522: He Made $40M in 2 Years Selling Mouth Tape | Alex Neist [VIDEO]

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0:39Just head to omnisend.com forward slash founder without the E to get started. All right, now let's jump back into the show. People are like, this is the dumbest thing I've ever seen. Taping your mouth shut. You guys are crazy. This is a scam. And I'm sure everybody out there is thinking, why the hell would you call it that? Like, really? Hostage day? people feel held hostage by poor sleep and they don't know what to do. So we took this term hostage state and created this brand around it. It gets your attention. And in this day and age, attention is the currency. I went in initially thinking we could do a hundred million.

1:14This could be a hundred million dollar brand. I went, no, this is a billion dollar brand.

1:21Before we dive in, I want to extend a warm invitation to join our thriving founder community. It's the perfect place to discover more insightful interviews aimed at helping you build, grow, and scale your business. So don't forget to hit subscribe. Your support means the absolute world to us. Thank you so much for subscribing. Let's get stuck in today's discussion. Hear the stories, learn the proven methods, and accelerate your growth and future through entrepreneurship. Welcome to the Founder Podcast with Nathan Chan.

1:56All right, well, let's just kick things off. Let's go straight for it. Like, why hostage tape? So hostage tape is the culmination of a lifelong journey, honestly. So you might look at it and you might look at the success that it's really an iceberg, right? There's just all of this stuff underneath the water that has come from a lifetime of experience. So the story that I like to tell about it is, so six years ago, I had it all. Two years later, I lost everything and mouth taping changed my life. So I actually was an entrepreneur before this as well, serial entrepreneur, and I had a software company.

2:44So as you can see behind me, I was an athlete my whole life. My first love was American football. And so I started this software business that dealt with sports video analytics. And as my journey went through with that, my wife and I went through a divorce. And I went through that typical entrepreneur journey of you focus too much on your business, you get burnt out, you get out of shape, you neglect your family, you neglect everything else just because you're so focused on this one thing. and then I was also sleeping like shit. I was just sleeping so bad that I snored like a chainsaw. I'd pushed my wife into the other bedroom for years.

3:26And it was through then that experience where I'm literally in my aunt's basement, right? So we go through this divorce. And when you go through a divorce, you're selling the house. The finances are a wreck because you got to go through all that, right? And then everything's frozen. So I'm like, I'm living in my aunt's basement and I'm like having a rock bottom moment thinking what do I got to do in this moment what do I need to do to be a better father better husband better partner better leader all those things and so I started looking at my sleep and I said how do I make my sleep better how do I how do I because that was really at a core of what was going on right pushing my wife in the other bedroom for years and just into Missy Erodine.

4:12And so I went down this rabbit hole of trying to find all these different things. You go into Amazon, you find, you know, pillow, you find mouth guards, you find all these things that don't end up working. And then I stumbled across James Nestor's book Breath. And if you haven't read this book, you've got to read it. You got to read it. It's a bestselling book where he, it's a really simple read that he takes all this science and makes it a really easy read, but he talks about this experiment where they go to Stanford Medical Center and they plug their nose for 10 days. And over those 10 days, they develop sleep apnea.

4:50They snored like crazy and had dangerously low levels of blood oxygen. And then after 10 days, they unplugged their nose, they mouth taped. And after one day, everything went away. So for me, like the light bulb went off and I went, wait a minute. I've been an athlete my whole life. My coaches never taught me this. They never taught me the benefits of nose breathing and the dangers of mouth breathing. You mean to tell me it's that simple? So my whole life I've been mouth breathing and that's really what caused a lot of the issues with just how I felt and just didn't get great sleep and the awful snoring.

5:29And I even had terrible issues with my teeth. So that started the mouth tape journey. I went on Amazon and I bought just whatever you could get. You kind of don't know when you're stumbling into mouth taping for the very first time, you don't know what to get. You don't know how to use it. So you just buy what you think is cheap and you get it. And before you put it on, everybody has the same thought run through the brain. You think, wait a minute, if I put this on, am I going to die? Everybody has the death thought of like, am I not going to, like, what if my nose plugs up? Am I going to wake up?

6:08And I went, no, I'll be fine. Like my nose was meant to breathe. So I'll just do it. You get it over with. And when I woke up the next day, I felt like my teenage son, right? The amount of energy that I felt, because when you get poor sleep, it stacks. And so I had this just burst of energy that I'd never felt before. And I'm 44 now, but at the time I was in my early 40s. So I couldn't believe just how I felt. And I knew in that moment that, wow, something this simple, this life-changing, I had something. and being an entrepreneur, you're always looking for problems. You're always looking for things that you can get into next.

6:50And I was at a phase in my life where I had sold my business and I was in a job. I hated it. So I was trying to figure out what was my next move. And I always thought e-commerce was a move I wanted to get into because when you're scaling a SaaS company, it's really difficult because when you scale, you have to scale people and And scaling with people is a hell of a lot harder than scaling with Facebook ads, if you know what you're doing. So I wanted to get into e-commerce. I'm like, this is it. This is my chance to pivot, start my second company, get into e-commerce, and I can do something that I'm really passionate about that's close to my chest.

7:32Because everything I've ever started is something that I'm passionate about, something that I resonate with. It's not just something I look at and think, oh, I can make a lot of money with that. No, this is something that's affected me my whole life, right? And it's just, it's so simple. And so then that led into this, all right, well, what am I going to call it? And the funny story about hostage tape, why did I call it hostage tape? Because you look at that name and I'm sure everybody out there is thinking, why the hell would you call it that? It's a bit controversial, isn't it? like, really?

8:09You know? So I was really into liquid death at the time. I loved what Mike did with liquid death. And I just, I love how he took this brand. He took the biggest commodity in the world that built a brand around it. That was the moat, right? So the story was when I started a mouth tape. And whenever my kids were over at my house, I would always warn them early on. I would say, hey kids, I'm going to warn you. If you run into the room and you see me, don't freak out. It's going to look like I'm being held hostage. I'm just wearing mouth tape. Because when you see somebody, they look ridiculous when you have tape on your mouth, if you've never seen it before.

8:55And you kind of look like you're being held hostage yourself. So lo and behold, I didn't know that that's what I was actually going to call the company months later. But then what I realized was that on the flip side of the coin, we were tapping into this core emotion that people felt. People feel held hostage by poor sleep and they don't know what to do, right? You feel held hostage by your partner and you don't know what to do. So we're tapping into this core emotion that people are feeling. And at the end of the day, right, if you can create a brand that people emotionally attach to and you're solving a problem, now you've caught lightning in a bottle.

9:39You've caught a couple of really key things here that are important that you can find product market fit and then you can scale that thing to the moon in just the right way. So that was really kind of a long version of where Hosh Estate came from. Yeah, no, it's crazy, man. And, you know from the research and seeing you guys around seeing your ads they're crazy they're awesome um this business has grown super fast so you you started in march 2022 that's when you launched that was the that was the first shipment like granted we started before then so really like there was six months before leading up to that where i was spending a ton of time getting the glue right so the adhesive on the tape because you know one of the biggest questions that people always have about that tape is well does it actually stay on or is it too rough you know like duct tape so there was a a back and forth of just trying to find just the right amount of glue and then we shipped the first the very first order on march 4th of 2022 yeah and fast forward to now like from the research that we've done like the business is doing over 40 million a year now right Yeah, well, we're trending to get to 40 million a year.

10:55Yeah, we're not doing more than that yet, but we will be. Yeah, and you're going for nine figures. You think you'll be a nine-figure business next year. So, funny story about that. So, when I first launched the brand, my business partner, Ben, you know, he's a longtime entrepreneur, just like I am. He's run his own agency, creative agency. And when we came together on the idea, we were like, well, what do we think this could be? And I did that exercise that a lot of people do. You go, well, I think the market's about this big. So I think we could do X. And I went, no, this is my second time around.

11:36I know what I'm doing. Don't think small, go big. So I added a zero to it. So this is going to be a billion dollar brand. So I went in initially thinking we could do a hundred million. This could be a hundred million dollar brand. I went, no, this is a billion dollar brand. And when you actually do the math, when you reverse engineer the TAM, in the United States alone, there's 128 million households, right? Over 71 % of them mouth breathe at night. That's at least a billion dollar market of a percentage of people that I know that I can capture in the U.S. alone. Hey, FounderFam, I want to take a quick break from the show to tell you about something we're really excited about, our Black Friday offer.

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12:57That's$200 off every single year backed by our 90-day money-back guarantee. Picture this, with the help of Founder Plus, you could be running your own Black Friday sale this time next year, or you could be smashing it out of the park, smashing all-time records. So don't miss out. This deal closes soon. Start building your business today at founder.com forward slash plus. That's P-L-U-S or click the link in the show notes. All right, now let's jump back in the show. So did you have many people question you like how you were going to build, you know, a billion dollar brand selling tape? Like how did that from like a unique selling proposition perspective in such a saturated market?

13:40Well, well, let's unpack a couple of things there because yes, in my own brain, I had to get over that hurdle of thinking, okay, this is a commodity. It's tape at the end of the day. How the hell am I going to start a business, scale it and convince people that this is worth them paying a premium for?

14:05How am I going to do that? And is there actually a business here? And I'll never forget, I got really big into listening to podcasts like yours. and I was listening to My First Million at the time, very early on when Sam and Sean were really growing it. So I loved hearing their ideas on business. And so I got introduced to who Moise Ali was. Moise Ali was the famous founder of Native Deodorant and he always told this story of, if you go into the aisles of Target and you see a wall of white, okay? there's an opportunity there. And what that said to me was is, oh, okay, you might be afraid and think that there's too many competitors, there's too many options in the market, so I don't have a chance.

15:00But in actuality, if there's a big enough tan there for it, then your opportunity is actually standing out. It's creating something that's different, that gets people's attention, that then you create a brand that people can identify with, connect to, that's your moat. That's how you build it. So that's then when I learned from what Mike did with Liquid Death and created this hostage tape brand that I knew was going to stand out and it was going to get people's attention. Because let's be honest, anybody that sees hostage tape come across their feed never forgets it ever. You don't forget seeing that.

15:41That's the beauty of it. Right. So then from there it was, you, mouth taping has certainly come a long ways. And, and I, I think, I think we need to credit James Nestor, Andrew Huberman, Dr. Andrew Huberman. Uh, and then also, I think, I think we deserve some credit there to really inject it into the social atmosphere clear and amplified even more. And we're like the, the first guy through the wall, you know, like the first guy through the wall is always the bloodiest. Like we were that guy, like the amount of people who thought we were just the, the comments we got, like the comment moderation that we had to do early on was insane.

16:23Right. Cause look, what a lot of people don't know is, is when you're paying for ads, you're paying for that. So why am I going to let people troll and put negative comments on my ads I'm paying for. So you have to do a lot of comment moderation. And we did a ton of comment moderation because the amount of people who are like, this is the dumbest thing I've ever seen. Taping your mouth shut. You guys are crazy. This is a scam. All that, everything. And it was awful. It was really bad. And especially the name hostage tape. People were like, this is insane that you would call it that. Your marketing, you know, directors should be fired.

16:58Like all the same stuff that you see, you know, liquid death joke about, right, was happening to us. And I just, I had, I tell my team, I had this delusional optimism that I've always had in my whole life of you knock me down, I'm going to get back up even faster and even bigger than before. And I knew no matter what anybody else thought, that I knew how I felt about it. I knew what it did to me and how it changed my life. because the best part of that whole story that I told earlier is that my wife and I are back together. We have two kids. Crazy, man. And so it completely changed my life, my kids' life, my wife's life, because we're back together and we're scaling this company, right?

17:45She's actually my head of HR. She handles all of our payroll, you know? So, and then my son, my son goes to school and all the kids that he's, he's going to be 15. So all the kids in school are like, oh my god your dad's the hostage tape guy can i get some hostage tape so he brings hostage tape to school and all the kids wear no strips in the school and then i get a call from the school saying okay can you not can you not have your son bring hostage tape to school so yeah so a couple things i'd love to unpack there like how did you and your wife get back together did you say hey babe i found this new new invention like it's hostage tape we're good you got to tell us a bit more about that okay so so when we when we went through our divorce it was pretty it was pretty rough it was it was bad in the sense that we didn't talk to each other we did curbside drop-offs and so when you do curbside drop-offs and you don't talk there's a lot of unresolved conflict there's a lot of unresolved pain there's a lot of unresolved communication that hasn't ever happened.

18:49Right. And so one day, so I had the business, I was working on it. We hadn't like officially really launched it, but I had it and we had started it. And so it was starting to move. And one day on Curbs I Drop Off, she came up to the car out of nowhere. And I'm a big believer in the law of attraction. I'm a big believer in just karma, the universe. You know, I'm a huge manifestation guy. Like I wake up every morning as part of my morning routine. I visualize, right. I've been visualizing this company, you know, our success for the last two and a half years, every day. I visualize this feeling of being successful and seeing, you know, a billion dollars on a computer screen.

19:39I see it every day. And so when she came up to the car, I was like, okay, this is different. I don't know why she's coming up to the car. I don't know why she felt compelled to, but she felt compelled to. We started to have a conversation and then she invited me into the house and I'd never been in my wife's house and I'd never seen my kid's bedroom before, you know? And that was a very emotional moment for me to be able to be invited into this intimate space that was part of my family. And then it started from there. One thing led to another from that moment. And imagine, right, when we split and we divorced, we didn't talk for probably two and a half, three years.

20:30Did not talk at all. So this was a very, like crazy you know moment to reconnect and start to talk again and actually like resolve you know whatever conflict that we had you know with each other yeah wow thanks for sharing man um so we go back to hostage tape you got your first order march 2022 what was the moq how fast did you sell out? What was your go-to market? Was it just, you just ran ads like, or what was it, man? Yeah. So, so when we started, I knew, so whenever I start a business, I always start a two-year P &L. I create a two-year P &L and I forecast what two years out it's going to look like.

21:18So I know the playbook. So I knew exactly how I was going to get to, you know, where we are Now, like I had already mapped it out. Now, granted, it doesn't always go exactly as planned, but at least you have sort of a roadmap that you like, you know where and sort of how to get there. And I knew the way to get there was with Facebook ads, right? Meta ads. And I'd never run Facebook ads before. So I had to learn how to do it myself. And so I learned because that was what, as a founder, I wanted to learn everything that moved the needle. The biggest things that moved the needle in Facebook ads was one of them.

21:58And from an MLQ standpoint, my manufacturer didn't, they weren't overly strict with me on having a minimum order. and so I didn't have to order an insane amount. Well, the funny thing about the first order was the first order was wrong. I screwed up. So the lesson to be learned here for any, any young entrepreneur out there is when you're putting your order in for inventory, you gotta, you gotta like triple check. Like my dad used to always tell me, uh, measure twice, cut once, you know, measure twice, cut once. Right. And I didn't, I didn't double check the details enough. So when I put the order in, I didn't reiterate, okay, just making sure this, this, this, and this of the order in one of the details was wrong.

22:51And so the first batch 1.0 of hostage tape was actually wrong. So then I had to deal with like trying to sell this first batch of, of hostage tape. That was not really what hostage tape is today. Like what, what it is today is technically we call it 2.0. It's Hasha's tape 2.0, um, behind the scenes, but the 1.0 was the wrong tape. So we had to just, I had to deal with it, you know, but fortunately I had, I had enough capital because I had, I had sold a, uh, when I sold my first business, I had equity, um, and, and all that. So I was able to sell enough equity when I left because I vested the equity out.

23:35And it's the same story that every founder has, right? You sell your company, you hope you can do something amazing. And then you realize they didn't actually want you. They just wanted what you built. And then you exit stage left after two years, right? So I exited and then I was able to cash enough out of some equity because they raised the secondary. So I was able to cash some of that out. And I had enough capital that I made the mistake. Like I could still buy more and we had enough capital to do it. So it wasn't a huge deal, but it was just like, ah, I can't believe I made that mistake. All right, let's learn from this, make sure it doesn't happen again.

24:15So then it was a matter of just, all right, let's scale this with Facebook ads. Cause I know, I know I can, I can put, you know, a dollar in and I can get two, three,$4 out, right? And fortunately or unfortunately, depending upon how you look at it, this was after I was 14. So I never knew what it was like to do ads back in the heyday where you literally put a dollar and you get$6 out and you didn't have to be very good at Facebook ads. But now you had to be, you know, a pro athlete at Facebook ads, right? And know what you're doing in order to get something out of it. And so for the first six months, our ROAS was barely a one.

25:06Really? It was bad. Yeah. And my co-founder, Ben, was like, the whole time he's like, are we sure this is working? And I'm like, you got to just have faith, right? I had that delusional optimism. And I said, at the end of the day, this is a cocktail TV play. Now, I wouldn't recommend for most people that you go into a business playing the CAC to LTV game because you have to have enough cash flow coming in to be able to dump it back into the business. And fortunately, I had enough capital to use that it didn't matter for me. I had enough runway, but I had enough runway to figure out how to be more profitable, how to increase my AOV in the first order to get more cash coming in.

25:51but yeah man like we struggled to find the right the right type of ads early on like believe it or not I couldn't get video to work really get any videos to work and I think it I think it came down to you know early on you don't have a lot of video of like real people using your product other than you yeah I had video of me but so I just couldn't get anything that maybe resonated or was authentic enough to the audience. And, and plus, you know, you're early on in your pixel. So your pixel is not very seasoned. It doesn't really know what you're looking for. And you're trying to, to, to find who those people are.

26:33Right. So it wasn't until January of the following year, like that six, seven months, right from March to December, it was like a one row as, and then when we got to January, it blew up because I finally found it and it was a podcast ad. So it was, I went on a podcast and we had took clips from this podcast and it was one of the co-hosts talking about him using mouth tape and he was using this other tape and now he uses hostage tape and why he liked it so much and why the other one wasn't very good. That's when I went, oh okay actual podcast style clips is what really kind of works so then we went all in on just talking head style videos of a value of content and a lot of the stuff you see now when you you know go to our instagram it's a lot of real live people like me or my team will be out at an event and we're just like doing interviews we're just talking to people yeah it's funny how much of a difference the right creative can make to your business like we've seen all the difference man like we've seen this at founder like there's ads where we've spent over a million dollars just on that one creative right it's insane um wow okay interesting so things really started to take off only literally 18 months ago otherwise that first six months was a grind yeah i mean we still did like keep in mind we still did almost a million dollars in that you know first year so it's not like we still didn't do really good it just wasn't profitable you know like our AOV at that point was 20 to 30 dollars it was nothing and the the thing that I look back on now and go I wish I knew that earlier was I didn't quite understand the CAC that I needed that I was going to get in Facebook.

28:39So I didn't quite think reverse engineering and go, okay, I should have went to market with a higher AOV product initially to be able to handle that that CAC, right? That cost of acquisition. So fortunately, what I did is I pivoted fairly quickly enough to know, okay, here's what I'm going to do. I'm going to get my AOV increased and I did it by bundling. And so I would then take, all right, rather than just buying one pack, here, buy two, get one free. Or I would have upsells and cross-sells in the funnel. So when you add to cart, then you click checkout, thing pops up, says, Hey, you want to add on, you know, two more of these for, for a deal.

29:26Right. And I would hit them at every phase of it on, on the, the cart in the checkout extensions, and then on a post-purchase. So it was always hitting people on how to increase it. And then we've gotten the AOV from initially like that$20 and our AOV now is up to like 55,$60. Yeah, that's awesome. And that single-handedly, I think is one of the decisions that saved the company and turned it into, allowed me to turn it into what it is now so that we're basically first order profitable and we're getting enough cash back, you know, pretty early to then reinvest and then keep going. Yeah, totally understand.