Bonus: $65M Exit, Zero Employees: How Olauto Automates Everything Except Customer Service

0:00Mike Maleszyk:We wanted to find this balance where like the business didn't take over our lives. We could use AI to make the business a little easier for us in terms of like the impact on our day to day, but never sacrifice the humanity of the business by doing so. So that's kind of where human touch comes in.

0:16Tyler Handley:People shop with small, mid-sized businesses and e-commerce because they want to feel that connection. So if you're optimizing for deflection rates and you're optimizing for automation, you're missing out on some moments that can really make an impact to your total customer lifetime value and the relationship that those customers have with their brand.

0:41Mike Maleszyk:Hello and welcome to the D2C podcast. Tyler Handley sold Inkbox to Bic for$65 million and his new company sells a$33 air freshener. Launched last September. It's already profitable. Has zero employees. No CX team. No marketing department. No ops hires. Two brothers. Some contractors. And AI running everything else behind the scenes. Except for one thing. When a customer emails a lotto, a human answers every time on purpose. And the guy who built the software who makes that possible is Mike Malisik. whose Tyler's known since high school in St. Catharines and now lives in Cambridge, which is my hometown that I'm headed to next week, which is wild.

1:16Mike Maleszyk:It's really exciting to have you guys both on the podcast. I'm really excited to explore how far brands can push AI before customers stop trusting you. And you guys are actually kind of running this experiment in real time. Welcome to the D2C podcast. Thanks for having us.

1:31Tyler Handley:Thanks for having me.

1:32Mike Maleszyk:Tyler, why don't we start with you? Give me a bit of your hero's journey, maybe a little bit like about the ending of Inkbox and kind of how you evolved into Olato and what you're really trying to build here and why human touch has been so important for it. Yeah, so with Inkbox, we sold temporary tattoos. This was pre-AI, obviously, and we were really focused on the artists and the artistry. A lot of other temporary tattoo brands at the time that kind of indirectly competed with us because we had novel technology that made the tattoos last a lot longer, look a lot more realistic. They would just use like really shitty like clip, like created art, like not designed by like real tattoo artists.

2:10Mike Maleszyk:And so what we always rested upon as a brand was the real artistry of the tattoos. And, you know, in the age of AI now, like if you're restarting a brand, it would be very easy to look at it and be like, oh, you know, we're gonna, we're just gonna outsource this to AI. And no, that's not possible. Anyways, a long way of saying that with Inkbox, it was a very human-focused company. We had a lot of employees because we did a lot of R &D. We manufactured the product ourselves. It was my first time running a business. And I was kind of learning along the way, right? And so when you don't know what you're doing, you kind of just put in more hours because that's how you make up for it, right?

2:52Mike Maleszyk:You can't be quite as strategic with your time because you don't know what that means. You don't know how to optimize your time because you don't know what you don't know. And so when it came to starting a new business, being a lotto, we obviously seeing AI develop and what it could do as well. We wanted to find this perfect balance where we could operate a business and all the stuff that we, you know, we could oversee, but not necessarily do day to day, we could outsource to agents. And then everything that was very like human about the business, obviously the brand, the creative, the customer service, the emails, like, you know, nothing's written with AI, you know, nothing that the consumer sees, you know, it might have passed through a little bit of AI at some point for inspiration or using it as like a sounding board for us.

3:41Mike Maleszyk:But at the end of the day, like, it's all like very human. And so we wanted to find this balance where like, the business didn't take over our lives. So we could use AI to make the world a little easier, make the business a little easier for us, you know, in terms of like the impact on our day to day, but never sacrifice the humanity of the business by doing so. And so that's kind of where human touch comes in. It's super interesting, because I, you know, I've been reporting on on AI in this business since since we first started since we since AI couldn't make hands on images. And I think CX is been one of the spaces that people have had eyes on that will be impacted most by AI.

4:21Mike Maleszyk:And Mike, you kind of went, you went a different direction with that. Talk to me about the origin of human touch and why you built it.

4:29Tyler Handley:Yeah. So just context for listeners. And I can add a little bit of color to Tyler's story too, just because I was at Inkbox in the early days too. So all the things he said earlier, I'm like nostalgic about, and I can say with confidence that like Inkbox would have been a different business in the early days if there was AI, but we probably would have still met a lot of the same challenges. Right. And I don't think we would have outsourced a lot of the creative that we did. We would have really wanted to maintain the human element. So yeah, as it relates to human touch, you know, I was showing a prototype to Tyler in the early days and he loved it so much.

5:05Tyler Handley:And him and his brother are kind of power users for us now, which is, which is great to have, but it was sort of a synthesis of a couple of things coming together. One, I had been doing some consulting previously with a business called Lucent Labs, and they were all about transparency and the gradient formulation. So I had transparency on my brain. And then two, just as a consumer myself, Tyler and I have been in e-commerce for a decade plus. I like to support small e-commerce brands when I can. I had some questions and I was on a website and I was talking to somebody on a chatbot platform. I was getting some weird responses.

5:42Tyler Handley:And so I asked them, I said, you know, are you a bot? And they're like, no, and I'm human. I was like, great. What did you have for lunch today? And they couldn't answer me. I think their response was something like, I can only answer questions about the product. And I was like, that's a little bit strange. Like, where are you living? What was the weather today? And I could only answer questions about the product. So like with transparency on the brain and then having that consumer experience and then sort of the business background that I had, I did some investigating, you know, I inspect the element, I've got some technical chops, I was looking at it.

6:13Tyler Handley:And then I went into the app marketplace and Shopify and I searched like customer support, you just control F AI, everything's AI now. So it just felt weird to have this consumer experience and the experience that I had running e-commerce brands. And then, you know, see everything that's on the market there. And it felt like there was a transparency layer that was missing. So that became the sort of ethos of what I wanted to build next. And like I said, I got Tyler involved in the early stages, showed him the prototype, and sort of reminisced about some of our past work together and talked about the mission, the vision.

6:53Tyler Handley:And then very quickly, him and his brother became sort of power users for us, which was great, giving us sort of that early stage feedback. But yeah, I found it really interesting. And I get it as somebody who's operated e-commerce brands before, selling at e-box, sold at Mejuri. And I've even been on the tech side too at Smile.io. And we used to say at Smile, our biggest competitor is a merchant's time. Right. You're an e-commerce owner and you have so many battling priorities you're prioritizing all the time. Automation is useful for you. Right. But then consumers on the other side are getting bad experiences and there's consumers that are anti-AI now.

7:36Tyler Handley:So it feels like there's there's loud groups on both sides and both are kind of wrong. And I think the merchants that are going to be successful tomorrow are the ones that sort of strike that fine balance. And it's something that I see, to Tyler and his brother's credit, doing really, really well in the new venture that they've started.

7:51Mike Maleszyk:Yeah, there's a way to use AI without it becoming slop. Tech companies will promise this crazy future where no one works. And I mean, they always have these utopias that when you actually think about it, feel like dystopias. So they're trying to push this narrative. And specifically young consumers are having absolutely none of it right now. because they're like, we never got to participate. You know, if our jobs are going to go away, like, you know, we never got to participate. Like, what happens for us, you know?

8:23Tyler Handley:It's a good point. It feels like there's a consent transaction that's missing, right? There's a consent layer.

8:28Mike Maleszyk:Yeah, we don't want to. You know, it's like, we don't - Yeah, they're automatically opted in. Right? And so I think there's a way to use it. Like, ethically is a big word because we all might have a slightly different, like, view on the ethics of it. But, like, I think there's a way to use it ethically across culture, across music, across content creation, across business development. And obviously in a business, like there's things that, you know, having run a quite a large organization before that, like, yeah, I could just offload this onto an AI and it's going to be no worse for wear for anyone in the world.

8:58Mike Maleszyk:It's just going to make my life a bit easier. Right. It also just fits the DTC ethos so much. Like people are buying from these, you know, owner operated brands to avoid maybe supporting BlackRock or one of these huge, huge corporations. Right. And so if you're going to be using the same slop techniques or slop, slop support, you can be cast with the same brush when you really are. You're, you know, you're two brothers building this business. You want to have that connection with your customers. Four of us, by the way, my brother and I, and then we have two other friends and we're between Austin and Toronto.

9:28Mike Maleszyk:It's kind of like the makeup of the business, but it's just four of us doing like the whole business essentially. So can you just paint me a picture of this sort of hybrid human touch that still has automation? Because it's not just going to be someone on the keys all the time. Talk to me about how it actually works to provide CX in this sort of human touch way. You know, a good example is automated. I mean, the most straightforward, simple example is automated responses. Like there's, I think it's 65 % of our customer service requests at a lotto and it's aligns with, I think, what it was at Inkbox too.

10:03Mike Maleszyk:It was probably shipping. Where's my order? Order's not here yet. It's something that's usually beyond your control, but customers are just looking for some insight, right? And so you have your like automated fields, right? Like forms and stuff like that. But, you know, oftentimes there might be irregularities with the shipping. Like they obviously could have the wrong shipping address or it got delivered, but then stolen. Like that's a very, that's a good one. Cause that's a very human one, right? Like if you just had automated responses, like that would just be, oh, like, oh, I'm sorry. Like, it looks like your order was delivered.

10:37Mike Maleszyk:It's like, no, it was delivered and then maybe stolen. Right. And so the ability to actually go in with human touch and like, look at every form field before it goes out. and like before it gets sent for an actual response to a customer, I think is really important. That's just one edge case. But I think what it allows for is this concept of like never getting caught on an edge case, you know? You can use AI to automate this kind of like your backend responses to like your most frequent requests, right? But you never get caught sending one out without having, like being able to A, review it and like understand that it's something that could be more particular.

11:16Yeah.

11:17Tyler Handley:You guys were the biggest source of feature requests for me, which was great. It was a great learning experience getting online live with you guys and seeing how you're actually using it. And that was one of the early things that came up. It's like, hey, like 65 % of our inquiries can be solved with automations. To be clear, I'm not against automations. I'm not really even against AI. It's a nuanced thing. Again, it's a bit of a striking imbalance. It needs to be supervised AI, right? You need to have a transparency layer. You need to let customers know when they're interacting with AI. That's also a thing we like about it, yeah.

11:51Tyler Handley:Yeah, if there's an automation that simply references a knowledge-based article and it can be delivered very quickly, almost instantaneously via a chat widget, I think customers are generally okay with that, right? It's all of these other things that sort of push beyond that. And one thing that I think merchants might be making a mistake with now is sort of optimizing towards the wrong things. They optimize it. I was listening to Merchant Talk the other day about sort of optimizing towards deflection rate and bragging about their high deflection rates. Like, well, what's kind of missing in that number, right?

12:24Tyler Handley:Like, yes, you want deflection. What's a deflection rate, Mike, for the audience? Things that miss the inbox entirely, right? So it's solved by the AI. It's solved by an automation. It's solved by just, you know, somebody pressing a button and getting the answer that they need. And again, I think there's a little bit of nuance in that and saying like, well, was there a missed opportunity for for a human to human connection where you might have an opportunity? Let's be honest. These are some of your best loyalty moments when people feel connected to your brand. And again, sort of going back to my experience as someone who's been in e-commerce for a while and thinking about my experience as a consumer, too, like I buy from consumer brands because I want to support the mission.

13:05Tyler Handley:I want to feel a part of the brand community. I want to feel a part of whatever that human is doing. We live in a day and age where we can just press a button and get a drone to drop something off at our door from like these big suppliers that are out there. And then if there's something wrong with it, talk to a bot who will send you a shipping label and they send it back. You can do all that at a touch of a button. But people shop with small, mid-sized businesses and e-commerce because they want to feel that connection. So if you're optimizing for deflection rates and you're optimizing for automation, you're missing out on some moments that can really make an impact to your total customer lifetime value and the relationship that those customers have with your brand.

13:44Tyler Handley:And again, to you and Braden's credit, like Braden, even on the automated, I took some convincing for me to have him do some of the automations and off hours for the widget. And he even still has eyes on it. He'll look at all the transaction records. He'll look at everything. He has everything from high to high. His eyes are on. And I think that's the right approach.

14:03Mike Maleszyk:Deflection is rarely a good thing unless you're like in combat and then you're trying to or in like a verbal fight. You're trying to deflect things. Otherwise, you want to connect. I'm curious, like what are some moments that maybe a lot of merchants out there are deflecting that they should redirect towards human connection?

14:20Tyler Handley:One that comes to mind often for me is anything that's product related. Some people think they can just post a knowledge base about the product. The bot can reference it and AI can say, this is exactly what you need. If they're searching for answers to the product, they're pretty low funnel for you, right? They probably have a cart. They're probably ready to check out. And just having a little bit of that white glove support, getting them across the edge, that's going to lead to higher customer lifetime value customer, in my opinion. And so it was interesting. I actually ran into this problem when I was building in, when I was building Human Touch, and I was building some of the automation features to reference knowledge base.

15:00Tyler Handley:And some of the product questions I was testing it with, because I wrote a knowledge base on just the Shopify default demo stores that they give you, they load up a whole bunch of snowboards, right? Because Shopify, I don't know if people know Shopify lore on this, but they originally started as a snowboard shop. And so they load up a bunch of snowboards and it's like, what happens So I asked the AI, I created a bunch of knowledge-based articles, asked the AI about these snowboards, and it was giving me the worst answers. It was like, you should not take that response and then go out and snowboard that.

15:32Tyler Handley:It was like giving me snowboard tips too and stuff. I was like, I don't know. That's terrible, right? And so if somebody's asking you a question about a product, they're definitely in market. They're definitely low funnel. You have an opportunity to really curate an experience for them and go the extra mile too, right? So not just answer something directly about the product, but ask something deeper. How are you going to use it? How does it fit your lifestyle? Get into it with them and make sure that they have a good experience. And if you want to go even further, follow up with them. Hey, a week later, how's it doing for you?

16:05Tyler Handley:You're not going to get AI to do that. I mean, you could, but it's going to be challenging.

16:10Mike Maleszyk:I'd also say, what counts as a deflection? What defines the customer need being solved, the customer problem being solved? If it's a missing product and the deflection is just, hey, it looks like it was delivered, what did that solve? I keep going back to this because it is one of the most common things you get in e-commerce is just shipping issues. and there's many different ways you can you could probably deflect them but like it's really nice having a human voice there too for those those situations i'm so obviously like most people pretty sick of i don't give a shit when i get an email that just says like i'm sorry to hear that tyler like you know it's like you can really tell when there's no care taken and like i get it when it's like Amazon or something because Amazon service is insane.

17:03Mike Maleszyk:Like I feel like for them, like, uh, whatever, if I'm talking to an AI, like you give me refunds when things are clearly stolen, like it's, it, they really favor the consumer. Right. But for, for us, like small, smaller brands, like that, that's not the case. Right. And so I would expect from us like more of a, just a human element in conversations. One of the things that keeps coming up on the podcast is just how important the voice of customer is. And so when you're, you know, when you're building your marketing angles, when you're building your landing pages, your product, you know, all the content about your products, the voice of customer being able to echo that back.

17:35Mike Maleszyk:And so I imagine having human touch with your support, being able to probe into different situations is going to reveal more valuable aspects of that voice of customer. And then you still have the AI to quantify it all and be able to give you a report on kind of what people are saying. But just having the human able to probe into those situations is going to reveal more valuable insights in that voice of customer.

17:58Tyler Handley:Yeah. And again, you can put in your agent instructions and we even have built into the platform where you can say, here's my grand voice and tone. Here's all the key talking points, but just having human supervision, right? In our AI transparency layer, it's either, you know, it's AI derived through, you know, and automation is the only way that you can do that. It's fully human or it's AI assisted, right? And it's fine again, to have AI instructions that really capture that voice of customer, but make sure that you're getting it right and add a little bit of like, so to speak, the human touch in the follow-up communication and, you know, the conversation leading up, make it conversational.

18:38Tyler Handley:If it's purely AI driven and it's purely based off of just an instruction set, it can get predictable for for customers that are loyal and returning. It can be, you know, people are really wise nowadays to certain keywords that tell you that it's AI can be telling that it's AI and they can feel off-put by that. There's some risks alongside, again, sort of that full automation path. So again, I advocate for some human element interacting in that. And I think it only strengthens your ability to use the voice customer.

19:14Mike Maleszyk:There's some teeth behind this as well. We're talking about this as being very beneficial for your brand, but the EU has just sort of passed some laws that make this transparency piece required. Are you selling into the EU, Tyler? And are you kind of aware of what's going on there? Aware of it, yeah. I think the EU is always ahead on privacy policies. Any policy consumer facing, the EU is always far ahead, especially if you've ever worked in like the beauty sector or the food sector. So it's not surprising that with AI and privacy and transparency, like the EU would be forward-facing. Oloto currently, no, we don't.