Inside MKBHD's Eye-Opening Ridge Deal

0:00The Colin and Samir Show is supported by Microsoft Copilot. This is something I thought I would never say, but can I share with you my favorite prompt? I mean, like when you say something like that, I have to say yes. Were you going to say no? No, but okay. Just let me hear it. So when I'm researching for a guest or I need to know a lot about a subject matter, I say, make me a podcast about. And when you do that, you're going to get a short blurb about that subject. And then in like two minutes, you're going to get a podcast. So check this out. Welcome to Co-Pilot Podcasts. Picture this, a guy working the front desk at a hotel, making lacrosse videos in his spare time, completely unaware that he's about to become one of the most influential voices in the creator economy.

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1:10Try it for your research. Try it for getting variations of your titles, your ideas. It's one of my favorite tools on the internet right now for our creativity. And now back to the show. The goal is like, yeah, if Ridge could operate more like Feastables, Ridge would be a better business. When you make products, sometimes you have to make shitty products for a long time. I'm sure Marquez could make amazing products if he put his time and energy into it, but he gets now the support of like, we'll do a couple hundred million dollars this year and we don't have any boss.

1:47Hey, podcast listeners, Samir here. I'm joined by - You've got Colin. And this is Nate. Nate, you're back on the show. I am. We got another special episode. Nate, why don't you tee this one up? Yeah, so last week we interviewed Sean Frank, the CEO of Ridge. They're the company probably best known for their best-selling product, the Ridge Wallet. And they announced that they've brought on Marques Brownlee, MKBHD, to join as creative partner and the sixth member of their board. It's a pretty historic deal and will probably influence the way in which companies the size of Ridge interact with creators and work with them moving forward.

2:26especially if it does well, which is going to be something that we're all going to be watching. So this was a conversation you had with Sean for an issue of the newsletter, The Published Press. If you're not subscribed, subscribe. It's at thepublishedpress.com. But you recorded the conversation. We're going to play it for you all. And then we're going to come back and chat about it. It's fascinating. I think right off the bat, we'd love to talk, of course, about the news that you all just announced. Before even getting into that, Ridge launched via a Kickstarter campaign in 2013, right? And I believe you joined the company as CEO in 2018.

3:00Over the years, you all sponsored a ton of creators. I think I read in one interview that you worked with 750 YouTube creators across 3 ,000 unique videos in 2020 alone. What did you learn from all that time and money invested in, you know, marketing, partnering with YouTube creators specifically? Yeah. You know, I was looking at our P &L this morning for the past couple of years. I think we've given$9 million directly to creators. And obviously it's over like the past couple of years, right? But it probably did peak in 2020. We've been doing it since 2016. The reason we got started is like I watch a ton of YouTube.

3:44like you know i'm i'm 29 so when i was like in middle school youtube came out so it's just like always where i was spending time and in 2012 2013 2014 with the rise of instagram you saw the rise of influencer and like capital i like as as a noun influencer um and that was really a like instagram phenomenon it didn't really spill over into youtube we weren't the first people to sponsor YouTube videos, but like the mainstream, like industry side of sponsoring lots of YouTubers, like tracking it, like treating it like a, like an official marketing channel. I think we were early to that, a Squarespace.

4:23But what did we learn? It's the best ad space that you can possibly have. People hate Facebook ads. Like people hate YouTube pre-roll ads. People hate pop-up ads. So if you're trying to build goodwill, one of the few ways to do that is like creator or influencer integrations, right? Like I bring up like Anthony Fantano. So we sponsored him from like probably 2017 to 2022. And it was like three videos or five videos a week every single week that entire time. And eventually you build goodwill with the audience, right? Like if it's a smaller creator, they're excited to see their person get their first brand deal, right?

5:07Because it's a very intimate platform. people are spending 45 minutes with creators like long form it's so much different than a tiktok or or you know an instagram or snapchat was hot at the time those things are so ephemerate like they're here and then they're gone we're like if you're watching long form you know uh storytelling format like you care about what that creator has to say it is like the only thing similar to word of mouth and it's kind of like word of mouth at scale so that's like what we found and like and why it works and why it was such a big channel for us the whole ecosystem got fucked up in 2021.

5:39So like forever Ridge operated on like a very steady state. Like we know we can make money doing this and like do it sustainably and consistently and not like just pop in and out of it with like five to$10 RPMs. That was like our sweet spot. So YouTube AdSense gives you like a, between like a two and a$10 RPM already. Sometimes it's higher if you're a finance creator and like our brand deals just like add on to that 30 second integrations really low level of approval we know that we could like typically make our money back doing that in 2021 crypto and gambling took off and they just destroyed the whole ecosystem from our perspective like creators we would work with forever you know we would give them a ten dollar rpm and they're like hey i'm getting a thousand dollar rpm now so you have to match that and it's like oh man we cannot but things have definitely got back to normal that like, you know, we're, we're back sponsoring channels and it's all kind of working out.

6:38I mean, I think something that Marquez said in his tweet announcing the partnership was that, you know, what stood out to him about working with Ridge was that you all are a big enough company with a proven track record of, you know, shipping new products as well as just refining your current product suite. But you also act like a startup and you're nimble and you move quickly. And that was something that really appealed to him. And it sounds like that ethos has been kind of at the core of how you all have not only approached working with a lot of creators, but also it seems like that's something really integral to kind of the company's ethos, I guess.

7:13Yeah, look, we were 11 years old this year. We've never raised any money. So six of us now. So me, my CMO, the three original founders and Marquez, like that's who's on the cap table. and we've got here by kind of just doing whatever we want right um and i think we're the perfect size to do a deal like this right like it's kind of like how tiger went to go do his own brand and it's because like nike's not going to give him a meaningful stake in that business they can't right and he wants to own it and actually control it like he can't do it with a nike or a callaway right he has to do his own his own brand and i think we're the perfect size where we can structure a deal with Marquez where it's like, yeah, dude, you can have solid, meaningful ownership.

7:58You can have a lot of control of this business. You can tell us what we need to improve and fix. And he gets the support of like, we'll do a couple hundred million dollars this year and we don't have any boss. We don't have to hit quarterly earnings. We don't have investors or the stock market to report to. So we can make sure we take our time and do everything as perfect as he wants it to be. This episode is brought to you by LifeLock. When you visit the doctor, you probably hand over your insurance, your ID, and contact details. It's just one of the many places that has your personal info. And if any of them accidentally expose it, you could be at risk for identity theft.

8:40LifeLock monitors millions of data points a second. If you become a victim, they'll fix it, guaranteed, or your money back. Save up to 40 % your first year at lifelock.com slash podcast. Terms apply. Winding the clock back a little bit. In August, 2023, you tweet out, quote, I'm offering a million dollar contract to a content creator to come in house at Ridge. You know, you explain why across the tweet thread, you wanted to bring in someone who spent real time with the business, was incentivized for the product to improve, not just a celebrity endorsement who would show up for a photo shoot a couple of times a year, collect a paycheck.

9:18Walk me through your mindset in putting this tweet out into the world. Were you expecting or hoping for a particular outcome? No, it's something I wanted to invest money in. I want us to get better at content. I think we're going to see a lot of brands die who can't tell a story. And Ridge got to where it is because we were really good at digital marketing. That was our core competency. And other brands outsourced that. And that's why other brands went out of business or raised money or had to be venture backed, right? We got really good at digital marketing very early on. That was a core competency to be successful at D2C.

9:54And I think 2024 is the sort of a new era where that same core competency is now short form video in content production. And I'm mature enough to admit we do not have that in-house. Like we're really good at making ads. We're really good at like, you know, web development and the same digital marketing skills. but we can't, we're not a creator-led brand. We can't tell that story. So I wanted to find someone to help us do that. I'm like, Hey, look, I'm going to invest a million dollars in this. Like I'm open to whoever. And we had like a lot of conversations, right? You know, around that same time we were talking to like UTA, CAA about like, okay, a celebrity partnership, you know, should it be Pedro Pascal or should it be that, that football player, Gronk, whatever I can't remember his name but that was who was getting pitched to us and those deals are expensive you don't really get that much of a deliverable out of it and I'm like hey look that's probably a very old way of thinking about it I think that's like a flash in the pan Manscaped did Pete Davidson and you haven't heard anything about that it was just one at one time so we wanted a deeper integration and actually to learn what makes good content if I say I want to be a creative brand what am I actually signing up for I need someone to teach me that.

11:08So I did the tweet out there and I just wanted to, you want to dance with whoever wants to dance with you. So it's like, who's interested? We got a lot of great inbound. We talked to a lot of great people. I think I pitched Colin Samir. I'm like, hey, you guys can have this job. Do you want it? They're like, ah, we're too busy. Coffeezilla, I hit him up. I was like, dude, do you want to do this? I'm like, it's pretty cool. He's like, ah, no, he doesn't want sponsorships on his channel or whatever. we talked to a bunch of great tiktok creators and like just trying to figure out who makes the most sense for this and you know we were getting down to making a selection like uh the the tweet was out there in the world for 60 days or whatever and i'm like you know we sponsored marquez in the past i'm just gonna shoot it to him like hey dude are you interested and he's like i'm not interested in this particular deal but i think we can work something out and it took it took a long time to get something that like we felt comfortable with and he felt like he could get behind and uh i think we signed the deal in December and we've just been like shooting content and like talking to his team.

12:08And that brings us to now we're ready to bring it to life. So we hope it's a new chapter in Ridge and the stories we're able to tell. Off of that, I think I saw you reply to someone in the comments who is just essentially asking, you know, is this just going to be an extended sponsorship or is this like, is he actually going to be working at this company? And you kind of jokingly responded like, why not both? And you screenshotted one of his videos where he has like Ridge suitcases or backpacks or something like in his trunk. And you mentioned that Marquez originally said, as you're currently kind of structuring this, I'm not sure if this will work for me, but let's continue talking about it and developing the idea.

12:51Would love if there's kind of any insight to those conversations that you can provide, you know, in terms of what you were looking for, what he was looking for and how it kind of, you were able to meet in the middle. Yeah. Well, the, the original deal that I put out there was a million dollars for 10 hours of work a month over four years. That was the way the original thing was structured. And I mean, Marques is probably like one of the top 10 most famous YouTubers of all time. And, and I, I just think his time is so restricted and pulled in so many different directions that like, It just needed to be a different structure.

13:28He also has a team that we could learn from and a deep roster of like, I mean, he probably has like 20 people that are working on the MKBHD brand at any given point. So the way we ended up structuring it was, I mean, he's coming in as an investor. He's on the board. He ends up getting a pretty meaningful chunk of the business. And then on top of that, we're going to continue being a sponsor across all of his different channels, social posts, whatever else. But the more meaningful, deeper layer is creating products together. That's what we probably exceed at and what I think a lot of creator brands struggle with.

14:12Jimmy and Feastables is the gold standard. He hired people from our X bars and has spent probably tens or if not$50 million developing this brand. So it's really hard to do for a lot of other creator brands, right? Like they're day in and day out shooting content and creating best in class content. And when you make products, sometimes you have to make shitty products for a long time. Like that's like the secret of being a product brand is that like, it's very hard to come out of the gate with something that like, not only is like the highest quality standard possible, but can make money at decent margins at a price point people can afford.

14:45It's the reason why like Apple's been so dominant for 30 years is because the first five years they sucked. right? And so I'm sure Marquez could make amazing products if he put his time and energy into it, but he gets now to work with our product team. We have a factory in Arizona, we have prototyping, and we just have capital to that type of stuff where, you know, if you want to make, I mean, that's the thing, it's so expensive to make products, right? Like if you want to make a brand new to the world thing, you want to order a hundred thousand of them. It's like, okay, so it's between one and$5 million to get that thing made and delivered, right?

15:18And it's just, it's a a lot of capital output. So that's something we do really, really well. So we're making a lot of products together, not just like core accessory products, but we have like a couple different product lines we've been, we've been specking out and we're going to do this for the next couple of years. So I think there'll be a lot to watch and see us develop. For sure. And even as you were talking about Apple per se, right, the five years they put into developing a product and just the fact that, you know, there's a lot of time and energy and investment upfront that goes into developing new things.

15:47It kind of reminded me of like Paul Graham's essay, you know, do things that don't scale. Like no one ever remembers the first day, right? Like, obviously, it's great. In this regard, you know, we see an announcement. But even as you mentioned with Pete Davidson and Manscaped, I believe, right? It's like, cool, what have they done since, you know? And in that regard, it sounds like that's such a big focus for you all in developing out Marques's role within Ridge is just to really have him coming in the door, developing new products and obviously sharing his insights from the creative standpoint and, you know, helping usher Ridge into this next era of creator marketing.

16:23I guess to my last question I had for you, you know, zooming out a little bit, I believe I read in an interview that you did that you said you want to sell Ridge for a billion dollars in the next three years. How do you think working with a creator like Marques helps you achieve this goal as a company? I'm gonna have two points. The first point is about, you know, remembering the first day doing things that don't scale. Yeah, we waited like five months to announce this thing, right? We wanted to make sure we had not only content, but like we were working well together. And like, we were clicking as teams before we ended up going live with it.

17:02I think the worst thing you could do is rush one of these things. So we wanted to make sure we already had the product roadmaps and samples and everything in the works before we pulled the trigger on like telling everybody about it. because I hate when people say things that they're going to do and they end up not doing it. When I put that tweet out in the world, undoubtedly we were going to sign somebody. I'm like, I have a million dollars. I have to spend it on something. Let's figure it out. So I'm glad I worked out with Marquez. And then selling for a billion dollars, I'm a big fan of manifesting stuff.

17:32So I said I wanted to sign Marquez. He ended up doing it. And every time I said I was going to do something, people always fucking try to make fun of me for it. I remember sitting with my CMO, Connor, this was like six years ago and being like, yeah, we'll get to a hundred million dollars in revenue. And he's like, there's no way we're going to get to a hundred million dollars selling wallets on the internet. And we did that like, you know, in 2021 or whatever. So I'm like, take that Connor, still my best friend, still talk to him all the time, but filling in the gaps there. My favorite brand of all time is James Purse.

18:01My favorite designer of all time is James Purse. He owns the whole thing. He's never raised any money. Every year they do$300 million in revenue. He pulls out like$50 million a year in profit. It is an amazing brand and he does whatever he wants to it. So he wanted to open a hotel in Cabo. He just bought a hotel in Cabo. Go on their website. It's a horrible shopping experience. Like you have to call to buy certain things. It's like, yeah, like we want to make sure that like you're qualified to buy this, right? He still charges for shipping and everything's$500. So what I love about that is it's very authentic.

18:34Like he's not trying to be a private equity optimized business. He's just trying to run the best business possible. So if Ridge ends up being a James Purse, I'd be so, so happy because that's like what I would love is something like so authentically itself that it can just exist out there in the world. With that being said, I'm just super aware that there is a market for profitable accessories brands, right? And like the natural outcome here is selling to LVMH, Curing, Tapestry. There's like roll-ups of luxury accessories brands. and there's just a very clear path that like by 2026, we're probably doing close to a billion a year in revenue.

19:14Somebody's going to want to buy that thing. And, you know, if we sell it, not only will I be rich, I think Marquez will make a decent chunk of money off it. So that's what we're shooting for. That was the majority of the questions I had for you. Did you have any other last thoughts or comments? No, I think this is going to be super common. Like, you know, a week ago, Ryan Trahan announced that he has a candy brand. And if you peel back the layers, it's a relaunch of a candy brand that's existed for the past couple of years, right? So we're already starting to see the shift from existing DTC brands or legacy brands becoming creator brands.

19:51It's a difficult journey. Everyone's always trying to get a piece of a celebrity, right? I think that's something I learned from this is that Marques is flooded with people trying to get his attention all the time. And it makes it really hard to make thoughtful, impactful decisions. So he has a great team and I think he does a great job getting down to the core of what matters. And I think that's why we end up working really well together. But we're going to see a lot more of these creator embraced brands. And we have to come up with a term with it. I don't know what it's going to be. But the goal is like, yeah, if Ridge could operate more like Feastables, Ridge would be a better business.

20:27If we could actually go out there and tell a story and get people bought in, I think it would help us create better products for more people. and I think people would like us more. So that's what we're working on. I mean, even bringing up Trahan and Joyride, right? Like obviously we chatted with him and covered it in the newsletter last week, but I think it really just plays into this aspect. You know, something we certainly talk about in the studio a lot is just that the creator economy isn't gonna be just the creator economy, this niche thing anymore moving forward. It's just gonna be the economy, right?

21:00And I think everything you just outlined and pointed to is very much playing into just where all companies are kind of moving towards, moving forward. Thanks so much for taking the time to chat today, Sean, and enjoyed hearing all about the recent partnership. Cool, Nate. Appreciate the time, dude. Talk to you later. So guys, I got to ask, after listening to that conversation, how do you feel about passing on the deal? It was funny that he brought that up. I was wondering if he was going to bring it up, that we actually met with him and their whole team about this deal. Yeah. I mean, first and foremost, I think Sean and the Ridge team are just like excellent operators and they've built a great brand.

21:41It's funny because I texted Sean on the Monday before the deal was announced just to go like, hey, how's it going? Did you ever work a deal out with a creator? And he responded to me and he was like, just wait. And I was like, oh boy, okay, you got a big one. Yeah. I think it was kind of heartbreaking that I knew it wasn't exactly right for us because I loved the idea. It sounded so fun from a creative perspective to get to, you know, add creative direction, create videos and photos for these products. And it sounded like potentially like a very one-of-a-kind financial opportunity in the creator space considering they don't have a bunch of investors and they make really good money every year.

22:26I mean, I will say during that coffee, we said... the ideal candidate for this is Marquez Brownlee. Yeah, and we knew it. And we knew it. And we were like, if you can do a deal with Marquez, do the deal with Marquez. I think these opportunities, you know, will continue to come about. And I think this is the right way to interact with a company as a creator, if you are capable of it. And so, yeah, I look back on it and there's days where I'm like, man, that would have been really fun. But I know that Marquez is the right creator for this deal. He has the perfect audience for it. and he has the right infrastructure.

23:00Yeah. Like his team creates incredible product videos every single day. That's what they live and breathe. Like they live and breathe physical product. It's perfect. Yeah, I guess too, like on the one hand, you know, especially talking with Sean and getting some insight into what went into bringing Marquez on. You know, Ridge, he talks so much about RPMs and how long they've been working with YouTube creators since 2016, right? I really love this line he had that they discovered early on that working with creators is equivalent to word-of-mouth marketing at scale. So on the one hand, it's like a company like Ridge or Manscaped or Squarespace that's been working with creators for as long as they have is uniquely positioned to take on this kind of role, take on this kind of creative partner like Marques.

23:46On the other hand, too, we just saw a better-for-you candy company, Joyride, bring on Ryan Trahan as an investor and co-owner to pretty much help relaunch that brand. So what do you think is the path we maybe see moving forward that every company, if they're flexible or creative enough, will be able to integrate creators somehow and become a creator-led brand? Or do they have to have some sort of knowledge or insight into how the YouTube world works? They're going to have to be at a similar organization. They're going to have to be similar from a structure perspective to Ridge or pretty flexible.

24:23I don't think like a large corporation can really engage with creators in an effective way. I think they have to be small enough to be able to move. Early on, Colin and I met with Nike when we were in the sports, you know, when we were doing lacrosse. And I remember they described Nike as a massive cruise liner. For Nike to be able to turn, it took a really long time. And they said startups are more like speedboats, right? They can pivot and move and be flexible. And I think startups with enough capital, like a Ridge, and enough scale like a Ridge can do these deals with creators because they're flexible and they have enough cash to make it worth the creator's file.

25:02And that's really important. Speaking of Nike, I also thought it was really interesting when he brought up Tiger Woods saying with a company as big as Nike, even someone like Tiger can't get enough equity. Like it can't actually be worth it as he's looking at making a new deal. And that is something very specific to Ridge and Marques Brownlee. And you're mentioning structure. Sure, like they're at a point in their business when they can actually give Marquez meaningful equity, right? For him to really take this seriously and spend a lot of time in their business. I also think that's kind of required because a creator introducing a partnership like this to their audience is a pretty big move.

25:44And I think you do have to play in the upside because there's also splash value in just the announcement. Like just the pure announcement of Ridge and Marquez has so much value that I think you have to become some level of owner as you're entering into a partnership like this. And you have to mitigate risk in the deal because when you have essentially a faceless brand like Ridge and someone with an incredibly well-known face like Marquez comes on board, he becomes the surface for whatever happens with Ridge. Sure. That's a reality that like if something goes wrong, they're like, oh, well, that's Marquez's company.