462: Why Subscription Products Need Purpose with Jessica Rolph of Lovevery

27:46So talk to me around Happy Family, how the acquisition to Danone came around, how long were you running that company for and what made you make that decision to sell? Yeah. So Shazi and I were running that company for seven years before selling it to Group Danone. And I would say that it was really the next evolution for us. Danone was number one in infant, sorry, Danone was number two in infant nutrition globally, right behind Nestle, and they did not have any food businesses in the U.S. And so for us, it was such a natural fit for us to be a part of this global brand. We were really interested in building a formula with them that was a next generation infant formula that was more nutritious, pure, more based on what parents really are looking for in terms of nutrition for their infants.

28:39And so we were able to build that with Danone. So it was almost like Danone was the fullest expression of happy family. Hey guys, I hope you're enjoying this episode and learning a ton. As you know, in this series, we interview some of the greatest founders of our generation to find out how they did it. However, if you're thinking of starting your own business and you wanna hear from some incredible stories from everyday people like you or I who are actually in the trenches, only been building their business for maybe one year or two years, like that are building right now and they're really in the early stages, but they're getting success, you should come and check out our new podcast From Zero to Founder, hosted by our community manager, Molly Flynn.

29:22These are in the trenches stories from our very own successful students that have gone through some of our programs. People just like you who are deep within the process of building their very own successful business. These are the founders of tomorrow. You can find the From Zero to Founder podcast on all platforms. And remember, it's founder without the E. All right, now let's jump in the show. So you exited Happy Family in 2016. Was it inevitable that you'd start another business? You know, it's so interesting. I think oftentimes we're really just guided by our purpose. And a lot of my family and friends were like, really, you're going to do this again?

30:06And I just couldn't help it. I felt like I wasn't done with the experience of creating a company and co-creating a company. And so my partner, Rod, and I, we have a 50-50 partnership. We've really built this business together. And that process has been one of the most satisfying things that I can say.

30:28That process has been so satisfying for me. And it's really about trying to get out this vision that you can't help but share. I had this insight to create a different way of helping parents feel confident about their child's learning. At the time, you know, again, there's all these plastic toys, products are coming in and out. It's the most important time for you and your child, but it's so hard to not feel overwhelmed or to know where to look. And so for me, it was this deep purpose of wanting to just share this information that I discovered, share this new way. because I had had such an incredible experience with my own children.

31:05I wanted to bring that to, frankly, to a global market. And how did you meet your co-founder for Love Every? So I've known Rod for over 20 years. He's actually married to my best friend from growing up in Minnesota. And so how long after exiting Happy Family did you go, okay, I'm going to work on my next thing? And you start speaking to Rod about this idea. Yeah. So we sold the business to Groupden Own in 2013, and I had a three-year earn out. So there's an agreement where we sold 60 % of our shares and we had 40 % of our shares left that we had to hit a certain revenue target in order to complete the transaction.

31:50So all of our investors exited at the moment that we sold the businesses in 2013, but Shazi and I needed to stay on. And that was an exciting time. I was learning so much about what it was like to work for a multinational. But then over time, I realized that the team just had it, that there was so much that they were doing and I wasn't as needed. I also simultaneously was having these amazing experiences with my own three children and dreaming about the subscription company, this direct-to-consumer program that we could offer that would really complete the picture around nutrition and now brain development.

32:28It felt so holistic in terms of my life purpose. And so I started dreaming about this business. my, I think Rod and I spoke maybe in 2015 and I was saying, you know, maybe 2016 and I was talking to him about, we were talking about, I think my co-founder Rod and I spoke in 2016 about where we wanted to move our families. So we were trying to decide, my best friend and I really wanted to move home to Minnesota, but both of our spouses were like, oh, it's too cold there. We're not really into going to Minnesota. And so we were, Rod and I were actually assigned by our spouses to think about where we all wanted to move together.

33:09And so we were on a conversation and I said, I've just been thinking about this concept around early learning and I'm so interested in it. Could we discuss this? And we talked and immediately he said, let's launch this company together. We'll be 50-50 partners and build it side by side. And it's been great. it's been a great partnership yeah sounds like it's been an amazing partnership so uh talk to me around launch how long did it take uh what was moq obviously the different different world right like did you raise money to begin did you bootstrap or talk us through we did a little bootstrapping to start and then and rod really kind of took took the concept while i was wrapping up at Happy Family.

33:57And then we decided in January of, sorry, I'm not going to get the dates right. Hang on one second, Nathan. Sorry. So we bootstrapped the business to start. We put in a little bit of our own money and really we're exploring and testing the concept. So we hacked together the design thinking model out of Stanford and made it our own. So we picked 25 families and we tested this early learning program with them for a year. So we flew around, met with them. We flew around three different, maybe four different times, I think. We were in their homes. And in the meantime, we were sending them the simulation of these play kits.

34:40So we were working with local woodworkers. We were sewing. I was ironing things. We were making prototypes that were the first concepts of Love Every and locally printing out guides at Kinko's and shipping out these 25 kits every two months. And then we were getting feedback. And so we would iterate, we would go into their homes, we learned about what kind of stuff the parents had, how they were engaging with their child differently with our playthings, and what we could do to make the experience better. I will say ugly prototypes are actually the way to win here. You can't spend too much time on your prototypes because if you use an ugly prototype, the potential customers will not feel embarrassed telling you that they don't like it.

35:23So that's one of the principles of design thinking. So we simulated this PlayKids program. At the same time, we were building out our first product, which is the Play Gym. And we were working to launch that product. We launched it in November of 2017. We raised seed money. We raised 3.5 million in seed financing to start the business. And then after we launched, we raised subsequent rounds of finance. Got you. And when you first launched, how did you guys get your first customer? Yes. We really wanted Target, to be honest, to be our first customer. So we had that in our business plan that Target was going to launch our brand because I'd had so much experience with Target from Happy Family.

36:09We couldn't convince Target to launch with us. And so we launched with Amazon, which was a great place to launch. We launched with Amazon because that's the place where search originates. It's the place where a lot of registries happen. And our dream was to be the number one in revenue and category on Amazon within a year of launch. And I remember literally going to sleep at night and visualizing number one in revenue in the category on Amazon, number one in revenue in the category. And within a year we made it. So it was kind of remarkable because there were so many products and lookalikes that were the similar idea to what we were building.

36:50Ours was three times the price and so much more intentional and Montessori based and really focused on learning for that full year. Our Play Gym product was so much more robust. And so from there, we also launched our own platform through Shopify and started to scale the business. Yeah, crazy. So you launched on Amazon first and that's an interesting idea because Amazon, like you said, they have search, they have a massive customer base. When people think of direct to consumer, they tend to do a whole pre-launch strategy, build up a wait list, run ads to a landing page. But you guys just launched on Amazon.

37:32Well, we launched the Play Gym on Amazon, but actually what you just described was our strategy for the Play Kits, the early learning program that is the direct consumer subscription program. So we built the list through our Play Gym product by acquiring customers at Amazon. Now, we didn't get the direct information, but we got them to follow us on Instagram. They became familiar with our brand. We built an email, a weekly email series talking about child development in a fresh way. and so that is how we started to build brand love. Yes, yes and the Play Kits is where the subscription came into it and when did you decide that you were going to launch the Play Kits as a subscription because that's an interesting concept.

38:17Yeah, you know there's a lot of businesses that kind of attach a subscription to a product offering and think that it's going to be a better business, a more, a creative business. It will, you will gain more revenue over time. For us, the subscription early learning program was really essential to what we're doing. So that we always intended to build an early learning program that's sold by subscription from the beginning, but we felt like it would be too hard and complex to launch with the subscription program off the bat got you so talk us through kind of um the subscription business because uh it's very uh lucrative if you can get it right and it's not easy and it sounds like you guys have got it right uh it sounds like you guys are going super fast like the the growth we're talking about, like you said, you're over 200 million ARR and you're in the, when did you launch the PlayKids?

39:20Only three years. We launched the PlayKids in summer of 2018. So we've been a little over four years in market with the PlayKids. Yeah. Yeah. So that's super impressive growth. So talk to us around like the unit economics. How do you know what to track? Talk to us like how you really mastered that or not mastered, but you know what I mean, So I'll start with the purpose, because I really believe that when you build a subscription business on a deep purpose and a core customer need, you can build this recurring revenue engine of growth. For us, you know, it's so much about that child and that parent and the parent craving connection with their child as their child's growing.

40:03So babies and children change by the minute. And it is so hard for parents to know how to help them and what they're interested in learning at each stage. So the fact that we can provide this really dynamic kit full of products that we invent ourselves combined with a guidebook that talks about all the micro development windows that are opening in that child's brain in this moment in time and then take the guesswork out of it, build confidence for parents, ship the products six times a year for the baby year, four times a year for the toddler years, between zero and four really helps parents know what's going to happen next.

40:40the stakes are high with early childhood. A lot of the parents are getting the message that huge amount of brain growth happens and that so much of it is this environment the parents are giving to the child. So giving them the right play things, the right guidance, the right information. We have an app that provides information for parents that has really high open rates and engagement. We have these guidebooks. That all builds confidence. So that is the purpose of the business. And I would say that typical subscription companies are marketing to adults. And to an adult, you're not changing. It's really hard.

41:15The subscription company has to stay dynamic and interesting in order to capture your attention over time. Whereas for us, the customer is changing so much. So we're really serving those two customers in a really unique way, the products for the children and the content for the parents and marrying them in a unique model. Are you hesitating to take the next step in your e-commerce journey? Founder Plus has you covered. With proven frameworks tailored to your business needs for fast results, a supportive community of over 30 ,000 like-minded entrepreneurs, and weekly live mentorship sessions, Founder Plus is your key to success.

41:50Try Founder Plus today for just$1 for seven days and start building your dream business with confidence. You can visit founder.com forward slash start dollar trial or click the link in the description to claim your trial. and that must have been really difficult to be able to do that right yeah i mean i think that it's difficult if you are thinking about the manufacturing of the products to highest quality standards to thinking about the complexity of putting all these different items that we've invented ourselves and designed on our own into these kits and developing this really amazing experience for parents that is so spot on in terms of every word that we communicate with you helps you build your confidence and doesn't erode confidence or erode trust.

42:39If you can do that, if you can obsess over that customer experience, you can build a platform and a connection around trust. Parents are willing to hand over their trust readily to someone who is solving this core need for them of help me feel better about this really chaotic, hard parenting experience. I want to feel more optimistic. I want to feel more confident. We bring that confidence to parents in their homes. Yeah, no, it's an incredible mission. And I'm curious, just like the difference between happy family and love every, what are some of the key things that you're doing differently the second time around?

43:16Is it easier the second time around? Good question. I would say it was much easier to scale faster. Yes. I didn't think it would be. I was kind of bracing myself for the same pain and the same struggles and the same chaotic sort of experience and all the highs and all the lows. I would say that we've been able to scale and grow this business in a more sophisticated way. And there were so many learnings that Rod had from his career of scaling mission-driven companies and that I brought from my career prior of scaling Happy Family that we've poured into Love Every. So it has been easier, but we've been going faster and harder.

43:54And so ultimately, it's not easier, right? Because you're pouring your heart into it, but we have found success quicker with Love Avery. We've gotten to higher revenue numbers. We've gotten to product market fit with almost all of our product launches from the beginning. Fundraising is always hard. Fundraising is so hard. I will say that it's easier the second time around, but not in the bag. So don't think that if you get a rejection from an investor that invested in you the first time around and they don't invest in you the second time, that there's anything wrong with you. It's just how hard.

44:31It is just the nature of fundraising. What about people leadership? What's changed for you this time around comparison wise? Yeah. My co-founder and I have really built a culture around this mission and this purpose. And I think that we've run a more sophisticated operation. So Rod has an incredible ability to recruit talent and he knows how to scale companies and scale teams. He had built a company from, I think it was something like 10 million in revenue up to over a billion in IPO value before joining Love Every. So he really went through having hundreds of reports. and for us I think it's in the process and the professionalism that we're approaching our team but also in that spirit and that heart and that mission and really hoping that our that our employees really feel that and we believe that they do amazing and um what about kind of I guess now that you're kind of doing this the second time around what advice would you give to founders when they're looking to launch a subscription business in the e-com space direct to consumer direct to consumer i would say that obsess over your product and really do a ton of testing and research before you launch and then after you launch remember that your product is not done that actually launching the product is a continuation of the product development process.

46:07And that's where you start getting feedback at scale and continue to obsess over that feedback and iterate your product. Never be satisfied with what you have. Always be looking to make it better. And do you reckon that, you said it before, not every, like people sometimes just kind of want to bolt on a subscription to a product. Do you think every product needs a subscription or it just depends? I think it depends on the core need. So for us at Lovevery, parents have a core need because they're like shopping on Amazon. The toys are all age graded, 12 plus months. I don't know how to play with this.

46:46Does my child need this right now? What am I supposed to be doing with my baby to play and feel good about myself? So that is a core need that we solved that problem that parents have with our business at Lovevery. So I think that the question that entrepreneurs should ask themselves is what is the core need that my business is solving and why does it need to be a subscription? Because face value, I think a lot of people don't really love recurring revenue businesses. They don't love to provide their credit card number to be charged every month or every quarter or every period of time. Businesses love it, right?

47:22We love it. As a company, we love that recurring revenue, but as a customer, you're worried that you're gonna forget, that you're gonna get charged again, you didn't mean to, or something's gonna happen. So really get down to that essence of what your purpose is and make sure that that is grounded in needing a subscription model. You talk a lot about the mission, what you guys are building with Love Every and also the purpose. I'd love to explore that a little more. How did you work out the purpose of what you're building? Was it from the very start or is it something that manifested over time?

48:02And what advice would you give to founders that don't have a business where the purpose isn't clearly articulated? Yeah, good question. For us, the purpose is to improve outcomes for children and really advocate for what that child needs at each stage and then help the parents feel really confident and good and optimistic about their parenting. And that's just a really core need as humans that we have. When you have a child, you just want the best for them, but you often don't know how to bring that to them and to bring that to their lives. So I think helping parents know what they need is our purpose and helping them feel really good about that early experience.

48:41We wouldn't have a business without that purpose. That's everything that we are. That's everything that we do. I think every company does have a purpose. I don't think it's hard for me to imagine why you would do something without a point to it, right? And so I think it's mining for you. Why? Why are you doing this business? Why are you spending your life energy, your important time and your lifetime on this company? What is it doing for you and what is it doing for society? So I think there's a lot more purpose out there. I think it's very easy to kind of throw away, oh, out in the outside, oh, that doesn't look like that company has a purpose.

49:22I think that a lot of companies do have a heartbeat. It's about making sure that you amplify that as a founder. And so how often are you talking about your purpose to your team? Would you say everyone at Love Every would be able to recite your purpose, your company's purpose word for word? Yes, I would say they would. I mean, so many of our employees are actually customers first. And they came to us because they were so excited about what we were building. And, you know, our employees that are not parents or don't have families at this moment in time, just share in the passion around, you know, they were a child once.

49:57They want the best outcomes for, you know, for humanity, I would say. And, you know, I think that human potential, we phrase it as human potential, really trying to think about what's possible for human potential is so inspiring. So yes, it is part of our core at Lovevery to be able to be aligned with the why. Yeah, I think it's super important. A couple more questions on the subscription side of Lovevery and then we have to work towards wrapping up. We'll move to the hot seat round. What is one of the key decisions that you guys made when it comes to retaining customers of your Playkit subscription?

50:38Yeah, it's a great question. So I would say that 84 % of our net revenue comes from our existing customers and 94 % of our customers come back for a second purchase. So we have world-class retention at Lovevery. And again, this isn't something that we had a gimmick to get. This is all about the experience. Are we providing value and are we continuing to mine our customers for more information about how we can improve that value to them over time? So it is about never being done with what you've developed in your product, always looking back, always trying to iterate and improve your product based on feedback.

51:16And we think that if we do that, that we will be able to continue to retain customers at this world-class rate. Yeah, awesome. And what about pricing? Talk to us about pricing. A lot of people don't talk about pricing, but it's an incredible lever to keep your business alive, especially when you look at costs of raw materials going up. We talk about costs of paid advertising, all sorts of variables that come into play when it comes to scaling a business. Talk to me about how you guys worked out pricing. So we, I will start with some of the levers of our business. So our CAC has remained stable pretty much since we got past the first kind of 18 months of scaling.

52:07We built a team and our customer retention has remained stable and our CAC has remained stable. We have been able to retain customers because we've been able to acquire the customers at such a stable CAC because so much of our acquisition is organic. So over 60 % of our customer acquisition is organic. About 40 % of our customers hear about Love Every Through a Friend. So this is a category where parents are just talking to each other. And so if we can give them a great experience that's physical, it's in their homes, they're playing with their babies, they're playing with their young children, their friends see the product and ask about it.

52:44So, so much of that kind of lever is really important to keep the business healthy. We did really suffer from the supply chain challenges, especially last year. So our logistics costs went through the roof. And I'm sure you've heard this from a lot of the founders you've spoken to. And it's just been in the news, of course. Container shipping prices, we were also not optimized in terms of our logistics and our warehouse. We made a transition. We decided to make a really hard choice to not raise prices. We are not a profitable company, but we decided not to raise prices because we felt that our price point was right for the customer at this moment in time.

53:21And I think that that strength to hold steady through the sort of everybody's like grabbing for the extra dollar on inflation and saying, okay, now's the time. This time is not going to come back again. I got to raise my prices. Everybody's doing it. Actually, our decision to not raise prices really helped us to continue to grow at a really strong rate over time. So that was a hard choice. and now we're working to use that scale to improve our margin, to improve our costs and to build a sustainable business. Yeah. Wow. Thank you for sharing. All right, Jessica, we have to move to the hot seat round and then we'll work towards wrapping up.

54:01I'm conscious of time. All right. So first question I have, what lessons have you learned from your kids that you've applied to business? I would say that I'm constantly learning lessons from my kids, my middle child told me that, okay, let me start over. I'm constantly learning from my kids. I would say I did a podcast interview that I wasn't very proud of a couple of weeks ago and I was beating myself up about it. I was like, oh, I could have done better. I could have done better. And my daughter said, you face it, you fix it. So I was like, let me go see if we edit out any of the things that I feel embarrassed about saying, right?

54:42This is so relevant, right, for this podcast interview. Second, my son said, you know, you can't change the past. You can only change the future. You can only do better next time. So just look at what you did wrong and do better next time. So I hope that this interview has been better. At least I felt better with this interview, but I would say that my children have become my coaches. And so they are teaching me all the time those lessons that I impart to them and that they are picking up from the world. They're bringing it back in their childlike voices with their innocence. And it really resonates.

55:13That's awesome. How do you maintain a healthy co-founder relationship? Well, we have a ton of trust because we've known each other for so long. But I would say to maintain that relationship has been, it's been very important for us to have co-founder check in time. So we actually just discussed this yesterday and we said, you know, we're not able to work out some of those challenges that we have when we're in front of the team? Can we write down where we're disagreeing? Because we have a lot of areas where we, on the day-to-day, have different perspectives. And can we have some co-founder time?

55:47We had that today and it was fantastic. So I think just being able to carve out that time together, it sounds so simple, but it's been really powerful for us. And I hope that we can get back into our rhythm. Awesome. Last question. If you could have dinner with any entrepreneur dead or alive, who would it be and why? I mean, Yvonne Chouinard, hands down. He gave away his company, Patagonia, to planet Earth and to climate. I am so inspired by him. And so, yes, I would love to pick his brain about how he thought about that evolution for Patagonia and what he sees for our future. Great one. Yeah.

56:25He's on the list. Someone we want to speak to. Awesome. Well, look, thank you so much, Jessica, for sharing all your experiences, lessons learned, and congratulations on all your success. I'm really looking forward to watching your journey from afar with Love Every and yeah, looking forward to that IPO. Thanks so much, Nathan, for having me. It's been a pleasure. Hey guys, I hope you enjoyed this interview. As you might already know, our mission at Founder is to help tens of millions of people every single week with our content, either start or grow their business, which is exactly why we're partnering with world-class founders such as Damon John, Alexa Von Tobel, Greta Van Riel, and so many more to teach crucial skills such as negotiation, finance, e-commerce, and so much more.

57:16So if you'd like to get access to these free exclusive trainings, please go to founder.com forward slash free. These are 100%. We go super in depth on teaching a particular topic and I know that you're going to love them if you enjoy this podcast. So just go to founder.com forward slash free. All right, guys, I'll see you in the next episode.