How to Scale Quickly Without Funding

0:00We decided to do a pre-sale to see if people were actually willing to buy and spend money against it. And that's when we sold what would have been the entire first production run in the first hour. Hey, everyone. Thanks for tuning in. I'm your host, Shuang Esther Shan, and this is Shopify Masters, your companion for starting and scaling your business. In a world of do everything everywhere, today's guest chose a different path. Mike Jojo and his team at Waterboy turned the simple act of hydration into a fun lifestyle movement, all by focusing on one radical idea. Do fewer things, but do them exceptionally well.

0:44From perfecting their supply chain to launching with just$700 and a landing page and going viral on TikTok, this is the story about how Strategic Restraint built one of the fastest growing hydration brands on the market. Mike, welcome to the show. Thanks for having me. Good to be here. So excited to chat with you. I know that Waterboy isn't your first entry into entrepreneurship. You actually had a previous business that you sold, which was a fitness app. So what made you want to enter into this already established, very different industry? Yeah, I would say like the things I've done have not really been connected, but the blocks have built.

1:28So it's only looking backwards. I'm like, oh, that was helpful what I did before. But I had the idea for Waterboy in 2018, actually, and I was just busy on the fitness app startup at the time. And it wasn't until 2020 where I had more time and I still felt like, yes, the market is very crowded, but all the competitors are really just varying amounts of salt and sugar. And to me, it was my needs after night out versus at work out versus daily are very different. So can we make a product more functional and more specific to that rather than like just general broad hydration. And that like thesis led us to, you know, like we're water boys today into launching a product.

2:04And so you identified that there needs to be unique recipes for different needs. And before you launch, you actually did a lot of work setting up the business. You had SMS campaigns, emails gathered, landing pages created, and you only invested about$700 into the business. So where were you doing in the pre-launch era to make sure that everything was set up correctly? Yeah. First step for me was, okay, can I get like just the domain and a Shopify landing page set up with just the ability to capture email and SMS in the event that if I make some videos on social and they do take off, I like don't miss the boat and I have an ability to capture that traffic.

2:47So that was like step one. But before that was a bit like the branding phase of, you know, what do we want to call this? What is some of the initial like branding will look like? And a lot of the imagery we had on their website was mock imagery. So it wasn't real shoots just because we didn't have any product. But it was it was enough to like give you an idea for what the product could be and what like need it would solve. So, yeah, we started with that, just branding to a landing page. And then I made probably the initial like 2030 TikToks with like, you know, very little experience making them.

3:19But those ended up, you know, taking off. And we were fortunate to have the pieces in place to capture that interest. And where were you creating content wise to basically engage and find the right audience, but also kind of validate your idea at the same time? Good question. For us at the time, and this was February of 2021, where we were making content and we launched really May, June of 21. But in 21, as we were looking at social media platforms, we decided to hone in and focus on TikTok because it felt like that was the one where your content reach is not dependent on how big of a channel you have.

3:57Whereas on others like Instagram, unless we had already built in followers, the reach wasn't going to really perform. and TikTok seemed to award performance. So we really just leaned on TikTok. Like, I mean, you can scroll back on the account and find the very first post. The account had, you know, zero followers, just like a landing page in the bio and an icon. And my other co-founder is Social Media Background. He's a bit more of a creator himself, but he wasn't really in on any of the content until the account was probably about 25 ,000 followers. And that was by design because we didn't want any false signals of his audience coming on and supporting the product because that can be hard to get product market fit.

4:38So it was really just based on, can we get the right messaging in place and see if people care without any outside influence? And if yes, then we know we're onto something. So it was really just me creating those videos and I'd never made a TikTok before. But I mean, if you scroll back and see the videos, they're not like insane edits. It's just me talking to the camera. Very like easy edits and cuts and just upload it on TikTok. Yeah. Yeah. And one of those videos was you comparing Waterboy to Peterlight. And that was a big viral moment early on. And it really kind of set up the foundation. So yeah, talk to us about that video.

5:15And why do you think it really resonated with the audience? Yeah. I mean, I would say even before then, the very first video where it was me driving my car and then I stopped to get my mail. I remember thinking like, okay, I just want to make a video to explain to people like what I'm up to and why. And I remember even almost like being scared of like, I hope my friends don't find this. It's going to feel cringy. Like I've not allowed my Facebook or Instagram friends or contacts to see me on TikTok. So I was like, no one's going to see it. And like that video, you know, went to bed. It had like 2000 views, woke up at I think around 110, 120 ,000.

5:47The account had grown from zero to about 7 ,000 followers. So that first video from the get go is very validating. And I'm like glad it was because maybe the first couple weren't, I might have been discouraged potentially. But after we launched that first video, then it was, oh, okay, like we have something here. People like the story.

6:07The seventh video, I kind of like still remember them by number. The seventh video I made was the Pedialyte comparison. And for me, it was really like my story of this is why I drink Pedialyte after I night out. And this is why I think Waterboy makes sense because this is why I'm making the product. Otherwise, if I didn't think it made more sense, I simply wouldn't make this. I would just continue to drink Pedialyte. And, you know, I found people that saw that issue or problem solution equal to me. But I remember posting that video on like a Thursday night at 6 p.m. and then going out with some friends around like 8.

6:39I was like, oh, my God, this video is like 200 ,000 views. It was like really the first viral video. And then it got flagged by TikTok because there was a very, very short segment in the video where we had like an image of a baby throwing up. And then I didn't really know much about community guidelines. So it got taken down because of that. And I was like, oh, no, like this video that had so much traction in early hours, we lost it. Quickly like cut out that part and reposted the video while I was out. And then it took off again, like at the same velocity. And then next thing you know, by the end of the weekend, so this was posted on Thursday by like Sunday, it had maybe a million and a half views.

7:16Our account had grown from six, 7000 followers to 25000. We had, you know, an SMS list of about like 18 to 20 ,000 people. So then we knew, OK, we have the product market fit because it's shown by all this inbound interest. And next for us was we have all this interest. We're not sure how warm it is. People might just be curious. So we decided to do a pre-sale to see if people were actually willing to buy and spend money against it. And that's when we sold what would have been the entire first production run in the first hour. I also wanted to pick up on the fact that you were saying you were nervous for friends on Facebook or other platforms seeing the video and you were hiding it with that option.

8:02But also you were still iterating on the product. You didn't go full force into production. So you're also in this early stage of figuring out the product and the brand while you were posting. was that also intimidating when you're sharing the process of you figuring out how to actually build alongside posting um the part that was more intimidating was maybe like the social fear that okay if this content doesn't do well my friends see it are they gonna be making fun of me and like random group text it was more of that but the videos weren't so much like i need your help in figuring this out it's simply like this is what i'm up to and this is like this is what i'm doing So there wasn't really a fear there because it was just taking you along on the journey as to what we were doing and why.

8:50It wasn't necessarily like seeking advice or maybe even like validation. So, yeah, that part was less scary to me. And the first couple of videos actually were supposed to be, you know, the product was supposed to be a canned beverage. And then we, you know, pivoted and took everyone along on the journey on the pivot. Yeah. That is also such an important turning point, right? You had this one idea. You wanted electrolyte drink in a can, but you quickly realized you had to pivot and actually do the more shipping-friendly form, which was not something you even were thinking about. So, yeah, share about just, I guess, having a setback or a challenge, but it also turned out to be a great opportunity to pivot.

9:37Yep. No, for sure. We always thought of the ready to drink as a V1 because we thought, hey, it'd be a great branding asset on podcasts and it's easier to show. But we'd quickly follow up with stick packs because our forte was like really online content. We needed something lightweight. And also the thesis too was when you're consuming a ready to drink, you're paying a premium because liquid is expensive to ship around the country. It occupies a lot more space, etc. and people already have water at home or on the go. So can we just sell them the powder version? So we already knew we wanted to go that route.

10:09So the pivot was just like a faster acceleration to like V2. But really, we just, I mean, we received an email, let's call it like on a random day at 4 p.m. of, hey, your drink, content has too much electrolytes. And in order for it to be pH stable, we need to introduce acidity. The acidity will erode the can.

10:31You can either go to glass, you can go to carton, You can go to plastic. We didn't want to do plastic. Glass would have been like too fragile and carton MOQs. Like the minimum orders would have been so high. We just couldn't have afforded it. So we're like, OK, by like an hour later, we're like, OK, we'll move to stick packs, you know. And then the next day we were just a stick pack company. So the pivot was with understanding of like the ultimate goal is, OK, we want to bring a better hydration formula to people. And we're not exactly sure how we're going to do it, but we'll just kind of figure it out along the way.

11:03Yeah, yeah. Because, you know, originally you even had the domain of Waterboy Can. And then as the brand was growing, as you decided to make this pivot, you also decided to invest heavily into the brand by buying waterboy.com as the domain. That's also a big decision, right? Like, especially early on. Why was that so important? Yeah, that one was more so finding the right timing. And we didn't buy waterboy.com day one, we bought it probably six months in. And by that point, we had already validated our product, we had enough funding and sales to justify the decision. And it was a tipping point between the longer we wait, we think the person that owns this domain, my catch wind of what we're up to and drive the price up.

11:50Or there was even a fear, what if a competitor buys this and just points it to their website. So we couldn't justify that on day one because we weren't even sure how we were going to do. And Waterboy Can was, you know, like$11 a year. And the waterboy.com was like a multitude of that. But the way we justified it, because I remember, I think we paid maybe about 11 ,000. The way we justified it is, okay, waterboy.com is very simple. If we ever do podcast ads, or if we ever need to tell this to someone in a video, do we think we can pick up$11 ,000 worth of simplicity in the future? And we saw this as like a long journey and just like an investment in the company.

12:25Even now, like, I mean, that's not a decision I would make at like at day one, but where you find that right time to be, whether it's three months and six months in a year. And for someone, I guess it depends on, you know, what other levers are there to pull in the business? Are they de-risked? Is this like where, you know, you want to invest? Yeah. And I think hearing$11 ,000 for a new company, that might sound a little intimidating, but the way that you've set up the business model for Waterboy, we mentioned it was only a couple hundred dollars in the beginning when you invested, but you had this really great flywheel where the business was funding itself and you were able to essentially have interest, turn that into paying customers and fund all these investments.

13:14What do you think are kind of the crucial steps you've taken to ensure that you're able to have this healthy runway that you build on your own? Yeah, I mean, for us, the ability to be scrappy was just like doing a couple of things right and not spreading ourselves thin. So it's OK, what do we need? We need a differentiated product. We need the ability to tell the story and we need some basic like branding with understanding that our branding on like V1 is not going to be on like V3, V4, V5. So for the branding piece, we actually found some like really talented designers overseas that really dramatically helped us reduce cost.

13:52And we were able to reduce cost because we also had a very clear idea and direction of what we wanted the branding to represent and be. So like the name, the character, et cetera, those were all of our own ideas. And someone was just helping us design. They weren't helping us necessarily build the entire like branding roadmap. And then the ability to create content. I mean, if you own a phone and, you know, and you have internet, that's really it. And then to tell the story, we were fortunate to tell it from day one, but, you know, sometimes it might take more at-bats in telling that story and iterating.

14:23And then if, you know, the people maybe don't care, then you have to reflect of, is it because my product or the way I'm telling it? And you have to then keep iterating that message. So a lot of those things you can validate and do with very little funding. It just requires to be a lot more hands-on and, you know, not outsource the branding work to an agency that might cost you quite a bit when you don't have a clear idea on exactly what the product's going to be just yet. Or outsource the storytelling piece to maybe, you know, an outside hired creator to do that for you. So I think there you really have to, like, get your hands dirty and do it yourself to, I guess, keep costs down.

15:02Yeah, yeah. Especially with your own storytelling, right? You're driving interest. You're building up that SMS email list. So you're already building this group of potential customers. So when you have those pre-sales ready, customers are actually funding the next round of production, and they're driving the business in a net positive way. What else is special is that, you know, you mentioned right off the bat is you saw that the way that you were consuming electrolytes was different. And you were using it for workouts, daily, weekend. And that kind of is like the ethos of how the products are, how the website is laid out.

15:43How did you even arrive there? Because it feels like the perfect strategy that ties in throughout the company. And it's something you had like right from the start. Um, honestly, personal need, I would say like anything you have a personal need and you're passionate about, you can make that product for you with the hope that there's others like you out there. And to me it was, I don't think my need is inherently like that unique because I know friends that take these products after a night out and I can see in reviews off of competitors that other people do. And when I go on competitors reviews on Amazon, for example, and read their three-star reviews.

16:20I can see like what people like and don't like. So there's elements and you can be tactical and getting some of that insight. And then some of it, I would really base around yourself. So everything from the copy to the product, I just based it with me in mind with the hopes that there were other people like me out there. So then telling the story of the product was very easy because it was, this is why I'm making it for myself. And so really there, I think the main emphasis is you have to have a strong why and a differentiated product, Because if it's creating a replica of something and then hoping to arbitrage traffic, it's going to be like a very hard, long road.

16:56And you can simply just do something that you're more passionate about that, you know, adds value and the consumers will, you know, will sense that authenticity and reward you for it. Yeah, yeah. It felt like because of this personal need, it made all of like the product branding, the layout, like everything is so seamless because of that. Of course, this is like the part of the direct-to-consumer success. And then Waterboy quickly entered retail, which is also massive with, you know, Target and Walmart. And so how did you approach those retail relationships to go from zero to over 5 ,000 doors in such a short amount of time?

17:37Yeah, good question. I mean, we took a while to go into retail. So we launched June of 21. And then we Target was our first retail launch in April of 24. And really, and then we had inbound interest from like a year before that, but just we felt like we weren't ready. So for six months of the business, we were trying to figure out how do we produce this? How do we make this taste good? Because the first versions like we're just didn't taste good. And it's like, if this doesn't taste good, people are not going to keep buying it. So we were very upfront, even on our SMS of like, hey, look, we've improved this.

18:05This doesn't taste good. This is what we're doing to make it taste better. We were like very transparent with our journey there. And then a year in, we started getting more into paid and building that traffic. But we still felt like from a production standpoint, we didn't have the capability or the team in place to handle retail. So retail was delayed a little bit on by design because we felt like we had one shot at it. And if we weren't ready and maybe if it failed, it would really dampen the runway for other retail growth. But as far as big retailers like Walmart and Target, I mean, like my co-founder and I put the initial pitch decks, we were in on the pitches.

18:40We didn't have anyone on sales, et cetera. Like our team was like three people, I think, when we had those conversations. I think what we did well there that every retailer cares about is a incrementality of do you have a differentiated product? Why does this belong on my shelf? Will you help me drive more dollars? Will that be done through getting the customer to buy, you know, a higher price point product to turn through it more quickly? And will you maybe drive a different customer into my store that otherwise wouldn't? And a lot of retailers are focused on Gen Z because the lifetime value of someone younger is a lot higher and there's a coolness factor, which lined up really well with their social strategy.

19:19So I think the two things we did well for retail is you have to build a presence online because they're really looking at digitally native brands. And then B, you have to have a differentiated product that provides incrementality on shelf.

19:34And then those retailers we really received as inbounds. And a lot of other retailers since have actually been inbounds coming to us. And then, you know, we'll continue the conversation from there. Yeah, essentially you're like proving to the retailers that you're able to help them reach this new demographic. Was it ever hard thinking about convincing those, you know, who already have brands they love, they already have a routine with retail products? Did you ever feel hard about trying to convince them to give your products on the shelf a try?

20:08No. I don't know why. I felt like those conversations, there wasn't a lot of pressure. And we approached it very casually because at that point, we were already selling all the products we could make anyway. So we're like, OK, if the retailer doesn't want us this year, we're going to keep selling it online. And then we'll be in like year two, year three. And to us, we felt like we had a strong why. Because when we look at the category, we just felt like a lot of the products were very similar. They had about the same amount of sodium and then some had sugar, some didn't have sugar. So we felt like in that landscape, a lot of the products weren't meant around when someone needs it.

20:41Some were like benefit driven, right, of like hydration plus immunity, et cetera. and to us we're like I'm not sure how much someone really cares versus more specific to when they need it so we felt strong about our social presence and our product differentiation and those retail conversations I feel like there were more of a conversation than really like a sales pitch and even after the conversation happened we weren't sure if there was other steps after that because I remember when we had our target meeting I was like oh I talked to our broker I was like hey is there like another meeting or when's the official line for you He was like, oh, that was it.

21:14I was like, oh, that was it. Like, had I known, I maybe would have been a little bit more nervous because I thought that was like the pre-conversation. And then, you know, next thing you know, like one day you refresh your email and they're like, you're in all doors. So you're like, oh, no way. This is crazy. But it feels a bit surreal or fake until you actually see it on shelf. And then you're like, oh, wow, I can't believe actually this product I made is now sitting in this store on the shelf. I think that's where it actually really hits you that it's there because everything else is digital.

21:44Yeah. How cool is that? Also, that's such a different way of operating, right? You have these drop models. There's customers who are excited about it. You can anticipate logistics and production. And then all of a sudden, you're in all doors in Target. How do you adjust yourself in terms of logistics and being able to actually fulfill those POs? Um, yeah, great question. For us, back to the point of like being a bit conservative was our customers online can sometimes wait if we're out of stock or even in a drop model because innately it's, hey, once it drops and it's gone, it's gone. But retail can't because when there's a void on the shelf, that means that there there's a real opportunity cost there and they're losing money.

22:30And the way they operate is, you know, they want to maximize every square inch. So for us is what needs to hold true in order for us to be able to service retail. So that's everything from, you know, personnel to fulfillment facilities to different production partners and production capacity. So we made sure we had that in place before we ever said yes to retail because we understood we could be out of stock in retail because it would be like a very different conversation than being out of stock online. Yeah. And I guess like what did you do to prep the company so that, you know, there is that like smooth transition where there will be no out of stock and you're able to basically feel very comfortable with kind of, I guess, operating both sides of the business direct to consumer and those large retail orders as well.

23:24Yeah, part of it was a production capacity production partners of okay, we think we will need to produce this many Are we able to do it now with the current systems or what else do we need? You know, do we need a different production partner? Do we need additional production capacity? Some of that The issue is sometimes when you're presenting to retail You don't actually own and have the products you're presenting So you might be presenting a carton of a certain flavor that you don't even make cartons, right? Like online we're all pouches and when they give you sometimes the yes and the green light, you don't have a lot of time to then like make it.

23:56So it's a careful balance between how much are you making in anticipation and how quickly can you like shift and make some. So we felt like we were gonna get in in some of these places. So the way we had structured our relationships with our production facilities were so lead times could be short if needed. And what that meant is then we were storing certain raw ingredients and packaging film, et cetera, on hand just to have if we needed to hit the ground running. But we weren't holding maybe into the entire inventory. So there's certain things on the supply chain and op side that we did to like de-risk it.