Ep. 97 How To Scale A Typical ‘Small Business’ To Be Worth Millions With Candace Nelson

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1:02Hi, friends. Grace from the Working Hard podcast here. When you're stretching every dollar, a little goes a long way and Walmart Business is here to help. They make it easy to order what you need from tech and cleaning supplies to everyday essentials, all at low prices and with helpful tools like spend tracking and tax exempt purchasing for eligible organizations. Because when your operations are smooth, your impact can be bigger. Visit business.warmart.com to get started.

1:33Candice Nelson is a living, breathing example of how to turn your passion into profit. After quitting her career in investment banking, she had plans to go to business school, but she changed them last minute to instead do what she called a pastry MBA. She started Sprinkles Cupcakes from her small flat in 2005, and nearly 20 years later, Candice has sold over 200 million cupcakes from her bakeries and cupcake ATMs across the country. The story of how she achieved this growth is absolutely wild, and includes cameos from Tom Cruise and Oprah, from featuring on the US version of Dragon's Den, Shark Tank, to being a judge on Netflix's Cupcake Wars, Candice has created a baking empire and I cannot wait for you to hear all about it.

2:12For this episode in particular I really wanted to focus on the idea of disrupting a market. If you think about cupcakes you do not think big business, you think probably the opposite of big business and what Candice was really able to do was to come into the market and in her own words have the delusion of being able to completely reinvent it even though every single investor every single friend of theirs whoever it might be thought that they were absolutely crazy going down this route she didn't just disrupt she changed an entire industry and I think her story is a perfect example of how far you can go if you really really really believe that you can and you also make a point of thinking of ideas that other people think are absolutely crazy and just trying them.

2:56Before we get into the podcast, if you could just go and rate this on whichever podcast app you are listening to this on, it makes a huge difference to the podcast and the types of incredible conversations we're able to have, the types of guests we're able to get on. So no, it's probably something you don't think about. But if you could just go rate it now or follow it, it makes a huge difference. Thank you so much.

3:19thank you so much for joining me thank you for having me i cannot wait to hear more about your story from you i've heard so much about it because i feel like it really is one of those just breakout successes and i've been hearing about it for years and i just i want to hear it from you and what it felt like at each of those stages i always ask at the very beginning whether you feel like you are more working hard or hardly working at this moment in time? Working hard always. Yeah? Yes. I don't know any different. Right. Is that your only setting? I think it is. Although sometimes I think, my God, I need a vacation.

3:57And we all need breaks. We all need a rest. But I don't really enjoy my vacation unless I feel like I've earned it. I'm not sure where that comes from. I wish I could just relax on a beach forever and not feel guilty about it. Yeah, I completely agree. and it's one of those things like where you when you say it's like saying that perfectionism is your weakness and you're kind of like yeah that's my only brag yeah but like as in like i feel it as in i feel more fulfilled right when i'm doing certain things and it is not true to say that i am happier when i am relaxing versus when i'm building and i feel like that's something that i very much had to reconcile over the past few years being like oh that can be true like you still need breaks but that that can be true that doesn't need to be like a just a like falsity that we tell ourselves like you can enjoy that type of thing it's kind of like a game like if you make it if you make it fun it can be fun absolutely I think people like us can find our flow in the building of a business in the challenges that are coming at us every day there's something just so rewarding about that yeah no I could not agree more I'd like to hear a little bit about your your early life and if you could tell us especially for anyone who might not know your story a little bit of a bullet point tour of kind of from your early life through education early career and kind of all the way to where we are now so we can get some perspective on your point of view cozy up grab a blanket I can't it's too hot So my family moved around quite a bit when I was growing up.

5:35And I spent a lot of my childhood in Southeast Asia, Indonesia, Singapore, Hong Kong. And so, you know, it was basically a masterclass in resilience as a young child, because I was constantly walking into new schools, often new countries and cultures. And I needed to find my new group of friends, figure it out. How does this school work? you know? And it made me, gave me a global perspective. It made me very adaptable. I mean, still to this day, you can throw me into any room. I'll find something to talk to with pretty much anyone. Could be a brick wall. I'm ready to go. But oftentimes I found that I felt a bit lonely because I always felt like an outsider.

6:21It didn't matter whether I was in the States or overseas. I just didn't quite feel like I fit in. Now there's a name for it, actually. It's called a third culture child. So I was a third culture child. You know, I think the silver lining in that is that it gave me a real strong sense of self because I really had to rely on myself a lot of those times when I didn't have friends. And I found myself becoming more and more comfortable in uncomfortable situations, ambiguous situations. And you and I both know that's what you do as an entrepreneur. You have to sort of operate not knowing all the answers and just trying to fake it till you make it and figure it out.

7:01So that definitely served me well. But I think my sort of itinerant upbringing served me the best in that I kept having this longing for home. And that's what ultimately drove me to start baking as a young child. Because when I was living in Maidan Sumatra, and I had craving for a cupcake or a brownie or chocolate chip cookie, I couldn't go to the corner store and buy them. So I spent hours and hours in the kitchen with my mom baking these treats that I missed from home. And so baking and food for me is always, it's always represented much more than what it is. It's really been a sense of belonging and connection for me.

7:41And that sort of set the stage for my future career, unbeknownst to me at the time, because I was being raised by a father who was a corporate lawyer. I didn't have a model for entrepreneurship growing up. I really just thought I was going to follow this corporate path. I went to the right boarding school. I went to the right college. I was recruited into investment banking. And I was following this corporate track thinking that it would bring me security and success, because that's what I had been led to believe. And then cut to the dot-com bust of 2000, when everyone I knew who was in finance and tech in San Francisco, which is where I was living at the time was out of a job, including myself.

8:24I was on the couch. I didn't know what I was going to do. And I realized that what I'd been led to believe wasn't true at all. I didn't have security and I didn't have success. I was down and out on the couch without a plan. And then not long after that, 9-11 happened and really led me down this path, sort of a self-epiphany, so to speak, where I realized that life was too fleeting to follow someone else's version of success, and I really needed to find my own authentic path. And so that's what got me back in the kitchen. I ended up trading my banking blazer for an apron. I ended up going to pastry school.

9:05And that was a real detour from what everyone had expected from me and frankly, what I'd expected from myself. I thought I was going to be on this corporate path and, sail off into the sunset in suits and heels. And here I was getting my hands dirty in dough, in beautiful ingredients, in this little pastry school kitchen every day. And I loved it. I loved how tactile it was. I loved that it was just so steeped in joy. And I felt like there was this darkness after 9-11, of course, that I had such a strong longing for joy and lightness in my life. and it just felt really good. That's such an amazing story and I think that the often what we have when it comes to the stories on this podcast and people's versions of success and their kind of reality of what's what's happened and their different pivots they've taken a lot of the time it was a pivot that came to them when they were in a comfortable place and I think that what's really interesting about your story is the fact that actually you know you're not coming in here here and saying that one day at work you just decided I'm gonna I'm gonna go bake you actually were put into an uncomfortable position when you found yourself out of a job you found yourself out of a job among lots of people who were out of a job and so you'd kind of pursued this version of success that you'd seen as the right option it felt like the one that was the most acceptable to yourself to your parents to your peers and became very quickly I guess the reality but suddenly became kind of came into view and I think that a lot of people at that point would have clung to this idea that actually you just need to get back into that like you need to get back into that because that is what success looks like to you and they like to some extent you've been rejected from that it's like it's one of the hardest things to lose a job and rather than just knocking knocking knocking back at that door and being able to take that second and go actually has life redirected me in this direction for a reason like am I meant to be going and doing something else and to take such a significant pivot to baking I think is incredibly brave and I think for that to have one of my favorite sayings is about not making the right decision but making the decision right and actually at that point you kind of going cool well I'm in this position I'm not just gonna knock back down doors to get back in which you could I'm actually gonna use this position to say okay why don't I reinvent it all at that point you've obviously decided to move into baking I think our perception of a career in baking is very different to what you've made the reality of your career in baking.

12:00Essentially, it moved on from what was this baking to this enormous company and really redefined what a cupcake company could become. At this point, did you think that that was going to be the case? Or would you have been happy with a smaller scale career in baking? So that's a great question. And I will say it didn't all reveal itself to your point earlier. It was just really, I mean, my whole world had been blown open. Everything I thought, you know, was a certain way turned out not to be. And so it really broke open for me the idea of possibility. I mean, anything was on the table. And so I allowed myself the grace of just putting one foot in front of the other and doing what felt good in the time.

12:49So when I started pastry school, I knew not much, but I knew that that felt good. And so as I continued to work on my craft and feel more confident in that, I knew that I actually had quite a talent for cakes. I became known as the cake person in my class of pastry school. And as graduation came upon me, and I realized I needed to make a decision as to what I wanted to do, I couldn't deny that there was still this business side of my brain. It was the business side of my brain that got me into investment banking. And it hadn't just died with 9-11. And so I had to marry this creative side of me and this business side of me.

13:31And so I set to work coming up with an idea. Initially, I thought I would just make special occasion cakes. But what I realized was they're not scalable. They're customized. They take a long time. They kind of drove me mad, quite frankly. I'd create this great multi-tiered cake and then try to deliver it in San Francisco. And I'd be on these hills and I'd just be hearing the cake sliding around in the box. And I just thought, oh my God, there goes like five days of work. But at the end of the day, I knew that any business had to be built on the fact that somebody would buy this item every day, potentially, right?

14:10They'd have to come back time and time again. And so that led me to the cupcake. And I remember walking through a supermarket one day and seeing this stack of just rather sad looking cupcakes in plastic clamshells and thinking, the cupcake deserves more than this. I mean, the cupcake in America is sort of a national treasure. We've all grown up with it. And part of my growing up overseas led me to have this almost outsider fascination with American culture. And so I really revered the cupcake because it was so innately American. And so I set about elevating the cupcake to the sort of style and with the care that I was reserving for these special occasion cakes.

14:55And the idea of the cupcake being more aspirational, branded, became an idea that I was obsessed with. And I started just working in the kitchen, you know, coming up, recipe developing to come up with the perfect vanilla cupcake, to come up with the perfect dark chocolate cupcake. And my husband was my test taster, and he was a very patient, patient test taster, though we both had to join a gym in the process because it was getting ridiculous. You've spoken there about how your attention to detail was a huge part of it. But I would love to know from your view, what made a sprinkles cupcake different?

15:38In actuality, I think the way I considered the cupcake was very similar to the way you might consider an article of clothing. I started with the ingredients, which for you would be the fabric or the material. And I wanted that to be the best that it could be. So the world's best vanilla, the world's best chocolate. And then I moved outward to the outward aesthetics. So you might be thinking of a special stitch or button or zipper. I considered the cupcake wrapper, which was a dark chocolate cupcake wrapper because I thought it looked more sophisticated and it grounded the cupcake. And then I considered the frosting on top, which was a hand frosted cupcake because I wanted it to communicate that this was an artisanal cupcake.

16:20This was a handcrafted product. And then ultimately, I had to consider the decoration on top. And if you think about what traditional cupcake decorations were, they were either those standard sprinkles or a plastic cupcake pick. And neither of those was going to do at all because I had reinvented the cupcake. Here was this modern, upscale, aspirational cupcake, and I needed a decoration to match. So I worked on a lot of different ideas, but ultimately landed on this double dot that looks almost like a bullseye. And it's made out of sugar paste, and we call it the modern dot. And these dots just became synonymous with Sprinkles cupcakes.

17:02My goal was that if you were to look at a table, a buffet of desserts, that you would be able to pick out a sprinkles cupcake immediately. And that's what that Modern Dot did. And so we applied for trademark protection, actually, for the Modern Dot, and we were granted it. And to your point earlier about fashion versus food, it's really not that different than the red lacquered sole of Christian Louboutin's shoes. That's essentially what that modern dot was for us. So really creating branding within the product itself in the same way as I hope that when someone wears Tala, the person who sees them walking down the street and can read that Tala and they can see how good that person looks and they go, wow, I want a pair of those.

17:48It's also being able to identify that when someone's coming to a birthday, you want them to pick up sprinkles because they can show everyone that they got it from sprinkles. And I feel like that's a really valuable lesson in understanding branding in all different industries. I'd love to know from you when it started to take off, like when it started to become more than just a cupcake business or however anyone would have seen it. I've heard that there is a crazy story with Tom Cruise. Yes. So to give you some context, my husband and I, we were now dead set on opening the world's first Cupcakes Only Bakery.

18:26this upscale cupcake bakery, everyone thought we were crazy. They said it will never work. It's never been done before. No one wants to pay$3 plus for a cupcake. They're used to getting them for 75 cents at the grocery store. And also you're opening in LA where everybody is known for drinking green juice and doing yoga. It's not going to work. People thought we were delusional. And to a certain extent, every entrepreneur is a little delusional. You have to be. You have to think of something that hasn't happened before. You have to be. And the moment before something's a breakthrough idea, it's a crazy one.

18:58Otherwise, everyone would be doing it. So it's really funny because we opened our doors thinking, well, you know, we believe in our idea, but there is a chance that no one will show up. But from day one, we had a really good business. I don't know if you remember the e-newsletter Daily Candy. Yes. That might be. You do. Okay. So Daily Candy went out on day one. So instantly, a lot of the tastemakers in LA knew about us and they showed up. But one of the turning points that you're referring to was, I'll tell you the story. I got a call from a friend. She was all excited. She said, did you see it?

19:32Did you see it? And I was like, literally on my 16th hour of working in the bakery, I'm like, no, I don't watch TV. I work nonstop. What are you talking about? Katie Holmes was just talking about Sprinkles Cupcakes on Entertainment Tonight. And it turns out she was on a press junket. And she was, these were very early days. So still, Sprinkles was not what it became eventually. She said, there's this little secret in Beverly Hills. Sprinkles Cupcakes, I just live for those cupcakes. I'm not quoting her exactly, but something to that extent. And here I was thinking, first of all, I loved Dawson's Creek.

20:07I mean, here's Joey Potter talking about our cupcakes. and I was thrilled. I was thrilled. National TV, we just have this one little location. But what happened next was that Tom Cruise started pursuing her. Tom Cruise and Katie Holmes started dating and they became Hollywood's hottest couple. They were the golden couple of the moment. Tom Cruise was on the Oprah Winfrey show, jumping up and down on her couch, talking about how much he loved her. Every journalist, every entertainment reporter in this town was trying to get an interview with this couple. And they would use Sprinkles cupcakes as bait on the red carpet because they knew that Katie loved them.

20:48And so all of a sudden, my little cupcakes were like caught in the middle of this media circus. And listen, I was here for it. I was just along for the ride. And so Sprinkles all of a sudden was in the news constantly, all because of this romantic whirlwind. That is absolutely crazy. What a story. And I think that another one of those things that you just could not have possibly imagined in the beginning of your journey. What do you think positioned yourself in the because I believe these things happen in their kind of, you know, we can't predict them. But I do believe you can position yourself correctly to mean that the likelihood is, or if someone something happened, then someone's telling their friends about it or whatever it might be.

21:32What do you think positioned yourself in the right place and your products in the right place to have been involved in something like this and really blown up in that way? There are a lot of things. I'll start with product. My product was really good. It is really good. It was a cupcake that people craved. It was really fresh. It was something unlike people were used to eating at the time. People would keep cookies in jars for days on end. People weren't used to eating really fresh quality baked goods in this town. But also, we flew in the face of expectation. The fact that we were doing something that everyone said was ridiculous for all these reasons we listed earlier was the reason that we captured people's attention.

22:16They were kind of scratching their heads and saying, what is that place? And it doesn't look like a bakery. It looks more like a boutique. And how much are those cupcakes? And so we really did get that viral marketing. We got that organic word of mouth because not only were people curious about a cupcake shop in the middle of Beverly Hills, but also, by the way, it was the height of the low-carb craze at that time. So everything we did was just the antithesis of what people would expect. And that's what gets people talking. Because it's really hard to break up out of the noise, right? It's hard to break above the competition and above the noise.

22:50And if you do something unexpected and you surprise and delight people, that's how you capture them. Yeah, I think that's such a valuable point because I also think that especially with social media, it's so easy to get caught up in competition, especially if you're in a saturated market. Like you went into a saturated market, but a market also that existed in a completely different sense to the one that you were trying to build. How did you make sure that you were kind of fostering that kind of pattern interrupt element into the business whilst also obviously needing to make sure you're keeping your doors open on Beverly Hills, which I can imagine is a very expensive place to be and just covering all of the bases as well?

23:35I think innovation really is a mindset. And I like to call it what if thinking. You know, Sprinkles came about because I thought, what if a cupcake could be different? Nobody else was asking that question because they just took it for granted. What if you could have a successful cupcake shop in the middle of Beverly Hills? I had sort of this outsider's perspective to coming in from San Francisco coming in, you know, to my point earlier, I always kind of felt like an outsider. So I look at things with very clear eyes. And I didn't buy into the reputation of LA as being, oh, nobody here eats carbs.

24:14Nobody here waits in line. That won't work. I thought, well, why not? And I would drive around town and I'd see a lot of donut shops and a lot of burger joints. And because I wasn't bought into that mystique, that idea that people just took for granted, of people in LA don't eat these things. I saw them from my own eyes. And I thought, I think there's people in this town that are eating this stuff. So I think having that outsider's perspective, I think embracing the crazy, saying what if. My husband and I like to say we really have a good time embracing the crazy ideas because Sprinkles was our initial crazy idea.

24:53The cupcake ATM was crazy idea number two. That came about because I was home from a party late. I was pregnant with my second son and I had a ridiculous craving for a dark chocolate cupcake. I mean, dark chocolate sprinkles cupcakes basically got me through both of my pregnancies. So this was nothing new. But what was new is that it was late at night. Sprinkles was closed. So I had no access there. And the cupcake stash that I always conveniently kept in my house, I'd already eaten. So there were no cupcakes. And most people, most quote unquote normal people would just dismiss it, go to bed, get a cupcake tomorrow.

25:32But because my husband and I have exercised this muscle, we leaned into it and we said, well, what if you could get a cupcake anytime, day or night? and we batted around these ideas and brainstormed this idea for a magical machine that was open 24 7 that was like an ATM but instead of dispensing cash it would dispense fresh cupcakes and the next morning we woke up and we started making strides on turning it into a reality and so I think you just have to be so open-minded and now today in my brainstorms at Pizzana my current business, not to jump too far ahead, I always set the stage in every meeting.

26:15There are no bad ideas in a brainstorm. And what I do to set the tone is I throw out the most ridiculous idea first. So just to clear the air and get it off the table. What if we sent Pizzana pizzas into space with Jeff Bezos next time he goes up? I mean, honestly, that would be super cool. But everybody gets a laugh and then they feel comfortable to come up with their crazy idea. And I think that's where innovation comes from. Yeah. And so kind of building it in as rather than as a disruption to the process, it is part of the process. Exactly. I think that's a really, really valuable insight into how you actually build that in.

26:57Because I think that as someone who is running a scale up, there's so much to do. There's so much to do all the time. there's no role duplication even just to cover the basis the basis of what we're doing people are putting in a huge amount of work and to at the same time be like cool do all of that and also bring me 10 great ideas a month yeah and let's try all of them and see how it works it's you know it's not always possible right but I do think that actually like carving out space and making sure that it's consistently repeated as part of the process rather than a departure from the process, I think is a great piece of advice.

27:41And that you're building a culture where people feel comfortable bringing those ideas in. Because listen, not every great idea is going to come from you or me. It's going to come from our customers. It's going to come from our team. It's going to come, we're going to borrow it from another industry. You just have to be open to that and open-minded in terms of asking those bigger questions, but also inviting your team and your customers to feel free and have that communication and feedback. No, I think that's a great piece of advice. The market's uncertain. Revenue's tied and hiring on hold. That's why results-driven companies are using Upwork to keep work moving.

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29:31At this stage, around the time of the ATM, or even before that, kind of with when you've started to see yourself really blowing up, like the company really blowing up, had you taken any outside investment? No. So to your point earlier, two out-of-work investment bankers going to bet it all on cupcakes. People thought we were nuts. and so there was no option for investment when we were first getting started and we knew that coming from the finance world we knew that so we just had we pooled our resources we had a little bit of money from just you know a couple of bonuses and you know charles had worked at a company where there'd been some liquidity with some stock options but nothing crazy i mean we were renting a duplex in west hollywood we had a very used often breaking down car and we were eating Trader Joe salads for dinner every night versus our friends who are now on this corporate track and getting promotions and going on beautiful trips and going out to dinner, we decided we were going to make the sacrifice for our longer term goals.

30:36And so we took the financial risk. We took the reputational risk. We worked hard. We sacrificed. And everyone said we were nuts. But then sure enough, when we opened to lines out the door, that's when all the investors came crawling out of the woodwork, desperate to invest, desperate to franchise. We said, where were you guys six months ago? We don't need you now. And so we just went ahead and bootstrapped and cash flowed. For eight years, we scaled the business across the country, came up with a cupcake ATM. And it wasn't until 2012, we opened our doors first in 2005, that we sold a majority stake to private equity.

31:17Charles and I were the only two names on the cap table. That's incredible. Was there ever a point during that where, you know, you're obviously profitable because you're able to keep going without kind of having that investment without burning through the cash? Was there ever a point during that that you thought we could take a bit of investment and we could go a little bit faster? There was a moment where we considered franchising, not because we wanted to, but because people were really desperate for us to. And sure enough, As soon as we were successful, imitation followed. Cupcake shops that looked a lot like ours started popping up everywhere.

31:54It was really frustrating for us because it just felt like we'd spent so much time taking all the risk and people were just sort of copy pasting our idea. And it felt like they were taking something from me. And I got a little distracted by that. But there's no point in getting distracted. You have to focus on what you're doing. And I think there was just a fear with franchising that even though we could go a lot faster, there's only a few little details that make the difference between an exceptional cupcake and an exceptional experience and an average and forgettable one. And so being the perfectionist control freaks that we were, we decided to do it our way, which was the slow way, but certainly protected our brand in the end.

32:42Yeah, no, and it makes complete sense. And it's one of those things that in hindsight, is absolutely, you know, the right idea. But at the time, I can so imagine, especially when I don't think it's too far to say, you know, I'm sure some people would have been telling you that you were a trend that you were something that was gonna, that was hitting off at the time and was going to come crashing back down very soon. So how did you avoid just becoming a trend to the point that actually, eight years later, you were able to send the sell to private equity and with a great business that continued to grow.

33:11I think the thing that gave me comfort was that cupcakes are a beloved American treat. It wasn't like I was bringing some unique trend from another country and having to educate people on what this was. Truly, the only education I had to do was this is this cost as much because of all of this care and these ingredients that have gone into it. And so I knew that there was an enduring quality to cupcakes in our culture in general. And then on top of that, I know that if you're delivering an incredible product in solving a need, which was, you know, everybody has to have a birthday. Everybody has events in terms of birthday parties, bridal showers, weddings.

33:54People were celebrating their weddings with sprinkles. And if you're really and gifting, gifting became a really big part of our business because these cupcakes felt as if they were a luxury product. So they were something that was worthy of giving. as opposed to a bouquet of flowers or a nice bottle of wine. They were on par with that. So I had comfort in the fact that people love cupcakes and they would love a good product. But I have to laugh when you say people call this a trend because when we first opened, of course, people said it would never work. Then when we were successful, they said, oh, it's just a fad.

34:29Then when we opened our second location in Orange County, they said it was just a Southern California phenomenon. It won't work outside Southern California. Then we scaled to Texas and across the country. And then they said, well, it will never last. I mean, and so my point is, you really have to have a strong sense of self and an unwavering belief in your vision. Because if you're waiting for other people to tell you you're on the right path, you're going to be waiting for a long time. But I think quality is always going to keep people coming back and then just continuing to try to surprise and delight.

35:05So that's where that innovation piece comes in. So let's talk about that surprising and delighting. Sounds weird when you say it that way. But that's actually a key part of Tala's strategy and kind of understanding how we can make sure we are constantly impressing our customer and constantly giving them things to talk about, get excited about, etc, etc. I'd love to speak about Sprinkle's approach to surprise and delight as a strategy as a whole. Mm-hmm. I'll give you an example of something we did early on that I think is a great example of this. So this is back in the day when Facebook was still generally a place where college kids were communicating with one another, but they were just starting to move into the business space.

35:47And Sprinkles was an early adopter. We were using Facebook in really innovative ways. And back in that early, more chronological algorithm, when people, you know, you'd push something out and people would see it right then, we had this program called Whisper Words. And it encouraged people to follow us on our newbie nascent social platforms. And so if you followed us on Facebook and you got the whisper word for the day, you could come in, whisper to the person behind the cash register and get a free cupcake. And so it just started this sort of virality to it because you'd be waiting in line. You'd see someone kind of hunch over and whisper this word to the cashier and you think, what is this?

36:31It's this sort of secret club. So it became this community builder and also just a really fun surprise and delight moment where by if you happen to be walking by Sprinkles and you checked your Facebook and you had the word of the day, you could get a cupcake for a friend. That's such a great, that's such a great activation. And I feel like it's one of those ones where, you know, someone says that idea, you go, yeah, that could work but I'm gonna lose that much revenue for the people coming and like is it are people really gonna do it and then are they really gonna actually buy it if they see that they can get it free or whatever it might be how did you know when a good idea was a good idea versus something that could sink the business and was something that would get people excited but not necessarily you know devalue your product at the same time of course well we were very opposed to any sort of discounting.

37:25And actually, that goes back to the early days. Because we were baking throughout the day, the cupcakes that were on our counter are, in our case, at the end of the day, were as fresh as those in the morning. And people had been trained to think those baked goods at the end of the day are a day old, they're going to be discounted, they're going to be half off, because that's the traditional way that bakeries did business. So I remember in the early days, people would be milling around. And I was like, come on in, come on. Oh, no, we're waiting for you to mark those down. Mark these cupcakes down?

37:56No, these just came out of the oven. I'm not marking these cupcakes down. So I would close my business with cupcakes still in the case, but at full price, and then donate those cupcakes as opposed to discounting. But in terms of doing promotions like that, I think you can stay nimble. I mean, you're not promising this discounted cupcake forever. It's literally a fleeting thing. It's like, for the next few hours, you can come in and do this, and then it's over. And you can just judge based on how many people it drove and you know decide for yourself if it works and if it didn't move on to the next I think that's so key to being an entrepreneur is having that self-awareness to know whether an idea you came up with don't be so precious with your ideas if it didn't work it's time to pivot and try something else and just fail fast I think is the right way to go I love the feel fast saying i'd like to look retrospectively at your kind of journey as a whole obviously hearing the trajectory you can hear how much success there was in there and how much you know you guys came in and reinvented like this entire industry that people hadn't seen in this way before i would love to know from you though what what the hardest moments were because i feel like those are the types of things that were probably led to some of the most success but also So, you know, there's absolutely weird times in my journey where I've thought, oh, this is the end.

39:18And it should be the end because actually I can't. Like I actually can't. I'd love to hear some of those moments from you. So we had just opened our fifth location. It was in the Bay Area in the Palo Alto Stanford Shopping Center. It's a very upscale shopping center. We'd never opened in a shopping center before. It was a really big deal for us. It was our most expensive store by far, and it was a big risk for us. We were really starting to expand, and this was a big risk. People in the Bay Area can be a little funny with things that come up from Los Angeles. So we were like, are they going to accept us?

39:54Are they not? Are they going to be snooty? So for all these reasons, we were very nervous. But we opened our doors, and we had a beautiful line out the door, and everything seemed to be going so well. and then I looked down at my phone and it was blowing up because the market was tanking. It's 2008 and people were losing their homes and banks that I mean I worked in finance and banks that I would never in a million years thought could fail were failing and all of a sudden I had this moment where I realized we were done. I said to myself it's been a fun ride but there's no way that But fancy cupcakes, expensive cupcakes are going to make it in this market when people are losing their homes.

40:41So I kind of said like a little prayer to myself as everything slowed down. And I was looking out at these sea of customers and had this just sort of very bittersweet feeling. You know, like this has been beautiful. It's sort of playing in my mind like a movie. But what do you do? You get up every day and you do your best. You can't control what you can't control. And what ended up happening was akin to the lipstick phenomenon, if you're familiar with that. Estee Lauder back in the Great Depression charted that lipstick sales went up when the economy was bad because people still crave that little bit of luxury.

41:18so they'll trade down from the really expensive luxuries to the more affordable ones. And Sprinkles ended up being that affordable luxury through the Great Recession, which was unbelievable to me because I could never have expected it. And I think it just felt like a moment where everything I had built was going to be over and that you can't ever be in that headspace, right? You have to have faith and you have to just keep putting one foot in front of the other because you really don't know what's going to happen. But it definitely shook me. It definitely shook me. Yeah. No, I can imagine. I can imagine that the uncertainty during that time, I mean, entrepreneurship is filled with uncertainty.

42:01That's probably the most defining factor. But as part of that as well, knowing that everyone else is facing uncertainty, we all know that uncertainty is far more harmful to business than actual lows. You know, you can predict lows and you can forecast for lows and you can invest or not invest for those. Unpredictability and uncertainty is, yeah, is crumptioning for businesses. I would love to speak a little bit about your exit. Obviously, that is something that a lot of business owners, not all, but a lot of business owners aspire towards and is seen as very much as a sign of success of a startup to scale up to exit.

42:44How did that feel exiting this business that you've created from literally a seed idea in your brain? So I'd say that might be another one of the hardships that I faced. Maybe not as relatable to everyone because it happened on the heels of an exit and an exit that I wanted for a lot of reasons. I had two young boys that were now starting school, and I really, because of my own upbringing, wanted them to have roots, and I didn't want to be toting them around to every store opening that we had across the country, which is what we were doing at the time. And then also because Charles and I really thought of ourselves as those zero to one people, you know, the creation of the brand, the building of the brand, the building of the team.

43:28But the scaling part, the operational part, listen, we did it to 11 stores across the country. We did a good job, but we really didn't want to have founder syndrome where we felt like nobody else could raise our baby. And there had to be other people out there who were much more well operationally versed to scale from 11 to 50. And so for those reasons, personal and business, we went through a process. We found a private equity firm who loved our brand, believed in our brand, and they were the right partner for us. So even though it was something that I wanted and that I was prepared for, I still didn't know how hard it was going to be for me to let go of my first baby, essentially.

44:13It was so hard. And there was a moment when, before we named it Sprinkles, I thought for a second about Candice's Cupcakes. And then I thought, no, if we sell it, that's going to be really hard. It's still really hard. My identity was so caught up in this brand because it was everything. I'd poured everything into it. It literally was my first child. And I felt unmoored, you know. And even to this day, I think a lot of people don't know that I'm not operationally involved. That's how tied I am to the brand. People still don't know. And it's been more than a decade. I didn't do a good job of knowing what I was going to do next.

44:52I think I was just so exhausted. it. I was so battle weary that all I could think about was I just need a break. But we are people that can't take a break for long. And so I really should have thought more thoughtfully about my next move. Because, you know, obviously, I spent a lot of time with my kids, you know, I poured into being class mom and doing all the charitable things I hadn't had an opportunity to do. But But then all of a sudden, my identity was sort of lost. Did you know that you definitely wanted to start something new that would be yours all over again? I really didn't think that far in advance.

45:31It really was just, I have to get to this finish line. This finish line is an exit. And that's success. And that's the end. And what I didn't realize was, it's all about the journey. It's about getting up and working with people that you love and admire and tackling those problems and just pouring yourself into something that that really lights you up. And without that, I was like, just a deflated balloon or something. I didn't realize I didn't give enough credit to the fact that I loved all the stuff that pissed me off. To a certain extent. Yeah, to a certain extent. I can completely imagine that.

46:09And it felt very surreal to drive by sprinkles in Beverly Hills which I do all the time and go in and sometimes people have no idea who I am yeah no and I think that's really brave and powerful to say and like I think it's really important to have people say cool what are you gonna do next right like what what is gonna like set your heart on fire after this right do you want to build from the ground up do you want to enjoy this thing that you've built. Right. And I mean, if you keep thinking life starts then, then what is this? You're not actually living. You're getting up every day. You're just waiting for that moment when life can begin, when this exit happens, when X, Y, Z happens.

46:57No, this is life. This is the good stuff, the getting up and, you know, problem solving all day long. You have to keep that in mind. I mean, otherwise you're just holding your breath and waiting for what I'd like to speak about your time on Shark Tank as a guest I think that the I want to speak about a number of different parts of this I'd love to first speak about what where the initial kind of desire to go into that space came from so since stepping away from sprinkles I have started another concept, Pizzana. It's based on Neapolitan pizza. And I've also been angel investing in consumer brands that I love, mentoring other entrepreneurs.

47:46And so it's just become a natural part of my life. And so when Shark Tank reached out and asked if I wanted to be a guest shark, I thought, let's see, I've been on Cupcake Wars and Sugar Rush, but I think if I go on Shark Tank, my kids might finally think I'm cool. We watch it together as a family. They love it. And it's just such an iconic show. How can you not want to jump at that chance? And so I did. I bought my red suit, put on my red lips and headed on out to the Shark Tank. Oh, I love that. And what's your favorite part of what you've kind of got out of that show? I think just taking part in such an iconic show that represents the American dream, that represents the opportunities of entrepreneurship.

48:32That fills me up. I believe in all of that. And then sitting alongside people like Mark Cuban, Kevin O 'Leary, Lori Greiner, who I did a deal with is pretty exceptional. And then being face-to-face with these founders who are building their dream companies. And my heart goes out to them every time they step on that stage because they're putting themselves out there. They don't know how that pitch is going to go. And by the way, it's all real. I have no idea who's coming out before they come out. They don't even know who the gas shark is going to be. And they get out there. Sometimes they flub their pitch.

49:12Sometimes they're just on fire. Sometimes it just doesn't go their way or the shark that they wanted isn't interested. And it's just exciting because it is so real live stakes. works there's big amounts of money involved it's it's just a really exciting experience from beginning to end and it's a well-oiled machine so just speaking as someone who's worked in tv before to walk onto a set and just have it be like boom boom boom everybody's been working on the show for 15 years everybody gets along everybody's happy they're efficient i mean it's like a dream workday. And as a shark on Shark Tank, what would be your biggest pieces of advice to someone pitching for investment?

50:00So when I'm looking at potential investments, I want to know that this person, this founder, is uniquely suited to build this company. And I'll take Kristen Dunning as an example. She was the founder of one of my Shark Tank investments, Gently Soap. Kristen Dunning had suffered from debilitating eczema growing up. She'd been bullied as a result of it. She'd always wanted to have a joyful bathing experience, be able to use soap that was something other than what her doctor was giving her, that clinical bar of soap. She also happened to be a plant researcher. So she was going to school, working with plants.

50:38She had greenhouses full of plants and was taking the healing properties of plants, these botanicals, and infusing them into soap in her dorm room. So young entrepreneur, super passionate, had turned an awful challenge into an opportunity. And when I heard her story, I thought, okay, Kristen Dunning is the only person suited to be building this company. From her origin story to just her talents and her deep amount of expertise in plants, she was the only one. So I invested in her. She's an incredible young founder. Her soap, Gently Soap, is botanical infused for people with eczema, sensitive skin.

51:21So shameless plug, check it out. And then I want to know that the product is good. You and I are completely in sync here. I mean, the product has to be amazing. It's mind boggling how much choice consumers have out there. And they're fickle. You really have to do something not a little bit better than what's out there, but sort of orders of magnitude better than what's out there. And so dare to be different, dare to make some noise, but have an exceptional product because you can get them to try it once, but if they don't love it, they're not coming back and you can't build a business on that.

51:58When I think about the fact that I'm investing in someone's business, I'm investing in them and we're becoming partners in a way. So I want to understand that this founder has a certain degree of self-awareness. We've talked about how there's delusion that is comes along with the entrepreneurship journey. And that's important because there's no innovation without delusion. And you've got to be dead set on your plan. But if your plan doesn't work out, or we have to have a hard conversation about your strategy not being the right one, I need to understand that you're going to be able to hear that and not be defensive.

52:38And sometimes you'll see that in the tank, right? One of the sharks will give some tough love, and the founder will get quite defensive. And that's usually a red flag for all of us that that might not be someone that we want to work with because there are going to be a lot of hard conversations to be had. And you want to understand that in spite of, you know, being so dead set on your vision and so committed to this cause that you're still going to be open to hearing when it might not work and the opportunity, you know, the possibility of pivoting being a necessity. Yeah, no, I think that's incredibly important.

53:12And before we finish, I'd love to know from you, what is the best piece of advice that you've ever been given? Oh, so an actor friend once told me, don't read your reviews. And I remember in the early days how hard that was because I was so obsessed with reading Yelp. And Yelp is such a brutal platform that restaurants rely on. And if I got a great review, I would just have a great day. And if we had a bad review, it would cut me to the core because I took my business so personally. But I realized that my friend was right because if you gave credit to the good reviews, you had to give credit to the bad ones.

53:57And if you are on this emotional rollercoaster ride every day with your day hinging on these reviews, you were taking your eye off the ball on what was really important, which is building your business. And, you know, don't read your reviews is pretty universally applicable these days, because whether you're an author on Amazon, or whether you have a social media account, your reviews are your comments, right underneath your caption and your picture, and everybody has an opinion. So the lesson is to just have a really, really strong sense of self and not let all of that noise out there take you off your game.

54:34Now, having said that, But as a restaurant owner, I have to stay on top of feedback and I want customer feedback and all of that. But I learned to look for trends. If I'm getting multiple people saying the same thing, then I know it's something I have to investigate and look into as opposed to just one review throwing me off my game. Right, exactly. So being able to make sure that you can learn from things that need to be learned from and spot these trends and spot things that perhaps need to be fixed because there are always going to be those. Like emotional regulation. Right. Like, don't go looking.

55:06Right. We can deal with this problem. We can deal with another problem. What we can't deal with is literally everything at once because we went looking for it to ruin our own day. My husband used to calm me down because I'd be on Yelp in the bakery looking at reviews. And I'd say, people hate us. They hate us. And he'd say, could you stop? Because there's a line out the door of customers who want your cupcakes and I could really use your help boxing cupcakes. And it's just like, you know, I just click right back in. Like, this is ridiculous. the true test is that there are still customers lining out my door people love to bitch and moan online so you know take that with a huge grain of salt right you can refine and you can move in the right direction you can understand and you can get feedback but you can't do any of those things if you are stuck right on this just assumption that everyone hates you and that you're not where you need to be because nothing can completely change overnight exactly well I think that's the perfect place to end thank you so much for your time this has been incredibly enlightening and inspiring as a whole in terms of I feel like anyone who wants to start a business and really reinvent an industry can listen to this episode grow that delusion use that delusion in the right direction I think that's the most valuable kind of piece of advice that we can give people well thank you for having me I always love speaking with other entrepreneurs and you're doing it right I mean thank congratulations on all your success.

56:31Thank you so much. That means a lot.

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