694: We Were Two Weeks From Shutting Down - Then We Found Our $30M Product

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1:03This is where, you know, shit hit the fan. One point I was looking at my wife and I was like, hey, I'm not sure if I can pay rent this month. Chris and I were just, you know, young punks to be honest. You're telling me that these guys are selling it for$149 and we bought it for$10 US dollar? Why don't we sell it on eBay? The sales kit just kept coming. What if we are able to launch just 10, 20, 50 new and exciting designs a year? And so that's what we did. We treat our product launch, product testing, like how we launch ads. We test up to like a thousand design per week. The first year of doing that, we were going gangbusters, right?

1:43And we were truly accelerating our growth. And it became a double-edged sword. We were given a very short window of time to turn things around to be exact two weeks otherwise we're done what looked like the end forced chris and jake to rethink everything one problem one product one bat and this time they went all in what if we are able to cut the science down to a fraction and what if we can go 100 online currently we're spending about like 600k per month in metal pretty much when worldwide like the same month we are already four five years ahead of our product roadmap we have a monkey right so our ai agent is called seizure the idea was like we wanted to train caesar become so smart and then later it take over i wouldn't be able to share much of what we're doing because my team would kill me

2:34hear the stories learn the proven methods and accelerate your growth and future through entrepreneurship. Welcome to the Founder Podcast with Nathan Chan.

2:48Hey, I have a quick ask. If you're loving these episodes, leaving a quick review is honestly the best way to support us. It helps the show grow and means we can keep bringing you the founder stories and insights you tune in for. Please share it with a friend. Thank you so much. Now let's get into it. Chris and Jake, welcome to the show. Excited to have you guys here. You guys have built an incredible brand in the past four years, Forbes 30 Under 30. I think you're doing, it was reported$30 million a year in just four years. Brand's growing super fast. You've got a lot of things going on. You started in the wireless chargers space, though.

3:24So tell us, how did you guys get started in e-com? Not a lot of people know that. The wireless charging part. Yeah, can't be no research. Right.

3:38earnest like we went to uni obviously but we didn't really you know like going to classes and whatnot we just always find classes to be quite boring we're always kind of adventurous always kind of um restless you know always want to do something so i remember that was like 20 or 2017 2016 2015 yeah 2015 yep so samsung came up with like the world's first wireless charger and we thought that was the coolest thing ever, right? Like you don't need a cable to charge your phone. How cool was that? And so being a uni student, we sort of wanted to buy that, but retail was like super expensive. I mean, we were talking about like$149, I remember.

4:21So we said, well, we didn't really want to spend that much money, but we want to get our hands on this cool tech, right? So we went on Google and we searched like, you know, cheap wireless charger. and turns out there are a lot of people selling, you know, generic wireless charger on Alibaba and they were like 10, you know, US dollars and we're just like, you know, that's cool. Why don't we buy one and, you know, find out if they're any good, right? So we bought one, received it. We, you know, obviously used it. It was great. It was just like two kids, you know, unpacking a Christmas gift were absolutely true.

5:02And so Chris was like, hang on a minute. You're telling me that these guys are selling it for$149 and we bought it for$10 US dollar. And why don't we sell it on eBay, right? So that's what we did. You know, we sold it on eBay, you know,$39,$39.99, free shipping, 30-day guarantee return, money-back guarantee, all that kind of stuff, right? Sold it. We listed and went to bed. next thing you know with our phone just kept ringing like ding ding ding ding the sales kit just kept coming so we're like well that's interesting why don't we just you know make it a full-time job um i guess that's how we started we just keep selling churning out and i remember that year we did like you know it was pretty good right i think million dollars no definitely not no no few hundred thousand three hundred thousand cash in each of our pockets so that was pretty good um and uh we then you know you know we were we were young we were like 21 years old 22 and we thought we just became the master of e-commerce of course it was it was funny to to think like that right but you know back then we're young we're naive we're like hey hey, you know, why don't we become a little bit more serious, right?

6:28Why don't we build a larger brand around it? And we didn't really want to continue the path of electronics because we recognize that, you know, you need a lot more capital to develop great products and innovation and stuff like that. And we didn't really have a lot of money back then. You know, of course, each of us has a nice, you know, 100K in our pocket. So we had the capital. And I remember we just graduated and we moved to Melbourne, Swanson Street. Just one small bedroom apartment. And naturally, we started looking for furniture, right? And so I remember we went to all these fancy places like Freedom Furniture.

7:13We absolutely loved the design. We absolutely loved the furniture that they had in store. But there's no way as a fresh graduate we could afford them. I mean, when I'm talking about like$1 ,500 for a cabinet,$3 ,000 for a sofa, beautiful, yes. Right? But there's no way we would put our money down for that. So of course, we went to IKEA. It's very much affordable, but it's so boring, right? Like black, white, oak, that's about it, right? But we really like the idea of flat packing the furniture, you know, break it down to small pieces so you basically say look we just want furniture we don't want none of the logistic costs the handling costs of you know moving around big boxes and stuff like that so we like the idea of flat packing we just didn't like the design so we're like well why don't we marry the two right a furniture that is absolutely beautiful stunning at the same time it's made with flat pack so we save all the nonsense and we're like well why don't we make it better by going 100 % online so there's no um you know showroom overheads we don't have to pay for renovation electricity bill nothing right so that's what we did um you know like how we started with wireless charger uh we sold them on ebay and i guess same thing happened again we went to sleep we list the product went to sleep and wake up the phone just kept ringing ding, ding, ding, ding, ding.

8:51And because I remember back then, there was not a lot of beautiful ventures sold online. We've got all this generic, again, black, white, oak, very boring stuff. And I think 10 years ago, we're probably one of the first few that sell exciting on Trend Design online. And I remember we just sell out in like two months, our first small container. and we just kept repeating the formula. So we kept expanding to different rooms, different pieces, different categories. Yeah, so that's sort of how we started. And so I'm curious, you guys have family business, your dad comes from the furniture background, but when you guys started this, you had to take out your own personal guarantee loans to start the business, that's correct, right?

9:47That came a little bit later. Yeah, talk me through. Like this is a capital intensive business, furniture. How are you guys able to fund this to keep growing it because you've bootstrapped it? We're just, we're very, very, I like to say that, you know, we are very, very smart and careful with our money. And we do a lot of pre-orders. And I think the final part is we have great support from our supplier. So I'll give you an example. Our supplier has given us 60 days payment term. basically they are our investors, right? And I think that came from us really spending a lot of time and energy building great relationship with our supplier.

10:30You know, I think a lot of founders, they will sort of see supplier as just another provider, but we see them as our partner, our investor, our team actually, right? So we were very, very much in the early days, spent all of majority of time with the supplier. I remember we celebrated Chris's birthday in a factory, which is kind of unusual. But yeah, we invest heavily in supply relationship. What does that look like? Can you talk me through? How do you invest heavily in your supply relationship? I think it's really thinking, always think about win-win, right? How do we make sure this is a long-term relationship?

11:13How do we win together? Because a lot of times, a lot of times founders, they want the cheapest price. They will squeeze the margin, whatever it is. And of course, a lot of suppliers, they do that. They also want to make money, right? So I think one word I would say is we're very, very generous, right? And we constantly think about long-term, how can we work together? What is our future plans? What are we doing? What are you doing in terms of marketing? and we sometimes even go above and beyond rather than just being a transactional business. We also say, hey, what are you working on on your business, right?

11:52We have some suppliers that say, hey, you know, we're very good at manufacturing, but we would also like to try selling stuff online and we will go to them, go to their team and we will sort of show them what we do. We just, we have nothing to hide. We say, hey, this is what we do. you know you can open up a website you can run meta you can do this you can do that content is very important um so we we think not just like i buy stuff from you you deliver the goods we think long term we think how can we win together in life in business thinking win-win has been always a part of our core key values like how we treat our employee supplier pretty much everyone and i would also say like pre-order play a huge part of our funding as well right um getting those pre-orders in like definitely help a lot with the cash and i think one things like we do really very differently is like um we we make sure like we test every single our products right like we how we launch our product is like we treat every launches like how we launch ads when we test the product we pretty much like in the earliest day how we do it is like we literally have so we build a framework called the abundance framework right so where we test multiple different design like we test up to like hundred thousand up to a thousand design per week talking about and yeah like from the design from the design from design and pretty much like every single detail like we test colors like how we in how how we run ads right and that's like um we're gonna test like multiple different angles persona but like we treat our product products product launch product testing like how we launch the ads so pretty much product has been always our key focuses in in all the aspects of the business so when we when we go into the market we are confident enough to get a lot of pre-orders.

13:59So that's how we've been able to find ourselves. Even from the start as well, we're doing a lot of pre-orders and a bit of luck as well at the beginning, I'll say. So tell me more about how you said you would test up to a thousand designs just with ads, different variants, and you just design the image, the product, what it would look like, and then you just run multiple ads? Yes. Yeah. A lot of different variations. How much might you spend? So the way how we do it is like we will use like, we will take images from Pinterest and we'll use AI to change a bit. I remember like this was about a few years ago when we first started, we call it the abundance framework.

14:44Right. Yeah. So yeah, like it's very simple, right? Like we just like how we run ads, We're going to put it into different ad sets for different categories. And then we just, yeah, like run into, what was it called? It was the instant form, right? We have the images and then we just drive traffic to the instant form. And then it leads people into like a quiz. So what we do is I will ask people on a scale of like one to 10, how likely would you have this furniture in your place? and we ask like how we will ask things like um what else will make it perfect so we get a lot of insights a lot of data on like how can we i think the focus is like how can we perfect the products we are obsessed in like making making sure we have the best product yeah yeah and then we add a bit of automation into it right on on running the ad so we make sure that we can test up to like a thousand.

15:49Yeah. We don't do that anymore right now because like right now we have found our North Star, which is a little lively. So yeah, we have transitioned. It's quite a journey for us, you know, like from Case Good to Catering Killers. Now we're in now we found our North Star, which is the one that Jack mentioned earlier, little lively. So tell me about that. So how did you find that North Star and that's what's really grown this business, right? Yeah, so there's a little bit of story here. And I talk about how we start from eBay and we roll up to different categories and different products and went from living room to dining to outdoor, whatever it is, right?

16:35So right about three, four years ago, we decided to accelerate everything. Meaning we knew that we are very good with trendy and designer pieces of furniture, right? We say, well, why don't we become the Zara of furniture? You know, when you go to Zara, every other month you go in, you see different design, different color, different cuttings. Lots of drops. It's a drop. It's a drop. Correct. Yeah. We look at the market, we're like, well, there's not really anyone that is doing this in furniture. There's a lot in fashion, fast fashion, whatever it is. But there's not a single player that is doing that in a furniture space.

17:19So that's where we created Abundance Framework. We mass test different design, color, shape, trends, style, whatever it is. It was insane, right? And it became a double-edged sword. I'll get to that later. But in hindsight, the first year of doing that, we were going gangbusters, right? People were just like, wow, I've got amazing piece. Every other month, people see new stuff. It's fresh, new design, new color, new shape, new style coming every other month. And it was truly exciting. And we were truly accelerating our growth. I mean, we were doing what, like 20 new products, like 20 to 15 new products.

18:07We went from that to like two, 300, really 2, 3x the amount of products we launched to market. So it was truly exciting times, right? And it became a double-edged sword because of two things. The first is we created a catch-22 situation ourself, meaning we constantly have new products coming into the portfolio. And when that happens, our existing product became old. they're not exciting anymore, right? So what do you do as old products? You have to clear it to make way for the new products to shine, right? So we find ourselves in this constant discount loop, which I call it a vicious cycle. You need new products to grow, but at the same time, you're constantly clearing stock.

19:03You're constantly giving discount. and our customer become sort of accustomed or addicted to that discount, which is bad. It's almost like, you know, they're addicted to it, right? But you have no choice. We have to keep coming up with new products and new products and new products. So we're just burning our margin. And I think in hindsight, we made a mistake of instead of slowing down and we look at our whole strategy, we say we're just going to go faster, bigger, we're just going to accelerate and things will turn out well. It didn't. It come worse. So second part was, this is where, you know, shit hit the fan.

19:50There's a huge retail company. They look at us and be like, they were like, these guys are doing something quite fascinating. The fact that they're able to launch so many new products in such a short period of time must mean they're doing something great. So the story goes, they copy pretty much every single thing we launch, right? And you wouldn't be able to tell the difference between our design and their design. It looks pretty much the same. The difference is though, we will sell a coffee table. I'll use coffee table as an example. We'll sell it for$599. They will sell it for$50. so I'm not talking about cheaper I'm talking about 110 of what we sell right and just as a cherry on top they will put us all over the news 7 news, 9 news, the article will literally read you can buy this coffee table from Lively for 499 bucks or you can buy it from X at$49 and so of course being naive and full of hot-headed blood and whatever it is, we say, look, and mind you, there are a couple billion dollar company, huge company.

21:15So we say, well, we're just going to accelerate it. They're going to give up. We're going to beat them. We're going to come up as number one. As a matter of fact, we're going to become a billion dollar company after doing this. And that was a dangerous part. That's what we did. And we were hoping that our speed would, we would overcompete them with speed because the hypothesis back then was they're going to get tired. They're going to stop copying us. They're going to realize that it's not worth it. They're going to realize that we're much faster because being a huge company, our hypothesis was they would be a little bit slower than us.

21:53So six months in, they didn't stop. As a matter of fact, the ACE, they accelerated more faster speed to market, more news outlet, more aggressive pricing to a point where I look at our social media team. I'm like, guys, I think we should just change our handle to product designer at X, right? So that was a very, very painful lesson. I tell you, we burned ungodly amount of money. Like how much? I won't say how much, but I'll tell you this, right? One point I was looking at my wife and I was like, hey, I'm not sure if I can pay rent this month. I'm not talking about business rent. I'm talking about my personal rent, right?

22:41So yeah, it was an ungodly amount of money. We basically wiped out our whole business saving and even my personal saving as well. Like we had to put, Chris and I, we had to put our own money back into business to keep running. So it was horrible. And that's when you had to take out the loans? No, we took out the loan to accelerate everything. Yes. And we burned every single cent of it. Yes, wow. To compete. To compete, yes. So then what happened next? We reached a point where we had to pivot and we had to pretty much come up with ideas very, very quickly. Otherwise, we would literally be shut down, right?

23:24We had a couple million dollars in debt. And we were basically, we had to come up with a plan. We were literally forced. We were given a very short window of time to turn things around, to be exact two weeks. Otherwise, we're done. Runway gone. Yeah, two weeks. So that two weeks was what we call hell week. and looking back, it turned out to be the greatest thing ever because that two weeks brought all of us together, me and Chris and our whole team. We just got together and just brainstormed. And I suppose one of the most pivotal moments was we say, okay, we're very good at testing different designs.

24:16We know that. What if instead of testing design, we switch it to testing problems, right? Rather than saying, hey, which color is going to the next big thing? We say which pain point our customer face is the most painful problem, but it hasn't been solved yet, right? So it's just a very simple switch. We will just switch the advertisement from the design of the product to the simple problem statement. and we did a lot of different problem statement tests. Like what? Can you give me an example? So like for example, we would test, we would put out a statement that says, my mattress is too firm for me and too soft for my husband, right?

25:08So that itself is a problem. So we would come up with 10 different variations of it and we would test it. And we would say, like the post, if you resonate with that problem. So then it becomes very simple, right? We will launch hundreds of different problem statements and we'll collect data and we'll look at, okay, which one has the biggest engagement? In other words, which pain point resonate the most with that pool of audience? So after doing many, many different rounds of that, we landed with one biggest pain, which is that my kids are getting bruises when they're running around in their bedroom.

25:56And you know, kids are kids, right? They love to run. Do you have a kid? Not yet. So kids being kids, they like to run around. They're active. You know, they're just kids being kids, right? So imagine this. You have a kid, 3-year-old, running around, holding a glass of milk on his hand. what happens if you trip? First of all, he's going to get a bruise somewhere on the body, right? Maybe the head, maybe the shoulder, whatever it is. And second is the juice, the milk is going to spill all over the bed. Now you've got a ruined bed and you've got a kid with a bruise, right? You're not going to be happy with it.

26:35And then you look at the traditional kids' bed frame in the market. They all don't make sense, to be honest. They're made with wood, metal, sharp corners. They're high off the ground. So it's very, very bruise-friendly, right? You get bruised very easily. And you're just one milk spilled away from ruining the bed. So we say, okay, we've validated that problem. People resonate with it. How can we solve it? We say, well, then we started asking a lot of questions, right? Like, what if, you know, we just don't use food at all? What if we don't have any sharp corners? what if we have a cover that is removable, washable, easy for parents?

27:22And it just comes back to one word, safe. We want parents and kids to feel safe whenever they are around the bed. And there's this side story where me and my team were visiting a traditional furniture store. They have all these wooden furniture, wooden beds lying around the floor. And what we observed was whenever a kid, an enthusiastic, energetic kid, whenever they would approach a wooden bed, they become a little bit cautious. They start to walk a little bit slow. They start to not jump around because they know that it's pretty hard, right? If they mess around, they're going to get a bruise somewhere, somehow.

28:07And we will also listen to parents saying things like, hey, be careful, right? You're going to hurt yourself. And we're just sitting there like, this is not supposed to be, it's not supposed to be that way. If you're a kid, you're supposed to be just run around, jump around, just be yourself, just be a kid. And that's where it clicked for all of us. We're like, hey, you know what we should do? We should make a bet that just let kids be kids. Simple as that. And how do we do it? Well, the bed is completely made with foam. There's not a single sharp corner you can find. If the kid trips, it's going to be fine.

28:47He's going to jump right back up and he's going to run around.

28:54So we did the sample. We made a prototype and we put it to the exact same showroom. And guess what we observed? Kids are still cautious around the traditional wooden bed frame. They're still cautious. But whenever they get close to our bed frame, which is a little likely bed, they became kids. They just run around, jump, and the parents are just watching, having a good time. So that was a pivotal moment. So you had two weeks runway and you came up with this new product. So you basically took pre-orders in a couple of weeks. Oh, yeah. How did you get the sample and design it so quickly? This is, you know, one of these rare moments where the things that you think is impossible is actually possible because it's really do or die.

29:42There's no if, there's no but. You just have to execute, just get things done. Anyway, we put the ads up, we put a product page up, went online and just blow the fuck up. I'm talking about like 60 Royce. 60? 60. so you nailed the product so well that like how much were you spending in the very very beginning of course it's sort of like yeah you know die down eventually yeah but i think the ROAS the 60 ROAS was an indicator that this is something that people really really want because it solved a huge problem okay so you guys did you you got the product ready you pre-launch it 60 ROAS you're Like, bang, let's go.

30:33And that's where you pivoted. Greatest moment ever. Yeah. From zero to hero. Yeah, it's also really come down, a lot comes down to like year of experience of using the Facebook to run tests and whatnot. So the one that Jake mentioned is like, we do a lot of messaging tests, right? To pretty much like when we first started, like you don't know like who's the personals. So we pretty much put up like a bunch of different messagings and then we just narrow down the personas and then we get to know, okay, this is probably going to be the best angle. So that's the best thing about like running Facebook ads, be able to use Facebook to quickly scale and gather a lot of insights and data and to craft the really great products and marketing messaging.

31:26Yeah, so Facebook's been a game-changing platform for you guys, paid advertising for testing, thesis, ideas, validating product ideas, concepts, problems. I'm curious though, what do you do when it's stopped working? I think like what we can always look at is like the things that we have control, right? So like if let's say one day Facebook is really stopped working, I think there's nothing we can do about it. But like if so, if we think outside of like the lever the lever that we can pull a lot of it can come down to outside of ads the landing page experiences where where we can do a lot of stuff on it um you know cero seo as well as on the brand side of stuff yeah it's like outside outside of the the broader side of stuff is the conversion rate is the brand perceptions um the content those are the things that i do think like we we can have control over yeah okay so you guys pivoted you found this new niche market now that's your focus how long ago is that that was three years ago now right no we actually launched the lively last october okay so it's been crazy like i mean i'm talking about 30 percent month of a compounded monthly growth and what about this big retailer copying you what do you do about that are they copying So this is the part where we look at our...