went to work. I started going to trade shows. It was very hand to hand trying to work it. And then I sold out of everything.

10:10And I think a lot of entrepreneurs who work in an industry like me, like with consumer products, they know what it's like. It's like, if you're successful, great, but then now you have to buy more the next time. And so to get that flywheel going actually takes a very significant amount of capital, which I had to learn the hard way. So during that process, I was like, can I get a little bit more money to buy this next order, a little bit to buy the next one? Once I started getting it really going, it took many years to do it that way, like six years, like you said, by myself. And then I took a small, a little bit bigger check, about 700K from friends and family.

10:45And then we were off to the races. The company started doubling every year. You're north of$100 million today as we sit here. You're 16 years in. It's been a remarkable story, yet you haven't taken one venture capital dollar. No. Which is incredible and a testament to the way you've been able to run this business. Was there ever a moment that you could have or maybe should have taken a VC round? You know, I think not. I think that it allowed me to build a true brand. And that's what I'm really working on doing. I think a lot of these companies that were funded by VC, they're on a timetable. Sure.

11:18And you get really quickly on this conveyor belt where you have to make decisions. And that totally changes your decision-making of urgency of trying to get something done. And for me, it was just like, I was always trying to make the decision what was best for the brand and the products that we were making. I wasn't sweating like, hey, I got to return capital to a bunch of investors all the time. And so it really let me build the brand I have. And I actually did recap out my family with a family office in Utah, which has been great. And that group has just been super patient and super supportive of what we're doing in me building the brand and trusting me to kind of get it to where we think we can, where it has potential.

11:53For those listening, a recap is a recapitalization of the cap table, meaning that a family office comes in and takes out the existing shareholders and provides them with that ROI, right? But there's a recap. What was best for us was to try to really just focus in the business with a little bit more professional group. And they were happy to do that. And I also wanted to get a nice return for that friends and family as a thank you for what they'd done. And then bringing in this group, it was just a small little family office out of Utah, but they're very successful and they're investing and they've been really good mentors and help to me.

12:26But what they did is just came in and said, hey, simplify things for us. And then we could just hit the ground running from there. So, yeah, it's different than raising like institutional capital where, you know, you got a bunch of LPs that are raising into a fund and then people, everyone with different kind of desires and needs. And you got a bunch of money that's in there that needs to be returned very quickly. That wasn't this case. What else do you think founders should understand about raising, bootstrapping, angel investing, whatever? I mean, there's so many founders listening to your story thinking, you know, I've got a product, I've got a business, maybe I have early product market fit, but I'm running out of cash, right?

13:02Because growth sucks cash. A lot of people don't understand that, but it does. It does. So what advice would you share with those founders that may be in your shoes 16, 15 years ago? Yeah, I think it really depends on your personal energy, your ambition, and also like your patience. So I really do believe like the tortoise always wins the race. I probably have too much patience, but if you have patience and you enjoy what you're doing, you can build something really great. You know, this lifetime's longer than you think in this regard. And so you can really build a great thing. But some people are like, no, I want to get in and get out.

13:38And that's totally fine. That's for a certain type of person. Obviously, if that's your kind of inclination, that's what you're trying to do and move on to the next thing, then there's actual wisdom in that because, you know, things change. The environment can change around you. But in my case, we're building a brand that has many different product categories, which has been able to diversify ourselves better. And building a brand is actually long-term, arguably more valuable in some cases because, you know, you're building up brand equity with customers, you have a name, and then you actually really are producing products that people can rely on.

14:10How do you decide what product categories to expand into next? We really don't try to put a cap on what we're able to do. We just, we let the customer decide. We get to take a lot of customer feedback. We hear from them. Usually they're making suggestions to us and we love it when they do. Like that was how we got into apparel. Apparel is a big part of our business now. It seems kind of weird to have bedding, bed linens, bath and apparel. But for our customers, it was just a natural bridge. They're like, I want to feel like this all day, the way I'm feeling in my bed right now. And so they're like, can you make, can you do this with clothing?

14:42And we're like, for sure. We know how to manufacture and really make amazing fabrics. Let's kind of translate that to every day. And that's kind of where we are today. So they help guide us around. We listen to the customers, we hear what they want to do. And then we say, okay, how far can we take this? And how many categories can we get into? One thing you're doing, which has been pretty unique is you've got a series, a full-on YouTube series called Bed Rot Challenge. Bed Rot Challenge. Which is like the survivor, but on beds. Exactly, right, exactly. Like the last person out of bed wins$100 ,000 or something.

15:14Yes, it's fantastic. Yeah, it's wild for sure. It's a wild premise. It's a wild premise. We're always trying to think outside the box, okay? So for us, we're like, we have this really amazing product. We need more people to pay attention and feel it and try it. If they try it, we know they're going to love it and they'll be changed forever. And so we're like, how do we get that information out? And we always try to come up with ideas. And we had some meetings at the office and this idea came up like, hey, why don't we have a competition with the employees in the office? Who can stay in bed the longest?

15:42There was this trend out on TikTok about bed rotting, which is people just, it's kind of a sad commentary, but they're just sitting in bed, doom scrolling on these social media. So we're like, man, that's so depressing. Like, what if we made it more communal and fun and people could like, you know, compete and like they could win money, you know, and have a fun time. So we're like, let's kind of flip it on its head and make it more of a fun experience and an activity and show everyone our sense of humor. And so what we did is we said, okay, let's just do this with the office. And we live streamed it with like three people, three or four people in the office.

16:14And they're just sitting working in bed all day and people are watching it and they're engaging, they're asking questions. And it gave us a chance to engage with our customer. And then they're like, we want to see more. And so we did more. We're on our fourth season, 85 million organic views. Yeah, it's insane. like how well it's been received and we're making it better every season. So there's much more to come, but it's worth checking out. So end of the season, there's a winner who takes home$100 ,000 check. A hundred grand, yeah. Plus the cost of production, plus the cost of the contestants, the talent, whatever.

16:45Do you look at this as purely a content slash brand awareness initiative? Or do you look at it as a marketing initiative that needs to have some sort of ROI to it? I think to start with, we didn't have an ROI in mind. So we really were saying, hey, this is a spaghetti at the wall kind of thing. It was much lower budget at that time when we first started. And that's how I would suggest doing any of these to see if you get any engagement and traction. And then we started to invest some more. And now we're starting to see that ROI, but we measure it in all kinds of ways. It's not just transactions that come through, although we are seeing that, but we're also trying to get the content awesome.

17:23The content that we make is a product. I see it the same way as I see our loungewear or our activewear or our bedding. Like it has to be, I always say it has to be 50 % better than anything else that's out there. And so we're trying to refine the product right now with content. We're not a media company, we're slowly becoming one. So we have to make that product good. We have to make it awesome. And then I think commercializing, it's a lot easier once you have a really great product, just like with the bed linens or the apparel. Have you done collaborations with other influencers? If so, have they been effective?

17:58Have they been profitable? Yes, thousands of influencers. We have worked with thousands of influencers. They've always been awesome ambassadors for our brand. And we love them all. I think big and small, right? And nowadays it's kind of funny because it's been democratized with TikTok. You don't really need a huge following to make an impact. And so what we've been able to see is like, yes, there are people who don't have big followings that actually drive revenue and can convince people of what they love. But our big thing with influencers is we won't work with you unless you love the product.

18:31And that goes all the way up to the top celebrities that we've worked with or want to work with us. We'll say, hey, tell us what you think about Cozy Earth. Why do you want to work with us? Because we want it to be authentic. Over a 16-year span from 2010 to where we sit today, marketing has changed a ton. And you've experimented with so many different marketing angles. What have you learned on the marketing front and which strategy drives the most return on investment? So if you asked me at the very beginning, I'd say, you know, SEO, right? If you could rank high on Google back in the day, like that was the first way to go.

19:07And so if you could put that money in, you're like, okay, I could capture a certain amount of the addressable market. And then I could grow the business from there. But like you said, every year, every six months, it's changing, you know, of how this all works. And also the pricing to get in is different. So like in 2014, 15, the cost per click was much cheaper than it is today. The CAC was much lower than it is today. What I tell everybody is it's similar to the way you build your business. Look at it like an echo chamber. And even if you're doing a small echo for now in PR or an affiliate or Instagram or a small podcast or a little bit of content that you're producing yourself, the more angles that you can get to create that echo chamber, the better.

19:46And it really does start to magnify as you start to grow your business. You can continue to invest in that and it'll grow. Of course, you know, our business needs digital ads to continue to kind of foster that engine. But starting with digital ads, I wouldn't recommend today because there's a lot of ways to get free exposure on some of these platforms that are really rewarding, engaging content. TikTok, YouTube are two big ones. I mean, reels to an extent. There's definitely a pay to play one way or the other. Like if you're using these products, none of them are free, even for the user. You either have to watch the content, right?

20:18They need the eyeballs or you need to provide it. And so you can do that through ads or you can do it through your own content. I think making your own content, there's a lot of wisdom in doing that today. It can get expensive, but it doesn't have to be, especially when you're first starting out and trying to tell the customer your story. Are you leveraging artificial intelligence as it relates to your marketing efforts today? It's now completely permeated our business, right? I mean, everybody's using it in the whole business from end to end. I would say some of our content is benefiting from AI a little bit.

20:49It's getting more so. We just made a hire related to this just recently in AI that's been very promising for us. But also we've been trying to rank with search, similar to SEO days, right? with chat GPT and Claude and getting our website and all of our content optimized to show up on these platforms, which is really good too. So it's, it's getting in there. It's still in the early days. I think people are still figuring out exactly, you know, how you could make, you know, turn it dollar for dollar. Like we're going to put inputs and get information out. That's immediately going to make us money, but it's definitely enriching what we're doing.

21:29And it's giving us a lot more to work on, that's for sure. So do you think about leveraging AI as a discovery mechanism, meaning that more so than a pure acquisition play, you can leverage it so that your brand surfaces first in these various tools? Like people are shopping using chat GPT and asking for an embedding recommendation. For sure. Right. So are you trying to manipulate what's surfacing there. I mean, if I could manipulate it, I would for sure. But, you know, I think, you know, what we're trying to do is make sure we're optimized. So it's very important for, I think, everyone to understand if you want to be seen, and this is the same thing in the search engine days, if you want to be showing up in those search results, you have to be seen as the authority on that subject.

22:15And so I think to do that, you have to create tons of content, tons of authentic, genuine stuff that actually helps the customer. And you have to have great products and people that agree with you and go across that. And I think AI is doing that really well. It's doing it better than search ever did. There is some buying happening, some conversion happening through the AI. We're seeing it more and more and you have to assume it's going to get very, you know, very prolific. Okay. So that's the acquisition side. What about the retention side? So leveraging AI for things like customer service, customer lifecycle management, anything there on the retention side of the business that's been helpful.

22:51Yeah. You know, some retention companies that we're using and partnering with, they're already implementing AI into what they do to help us get better insights into our data. But one thing that's really helped me recently is just, you know, understand how we orient the company. Remember, we're across a lot of different products and, but you have to be oriented with some kind of flagship and how you do, how you kind of proceed and what you're going to, what you think you're going to grow and scale in. And I can tell you like just using AI for me personally as the CEO and founder, it's really helped me look deep into our data, understand how our customers cross pollinate between categories, which ones could result in the most lifetime value, and then where thereby where the strategy and overall kind of, you know, orientation of the company should be and what direction everyone should be rowing in.