How to Scale Your Business From $4,000 to $1M in Revenue

22:30Is that what led you guys to seek funds? That was a huge part of it. That was what led to our first larger round. So we did a friends and family round, which was like really small, like$130 ,000. That was basically just to fund the rebrand and to like fund the initial packaging that we needed, the creative work, the new website, new photography, all of that. And then soon after Dragon's Den, we raised, I think it was 1.3 or 1.4 million in two weeks. And that was because we had all this momentum. We had Dragon's Den, we had commits from large retailers. And it was like a night and day difference of raising that money versus the$130 ,000.

23:05It took us forever to raise from a few small angels and Connie's parents ended up putting in like half the round, which is why it's now pretty much a friends and family round. But yeah, it was, that was why we would need the money was to support these nationwide launches. And then also when we looked at the successful brands that got really large in our space that eventually got acquired, almost all of them had raised capital at some point. And so we knew that this was going to be an inevitability for us is that we needed to raise external money. Okay. So that first big raise 1.2 million, 1.3, 1.4, somewhere around there.

23:38Did that come from one venture partner? No, it was a bunch of like super angels. So people that were putting in 50 ,000 to a hundred thousand dollars. Um, but it was all angels. So I think we had like maybe 20 to 25 people in that round. Was there a lead investor that facilitate all this? You're just pitching one-to-one pitching one-to-one and finding connections. So we would be on calls with these investors from 8 a.m. to 8 p.m. I actually slept over at Connie's house so that we could maximize our time. And we just had meetings like scheduled back to back to back with people. Every time that someone would say no, we would ask for an intro to somebody else that might be interested.

24:16Or if they said yes, we would also ask for an intro to somebody else in their network that might be interested. And we set the terms. So we raised on a safe, we set the valuation, we set the minimum check size. And we also set a really, really firm close date, which is something that I think we screwed up in that first round that we had tried to raise, is that we were like, oh, we'll just do a rolling close and we won't set a firm close date. No, I think founders really need to set a close date to light some sort of urgency underneath investors. Otherwise, the tendency is just like, oh, you're a bit early, but let's keep in touch.

24:47Or, oh, not right now. You're a bit too small, but we love what you're doing. Let's keep in touch. You need to give some sort of sense of FOMO. Investors are very emotionally driven compared to what a lot of what you would think. That sounds exhausting. I mean, you hear from companies that raise that raising becomes a full-time job for the founders, right? You're pitching constantly. You've got to be out there, you know, pounding and pitching and selling all the time. But it sounds like all good things because 1.2 million in two weeks is pretty quick. It was really fast. You raised 1.3 million and you've now raised how much to date?

25:27We've raised a total of$6 million to date. So there was that first$1.3 million round. And then around 18 months later, we did another$1.3 million. That one took us five or six months to raise. It was a much harder environment to fundraise in. And it was like pulling teeth to get that money over the finish line. And then around a year ago, in Q1 of last year, we raised$3.5 million. And that was our first time that we actually had venture in, like formal equity or venture equity. And it was our first time doing a priced round. All the rest of them were done on safes. So that was our first time also adding a new board member that wasn't just Connie and I.

26:07When we were talking earlier, you were mentioning to me that the right investor goes way beyond the size of the check, right? And it's all about the vision that the investor has for the brand or how they would work. with the company. Tell me more. You want to make sure that whatever investors you bring on have the same vision for the company as you do, or at the very least won't interfere and are supportive of the vision that you have. And it's pretty obvious actually about which investors won't work. I think a lot of founders think that they're like wolf in sheep's clothing and they'll like sneak in.

26:41And maybe there's some cases where that happens, but oftentimes investors will tell you like, this is a deal I'm looking for. And if you're like, that's never going to be us, that's probably a good signal that they're not the right ones for you. Or you'll get this gut feeling that you're like, I don't know that I can really trust this person. I would say founders should listen to those gut feelings. So one example of this is one of an investor who's wanting to put in like a sizable check. I think it was like$200 ,000 in that first round. We ended up turning away because his whole vision is that he wanted to find like the next Estee Lauder.

27:11And that was not the vision that Connie and I have for the business. We don't want to build a massive multinational company with thousands of employees, like global offices, IPO-ing. That was not the vision that we had for the business that we wanted to start. And so it was just such a mismatch. And that would not have been a relationship that would have worked out. Sounds like this principle also applies to your retail partners, right? Because you guys are still in Whole Foods as far as I understand it, but not in Target. But at one point you were in target? We were in target for a very short blip, like six months.

27:46And we launched there, I think it was the start of 2021, I want to say. So very soon actually after we launched Whole Foods, but we made the mistake with that one where the buyer wanted to roll us out across 800 doors. We were not ready for it. And we pulled out within six months of being at shelf because we could just see the writing on the wall. We were like, our product is not moving. We don't have nearly enough brand recognition within the U.S. to support a rollout of this size. And also, our products are probably too premium for Target. There's no opportunity for us to educate at shelf of how are 3Ship's products different from this product that's$8.99.

28:22Is the Target consumer necessarily going to care? So what we learned through that was that it's much better for us to be the more affordable price point at a more premium prestige retailer than to be the more premium product at a mass retailer. And that doing that slow rollout would have been so much better for us. But I'm very glad that we pulled out because controlling your destiny and controlling the narrative, especially within retail, is really, really, really important. So who's next? Who's the next big retailer? We would love to land one of the big beauty retailers. So Shoppers, Sephora, Ulta, any of those would be the next step for us.

28:55And I think that we're starting to get to a point in Canada that we'd be ready for that. Take note, we're in Canada, SDM. So if you're watching or listening, three ships is going in, whether you like it or not. Okay. So talk to me about the responsibility the company has beyond the fundraise. So from an investor standpoint, are they directing where your capital is going to be allocated and or used? Do they care? How do you think about capital allocation beyond the fundraise? For our investors, they're not very hands-on with those details. They have to approve our annual budgets. And so that's their process of making sure that they're aligned with where we're spending the money.

29:36But they're not checking every single transfer that goes out of the business. They're not being like, oh, you spent$20 ,000 on this campaign. We don't agree with that. They're not involved in those day-to-day details. Most investors care about the high level. And as long as you communicate with them about both the good and the bad, and you communicate with them proactively, they're not going to feel the need to be in the weeds of your business. Like that's ultimately not really how most investors see their role. They're more there to support you and to help guide you and allow you to see around the next corner and make sure that you're well capitalized for the growth that you have.

30:10They don't typically want to be in the details from my experience. The only time that they'll start to come into the details is if you're not proactively sharing with them. So something that we've always done from the very first round is that we would send out quarterly investor updates to all of our investors. and in those early stages, even prospective investors to keep those leads warm before our next round. So we'd share with them what's working for us, what some of our major wins were, where we can use help, what intros we need and connections we need, and then what some of our major projects are for the next quarter.

30:44It would probably take us like 20 minutes to draft this email and send it out through Klaviyo just to a list of investors in there. Pays off so well, because then they feel like they actually know what's going on. They won't be on top of you because you're proactively communicating. And also you're probably going to get more out of them because you're asking constantly every quarter for something new. So you're always front of mind for them of being like, okay, I know what three ships is up to or I know what they're struggling with. So when I meet someone in my network, that's someone that I can introduce three ships to.

31:11Yeah. Speaking of Klaviyo, lots of folks that are watching will be familiar with Klaviyo and or are thinking about using the platform or using it with the marriage with Shopify on the front end. How do you think about email strategy on the whole? What's worked? What hasn't worked? How many emails do you have? Are you using email to build community? Just expand on this for me. Yes, yes, yes. Email is such an underrated channel. I think for us, it accounts for around 35 % of our revenue, give or take between email and SMS, 30 to 35%. It's incredible. It is a way to keep engaged with your customers.

31:50One of the formats that works the best for us is actually like long form, like more written content of like founder notes so that people feel really, really connected to what's going on with the business, especially if there's a major change. Like if we have to take a price increase, we'll write that out as a founder note. We won't just do like, oh, our prices are going up, like shop now. It'll be a longer form explaining what's going on. Or if we're launching a new campaign that's really emotional and like really means something on a personal level to Connie and I, we'll write that out in a longer form note.

32:20So brand should be leaning into. And email is huge. Like at any opportunity, you should be collecting emails, trying to get people to stay on the email list. I think our list right now is around 150 ,000 like engaged subscribers. So it's a great way to keep people coming back. How does Three Ships think about community? I know that community is sort of a buzzy term these days. A lot of brands think about building community as kind of one cornerstone or pillar of their brand strategy. Do you have a community strategy specifically? Do you think about it in sort of like detailed elements as to how you're going to address it?

32:58We do. I wouldn't say that's a full community strategy, but it's making sure that we bring our customers along for the journey every way that we possibly can. So having direct conversations with them on social, Connie and I earn a lot of our content. We go on social to ask them questions, even to help them rename products. We've gone on there to help ideate with our customers. We even involve them in our actual development process. So we'll send out directly from the lab 50 samples to 50 customers that have said, yes, I want to test your products before they come to market. And they'll give us feedback that will allow us to go back to the lab and iterate until we get the perfect formula.

33:33So I think bringing them behind the scenes is a big aspect of community and taking them along for the journey with you. We also do live shopping events, which I think are also very underrated. we've probably all heard of how much live shopping is crushing it in China. We've seen those videos of people that hold up like the item for two seconds and slide the orange boxes away. But live shopping is a great way to build community in North America too. So it'll be very simple. We use this platform called Firework. Connie and I will get on in front of an iPhone for basically an hour and talk about the new product, converse with the customers back and forth.

34:07They can ask us questions. We ask where they're calling in from. We'll usually have maybe a thousand people join in for during that one hour period. And we'll do 35 to$40 ,000 in sales in that one hour. So it's a great channel for community building. Other channels that have been effective from a return on ad spend perspective. What can you share? We're still very heavy into meta. That's where the vast majority of our media spend goes. Yeah, still. And we find that that still gets us the best return on ad spend, best click through rates. yeah, we're still big into meta. TikTok? No, we haven't really broached TikTok too much.

34:43It's a very different form of content. And being a Canadian company, TikTok shop is not available to Canadian companies. We've tried every way we possibly could to try to get set up on there. Unfortunately, it's not available in Canada yet, but TikTok should roll out to Canada. We would love to be on there. Do you feel like you need to hedge against meta? I mean, it feels like meta has been to the default from a customer act acquisition and media spend, excuse me, standpoint for quite some time. It has, yeah. Over a decade now, a pseudo monopoly on the D2C media acquisition space. Do you see some sort of platform evolution happening?

35:21Do you think there are other strategies or tactics that companies should be looking at or taking advantage of? I mean, they should always be focusing on customer retention first and making sure that they don't have a leaky bucket within their funnel. So those strategies will never go away. I don't think of email, SMS. SMS is very underrated and that's more of a new form of marketing. But for us, for the foreseeable future, we've tried other platforms. We've tried YouTube and we don't really see the same lift in the same way. TikTok is not available. In Canada, we've done a few smaller tests just within the ads platform, but that's not really how TikTok operates in the same way.

35:55It's more about virality and getting creators posting, which they want TikTok shop in order to be able to post and get their compensation through affiliate codes like really easily. So until I think TikTok will be the next big thing for us once they come to Canada. How do you and Connie think about influencers and or the role of influencers with three ships, if there is one? We've tried influencer marketing in the past where you're paying for posts, you're seeding. Seeding works very well because it's authentic. It's a strong relationship. Sorry, what is seeding for listeners or viewers that don't know?

36:26So seeding is where you'll send out your product to an influencer or a content creator with no expectations. They can post about it if they like the product or they don't have to post about it, but you're not paying anything. You're just giving them free product. That works very well because it's authentic. People will post about the product if they really love it. Once they post, we'll then set them up with an affiliate code for them to start earning commissions. Anything that we've done of just paying for posts has never worked. Like we've wasted so much money on influencer postings. I do not believe in it.

36:53I don't usually approve budgets for it anymore because it just doesn't work for us as a brand. How has your relationship with Connie evolved over the years? Feels like within 24 hours, deciding you're going to be business partners, eight years later, you're best friends and running this thing 24-7. Is it tough? It is like any sort of major relationship that you have in your life. I think in the initial days, we had to learn a lot about the ways that we are different, especially in our communication styles. For example, if we said that we were going to meet up at seven, Connie would be like sitting there waiting starting at seven even if we were meeting up at her house Like that I was going to come to her house at seven.

37:33She would just sit there and wait She wouldn't like do other things like around her house She'd just be sitting there and I didn't know that like whereas for me i'm just like, okay If I come at 705 that's still fine and on time that took some adjustment is just like just Our different communication styles and expectations She's someone that will add three exclamation marks to everything that she types and sends because she doesn't want anyone to think that like Like she's upset and will have so many smiley faces. If someone's like, see you at seven, she would put like three exclamation marks. And then I would just reply back, sounds good.

38:07No emoji or exclamation marks. And she would think that I was pissed at her. So those sorts of little intricacies of communication took us, I would probably say like one to two years for us to really understand and work through. But it's the same as any sort of relationship that you're in, right? And Connie and I, in many ways, we're more accountable to each other and signed up for more legal requirements than we are with our husbands. I'm accountable to more debt with Connie through all of our lines of credit that we fund inventory through than I am to my husband on our mortgage. It's like any relationship.

38:38I think you really need to focus on quality time together. We really intentionally carve that out of having time to just go and be friends. We try not to talk about the business, even though it inevitably always comes up. And then we also have designated sessions put aside where we'll actually give feedback to each other. We try not to let things fester. And so once a month, we basically give each other mini performance reviews of like two things that that person did well in the month before. And one thing that they didn't do well or could improve on. That's helped tremendously with open communication is having that specific time set aside that we both have to feed back to each other.

39:13So it's a learning process to learn what works for you. Even before you launched, you had it in your mind that you wanted a co-founder. Yeah. Why do you think you would be successful running this alone or you wouldn't be? I don't think so. I don't think either of us would be able to run this business alone. We have too many gaps as our own individuals that the other person helps to round out. And I think being a solo founder, I have so much respect for those people that can do it. I definitely can't. I find it very lonely, very isolating. the lows feel so much lower because you don't have someone to commiserate with that really understands.

39:49And then the highs don't feel as sweet because you don't have somebody that understands what it took to get to that point. So for me, it was a very obvious decision. And when I went through that process of deciding, okay, yeah, I want to bring on a co-founder, a lot of it was reflecting on my time in school of like, okay, did I work better on my own as solo projects or did I like group projects more? I loved group projects. I created better work. I was more happy with the output. The process seemed less stressful. I didn't like individual projects at all. It felt very lonely and boring and hard.

40:22So I think that any entrepreneur that's maybe making that decision of should I have a co-founder or should I not do some reflection of do you prefer group projects or do you prefer working solo? Would you like to have somebody that you're accountable to and that they're accountable to you as well? And it's a very personal decision, but it was definitely the right one for Connie and I. And also doing 50-50, I think is really important. It was not a business when I met Connie. It was an idea. And a lot of people at that time told me, oh, why would you go 50-50? Why didn't you do 60-40? It was your idea.

40:54I'm like, well, an idea is a dime a dozen. It really comes down to the execution. Idea is like 1 % of it. Execution is 99 % of building a successful company. And I didn't want to just have an expensive employee. Like I wanted her to feel like she was truly in the weeds with me. And for us to not have one person that has ultimate veto power, like I didn't need that power over her. I wanted a true partner in the company. How do you and Connie navigate personal challenges that come up? I know you're talking offline. If you're comfortable sharing, you had a big personal challenge happen, totally unforeseen, just two years into the business.

41:34Yeah. So for some background, in November 2019, I was 26. Connie and I were the only two employees with the business. We had just started the rebrand. Rebrand was like six months away, seven months away from relaunching, and I was diagnosed with brain cancer. It was not on my bingo card. Did not expect to be dealt a blow like that at such a young age. It was very destabilizing, to say the least. I went in for surgery four months later in March of 2020, right before COVID, before I was discharged. I think I was discharged two days before the lockdowns happened here in Toronto. And so it was a period of time of a lot of confrontation of some of our biggest fears as humans.

42:15You have to come to terms during a diagnosis like that, that we're not in control, which can be very scary or it can be very freeing. And I found that during that period, Three Ships was a real source of creative inspiration for me. It was like an outlet. It gave me something to look forward to. I don't think it ever occurred to either of us that we would throw in the towel and be like, oh, we're still early in this company. Yes, we're full time with it, but we can still go back and get jobs. Let's just do that. This is too many risks. Never occurred to us. Because I just imagine myself being told that I have two years left to live.

42:51And if I hadn't pursued this, and if I hadn't decided to build this business, I would have regretted it. I would have died regretting it. And I just didn't want that for myself or for people around me. And it's also taught me a lot about how to be a good, grounded founder. It makes you realize when you face something that's truly a life-changing situation, that there's very little that can happen in the business that is honestly that big of a deal. A lot of it is more like challenges and hurdles and inconveniences, but very few things are truly make or break that can happen in a company. So it's allowed me to be much more focused on what really matters, focused on the impact that we want to have for our customers.

43:34It's given me a lot more belief in what we're doing of natural products and the role that that serves in people's lives. And it's in many ways brought Connie and I closer together because she also had to confront these fears of losing a best friend and her co-founder. We had to have those hard conversations of what happens if I don't wake up from the surgery. It was a 10-hour operation. They were going deep into my brain to try to remove this tumor. And they take you through all of those risks of there's a 2 % chance that you won't wake up from this. Or there's a 5 % chance you'll have a stroke on the operating table and you won't be able to speak when you wake up again.

44:10There's a 8 % chance that you won't be able to walk. My tumor was the size of a large egg right next to my motor strip. And so the main area that they were worried about was lack of like that I was be paralyzed on my left leg after waking up. I did have some issues, had to relearn how to walk, had to relearn how to read and tell time. My perception of things and how they relate to each other was all thrown off from the surgery. But all that came back within a couple of weeks. I was very lucky. But we had to have those really hard conversations of the uncomfortable what-ifs. And again, I think that that was for the better for us as founders because it taught us that those are things you can't avoid.

44:47You have to confront those conversations head on and anything can happen within life. It's obviously been a very scary process to go through, and I'm still getting treatment now. I'm on a clinical trial at Princess Margaret. It's been hard to juggle a major chronic health problem as a new founder, but it's also been incredibly rewarding. It's incredibly rewarding to hear the story. So thank you for sharing. Do you feel a different connection to what you're building? Oh, 100%. Now having gone through this? Yeah, night and day. Like this really feels like it serves a greater purpose for people. And I have an understanding of more and more about why our customers that are like us, that care about natural products, the deep connection that they have.

45:35That they're doing this not because they necessarily want to change how their skin looks or they want to look like 20 years younger. Like that's not their expectation here. But they want to take care of themselves for the long term. And so it feels like a very positive, uplifting type of way that we can deliver that for people and to give them that sense of peace and comfort and control over what it is that they're using on their bodies every single day. And it's also given me a greater appreciation of the ups and downs that go along the way because I'm like, wow, we're so lucky to experience these challenges.

46:06We're so lucky to get to do all of these different things. Like it's not lost on me that a lot of people don't get to experience that. And I now view aging especially as truly a gift. Like, I don't like hearing people tell young people, you don't want to get old. Like, yes, we do. That's a goal for all of us. We all want to live long, healthy, happy lives. We all want to get old. I don't understand where this narrative about anti-aging and being scared of aging came from. It's so negative and backwards and just false. I agree. Yeah. And I, especially in the beauty industry, that's so predatory on people of making them fear aging or looking their age or getting older.

46:46It's just wrong. And so something that we stand for as a brand is you will never, ever hear us use the terms anti-aging unless Connie and I slip up when we're talking because it's so embedded into the narrative of the language that we use. You won't find it anywhere on our website. We don't market any of our products. It's anti-aging. We'll talk about the benefits I'll give for your skin. They'll be smoothing or firming. but we won't talk about anti-aging because to my core, I believe that it's such a gift that people should not be shamed for or scared of. Like we should all want to get old and look forward to that process of, of getting older.

47:19You know, I'll ask you, uh, uh, we're both founders. So, uh, I think that this is an important question to ask, but, um, do you think that as founders, as entrepreneurs that we're doing a good enough job talking about health and wellness of founders? I don't think so. Burnout is so prevalent. I've no founders that have burnt out and had to leave their businesses. I think the expectation is that you need to build something really fast. The stories that get talked about are the quick builds that then go from being launched to acquired within three years. And that's just not realistic. That's not the path for most companies.

47:58And so sustainable growth for both the business and the founder just doesn't get talked about enough. And Connie and I have definitely fallen victim to this at certain points too. Like I used to make fun of Connie for, she'd be like, oh, I had self-care last night. I had a bath. I was like, did you have your laptop in the bath with you doing emails? And she's like, yes, but I was still relaxing. I'm like, Connie, like you need to fully unplug. And so I think it's really important for you as a founder to listen to your body and to recognize when you're feeling stressed and overwhelmed, when you're feeling burnt out, when you're feeling exhausted.

48:33And don't feel guilty to cancel your meetings that afternoon. It's okay. It's not the end of the world. If you're like, I'm so tired. I literally, I'm just viewing all this in a negative light. I don't want to do this right now. It's okay to take a breather for a few hours. That's healthy and that's fine. And on the flip side, if you're feeling really inspired and fired up and motivated and your head is in the game that day, work for 12 hours. If that's what you're feeling that you need to do and what you're excited to do. Like I think intuitive work is something that is so underappreciated and under talked about and is so critical for founders to really bring their full selves to their businesses.

49:11I think that's a great place to wrap. Yeah. Laura, it's been a pleasure. Thank you so much for having me. Drop us a comment and feedback right below. Tell us what you thought of today's episode. Make sure you're subscribed and we'll see you at the next episode of Shopify Masters.