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Get a DemoOperators Titans is brought to you by AppLovin. Get access to the Operators channel expansion playbook, online masterclass, and up to $5k in ad credits here: https://www.9operators.com/paid-growth Or, skip the waitlist and launch your AppLovin ads today with our Operators-exclusive link: https://applovin.com/9operators How do you build a DTC telehealth platform from scratch and play the long game right? Tim Doyle, founder of Eucalyptus and incoming SVP International at Hims & Hers, joins hosts Matt Bertulli (CEO, Pela Case & Lomi) and Mike Beckham (CEO, Simple Modern) for a wide-ranging conversation on building, scaling, and exiting one of the most ambitious DTC healthcare companies outside the US. Tim traces his path from political media buying in Australia to launching a multi-brand telehealth platform across multiple continents and the hard lessons in between. The conversation covers Tim’s “salary cap” approach to talent building, how Eucalyptus turned clinical outcomes into its most powerful marketing asset, and why he believes bold creative scripts remain the most underrated lever in consumer marketing.
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Ladies and gentlemen, my fellow operators, today we have a real treat for you. I'm going to set this up properly because it's a banger. If you have ever wondered what it's like to sell a company for over a billion dollars, if the GLP-1 craze, it's all it's cracked up to be, if you can really run a holding company of brands scaled to hundreds and hundreds of millions in revenue, expanding to all the major global markets, and finally get to that headline-grabbing exit to a public company, Well then, today is your day. Our guest has done all of this and he is going to share all of the frameworks and models that got him to where he is. Welcome back to another episode of Operators Titans, brought to you by our friends at AppLovin. Today we are talking with Tim Doyle, the founder of Eucalyptus. My God, I learned so much from this one, and I think you will too. I like to kick these things off with a little bit of like, let's just get into it, something practical. Uh, I read this thing that you have a, what you call a salary cap. I gotta be honest, only heard about this in sports. Never actually heard a founder have a salary cap. Can you please educate Mike and I on what the hell this is and how you think about it?
I mean, it comes from, it comes from sport, right? Like if you think about, uh, think about NBA teams and you think about like, uh, the soft cap and the hard cap and the the various things that they have to worry about in order to build a roster. I find that if you take the same approach to talent, you— let's take OKC currently, right? You have a certain number of young players that you're trying to bring through. You have a certain number of vets, you have a certain number of stars, you have a certain number of kind of 3 and D kind of players that you're getting value for money out of. And I think like too much of talent is kind of focused in a different way where it's like, how do you hire the best possible person that you can get at all times? And it's like, how do we build a team of all superstars? And the reality of building consumer businesses, or at least resilient ones, is that's not really feasible. You're not Anthropic, you're not OpenAI, you're not Meta. And so you have to think about like, where are we making investments for superstar talent? Where are we making investments for talent that can really grow? And then where are we making investments for talent that will just perform the job really well? And you've just got to be intentional there because I think like, particularly in the era of like venture-backed consumer, which I've like worked a lot in, It's really, really easy to get enamored with the idea that you need 250 software engineers to build the next version of your product. And in reality, like, you know, the margin profile and the subscription profile and the retention of businesses like mine and businesses like, you know, 95% of consumer businesses just don't support that style of hiring and that style of kind of bet. And I guess like discipline is really, really important. And I think talent is a really good place to start and being intentional about where you're investing in what type of talent, I think is really, really key to getting the best possible team that you can.
You could make an argument, Tim, that that doesn't really work for anybody. I mean, look at the SaaS companies, like none of them have made any money. And now there's a reason why, like Anthropic is just the undertaker because everybody's looking at them and they're like, wait a second, you know, you guys couldn't really justify all of this stock-based compensation and overhead before, but now you really can't. And so like, I think it was probably always true. We're just in an era where it's increasingly obvious how true it is. I did have a question though on the salary cap. So is the idea that you're like, we're not going to spend more than X on headcount and our goal is to allocate that as efficiently as we possibly can. Is that the idea?
I think like, like that's the simple version of it. I even try and go a layer deeper and think through like the bets we're making. So, um, like one of the really hard parts about building a business like ours is you kind of have to find new S-curves because, um, you know, the core products. atrophy over time in terms of their unit economics and their retention and all the things that are natural gravity in a consumer business. And so when we're going to invest in a new thing, whether that's a new brand or a new condition, um, what is the type of talent and, and size of talent bet that I'm willing to make in that space? And sometimes it'll be a technology bet, but other times it'll be like a creative and marketing bet. Um, it's very rarely a media buying bet, but you know, um, it's, there are types of talent that fuel certain types of bet and and allocating and building a roster around those types of talent as opposed to getting a misshapen one where you've got, you know, an engineering superstar and a creative superstar when you might not need both, um, is a really, really important discipline that we've been able to build over time.
I love that analogy, Tim, because what you're saying is like, if you have a football team, it doesn't matter if you have 3 All-Pro running backs, it's redundant and it's not even actually really helpful to your team winning more. And that the idea of like you're trying to balance your talent across different disciplines where you can actually get the most out of it. And I think we've all been on a team where it was like, man, you had an abundance of riches in one or two areas, but then the bottleneck were these other areas where you didn't have nearly enough talent. So I think that makes a ton of sense, like this kind of talent balancing thought process.
I see a counterintuitive part to that as well, which is, um, as a founder, I think you should probably, uh, hire away from your own core skillset more than you hire into it. Because I think you've gotta be, one of the things that I like got really wrong early on was this idea that you should hire, um, out of your own job. And so you can kind of, focus on bigger things. Like, um, I've always been a media buy background, and so, um, my, my job has— like, under times of pressure in the business, whether that's kind of the, the end of COVID or, um, or, you know, when we had drug shortages, like, what has actually created a margin of safety for us is my ability to do my own core skill set at the best kind of possible level. Um, and so it's kind of counterintuitive, but you want to be hiring away from, from what you— because the role that you need to play in the roster.
When you're talking about this like talent diversity and salary cap or this building a roster, because you guys, you're like multi-market, multi-brand. How did you think about teams within the organization then?
I think like probably with not enough discipline would probably be the honest answer. I think like the, the Bezosian kind of two pizza teams, I think we probably got a little bit enamored with, to be honest, like it was just not really in my kind of circle of competence originally to kind of size engineering bets. And so I guess like this is maybe getting ahead of things, but like Eucalyptus is largely commodity physical products with a differentiated service experience that relies on differentiated technology to deliver that. So, you can, you can size the engineering bet however you want. And I think we got too enamored with too many of these bets being too large. And so, lost discipline and we actually had to cut, 25% of our staff at one point, which was an extremely painful experience, but like, formative in the, in the sense of ensuring that we got to a point of discipline when we made bets and, and sized teams appropriately, um, and, and knew what the purpose of the team really was and how we were trying to differentiate and, and what was important. Because once we, um, when we had lost sight of that, it was, you know, it was, it was super painful. And we just like— I looked at the P&L from those times and was like, that was a disaster. And so, um, and so to get back to that discipline was really important.
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I'm curious what you think about the kind of tactic-based insights that you'll see at a particular moment in time and how important you think those are. Like, do those kind of wash out over time, or do you think that great businesses are always built on kind of insights that are, that are true, really true for a period of time and provide a significant competitive advantage that allow you to do something you just wouldn't be able to do otherwise.
Interesting. I think, I think like certainly the business history that I've like looked back on, I think a lot of it has been built on shifts in the media landscape. Like I think whether you look at the App Store generating obviously the mobile app era and all of the businesses that came off that, the first, the Facebook Pixel starting the, I guess like the the direct-to-consumer era in a meaningful sense. And then like recently we've obviously had like returns to a bit more of an organic content world with TikTok Shop and, you know, the influencer world and the kind of continued breaking up of that and probably like Shopify underlying that as well. So I think like, I guess you, you get these moments that, that create businesses and then can you build durable strategies over the top of that? I think the one strategy that has, that has remained durable for me throughout the last 10 years is like the importance of creative has gotten higher and higher and higher and higher. And the definition of what good creative is changes all the time. But you're producing more, you're producing faster, you're producing like to a higher level of insight. And to me, the temperature, I feel like I've been a slowly boiled frog in that world because it's just happened to me, you know, every day that the quality has gone up, the authenticity has gone up, the speed has gone up, the volume has gone up. And so to me, that's been the one durable one. And then underneath that is like you know, a lot of changes in the media landscape, although obviously like Meta has stayed universally very important. I would say like attribution has become more challenging and that greater challenge has created kind of greater diversity of channel. And I think greater need to be bold in your bets. Like I kind of reflect on a golden era where you could run a, you know, a square static on Facebook and run a discount message and $4 CPMs and $50 CACs. But the modern version of that is, you know, you have to be much bolder in your storytelling, much bigger in your bets, much better at more channels and still on that kind of core principle of being really good at measurement and really good at storytelling. And so I guess there's durability and then there's variance and you've got to be comfortable in both.
It seems to me that this is probably the tale of this age, that the tools that we're provided with to create new creative or to look at analytics or to spin up a website or obviously better than they've ever been before. But all that that's doing is it's really raising the bar. And that's kind of what you're saying. I mean, the bar for success today compared to, I guess at this point, this is my 17th year in e-com, 18th year. And it's just amazing the difference, as you're saying, in competitiveness and the bars for success. You just have to bring a level of excellence that is, it's hard to even compare to 10 years ago because it's so different.
And excellence is the start line, right? Like I, like it's excellence plus creativity. Um, and like those, you know, those are two really different modes of operation, like getting to excellent and then getting to like truly creative is just like two really different problems to solve in the same team and often in the same people. Um, and so yeah, the bar, the bar is very, very high. And so, yeah.
And often, uh, straight up opposing each other too.
Yeah. Sometimes. Right.
Um, like, well, great companies.
I mean, there's a lot of history of this, that great companies are full of creativity and conflict over that creativity, that that's kind of like, if you look at the Wright brothers, like they would, they would go out and test stuff and then they would just argue through the night and then they'd go back out the next day and then they would test some more stuff. And sometimes they would be arguing and then they would intentionally switch positions and argue the other person's position. But I think that this was something that took me a little bit of time. You know, it's like when you first get married, you think like a great marriage means that we're not getting into fights all the time. And then you realize like, actually, like a great marriage has healthy amount of conflict that's done well. And I think that the same is true of businesses, that you really have to have people that have strong enough different points of view. And that's really what creativity is, where they're willing to really argue for something and, and kind of pound it out. And I agree with what you're saying because like in a world where, uh, these machine learning, you know, AI-driven things are basically able to look at everything that's ever been done and say, well, we'll whip you up best version of that. As a human in the loop, like, you've got to be adding value by saying, well, here's a totally new way to come at it, right? And if you can't do that, like, I don't know how you stand out. Or, you know, it's like what I tell people all the time is if you want better than market performance, you have to be doing something different and rapidly, right? And I think you nailed it, that thing has to be creativity in the years ahead, or you're just not going to be able to have market-beating performance.
Tim, your, uh, I mean, we get— every time we do one of these, these sort of series, we always get these weird, um, founding stories. Like, if you look at, like, people's entrepreneurial journey, it's always strange. I mean, Mike's is strange, mine's less strange. I think I have the least strange of everybody we've talked to. Like, I'm just so obvious. Um, going from, like, politics to sort of, like, mattress company to telehealth health company, is the through line this like creative obsession, like this, like just media obsession, or is there something else that kind of connects all of these things in your mind?
Koala experience was really formative for how I thought about, um, so the Politiclip experience was very formative to how I thought about advertising. And then the Koala experience was very formative to how I thought about business. And I think, um, I guess like the, and this is, this, this kind of dates me as being quite old, but, um, but, uh, the, when I started in e-com, um, I knew nothing about it really, but Uh, Casper was exploding in the US. Um, one of my friends who was working with me at the consulting firm, um, left to start a mattress company. I thought that was insane. Um, and so that, but then, you know, it, it took off and I, and I joined. And what was super interesting about it is, um, you know, Casper is a, a story of an epic flameout over the period of 5 years, kind of sponsored by a huge amount of venture dollars. Um, Koala actually IPO'd, um, a couple of weeks ago, uh, at a, as a really durable, you know, smaller than Casper, but very durable, very successful business. And I think like, I reflect on like what the moments that made that work were. And I think it was the true, the first true example of like, uh, a single product D2C business not being able to consume venture dollars. Like essentially the idea of marginal CAC being introduced in real time to this like business that thought it was going to be, you know, the global champion of sleep. And so we, we watched that explode from a distance. And, um, what I thought was really clever that Koala did and I was a part of was like realized pretty early on that it wasn't selling a mattress as much. It was selling like a convenient furniture experience. And so, um, built the brand and built the experience about like 4-hour delivery. So it was like a, the brand was almost entirely built on 4-hour delivery. Um, and so what was really interesting about that is like they solved a logistics problem to do that and then got known for really fast delivery in a generation of people that were moving house more often than they had before. Um, and instead of being like, we're gonna be The famous Casper line is like the Nike of sleep. They quickly moved into a bed base and then into a sofa. And I think like the sofa was actually the really interesting moment because it's not intuitive for a business that starts in mattresses to be a sofa company. But basically what they were saying is like, if we can be there on the day people move into their apartment, then we can maybe fill a couple of the needs. And instead of being like, let's get $100 extra of revenue out of a pillow, or let's get, you know, $150 out of sheets, they're like, can we get another $1,000? Out of the sofa. And I think while I was there, the AOV went from, let's call it $900 to $1,500. And so as the, you know, marginal CAC game begun, it, we kind of turned up to a knife fight with a bazooka and like kind of destroyed all the other mattress companies. And that was the path to durability. And so like, I guess the through line into Eucalyptus was, you, the internet is a story of things getting more convenient and faster over time. And so if you can take high friction multiplayer experiences, um, turn them into low friction kind of single touch experiences, then you can really build something that is a differentiated customer experience. And then if you can build an LTV engine on the back of that, then you've got the core economics of a really great business and, um, something that can really scale. And then the, the problem that I kind of saw at Koala that, uh, I wanted to solve with Eucalyptus was, um, I didn't feel like Koala had, um, the levers to be a multi, you know, $100 million, multi-billion dollar business. It just, it just like, it always felt like it was going to be a great, you know, several hundred million dollar business. And there wasn't, there wasn't enough financial upside for me in that. So I, I thought about Eucalyptus as well. If you can build technology experiences that differentiate from a, uh, like let's call it a convenience perspective, um, in environments where Shopify doesn't exist, um, then can you scale those up, uh, to real scale and can you launch them in different categories and in different markets? And so, um, my belief going in was single platform, multi-brand, multi-experience, multi-market, and we could get something really venture scale if we did that well. And then, um, the thing that I got extremely wrong, extremely wrong, was that, um, one core marketing engine would be able to allocate capital between opportunities and kind of have more durability in those opportunities. Um, so you, you know, if our skincare brand can grow really quickly because it's doing, you know, really great creative, then we can pull back from our men's health brand, or we can pullback from our fertility brand. The problem there was like they're all exposed to the same exact type of risk, which is Facebook CPMs rising or, or, you know, choppiness in, in kind of D2C markets. And so I ended up with like a levered, levered bet on Facebook rather than an actual kind of like diversified one, which was a nightmare. And so I got some things right, got some things wrong, but, but the through line was the internet always gets faster, convenience really matters. And then, and then the same kind of creative and marketing bets that we were talking about earlier.
I've just got to ask Tim, because I think you're bringing up like the most practical problem that all of us face, which is our portfolios are just insanely concentrated. And it typically boils down to, I'm either functionally 100% concentrated on Amazon or on Meta, right? Or something like that. So what would be your advice? Like, having kind of gone through this whole process and tried to diversify and realized you still had an upstream dependency, if you were going to rebuild from scratch, would you just say screw it? Like, you know, I'm going to have to be concentrated. It's just the world we live in. Or would you build in a different way?
A couple of things went right for me. Well, one, one thing specifically went right is, um, like the greatest opportunity ever to arrive to healthcare arrived at the perfect moment for me. And so we went from being a diversified portfolio of bets growing 40% year on year to basically all in obesity care growing 250% year on year. Um, and so, uh, I guess like the, what I realized at that point is we could achieve the same portfolio effect across markets, but much easier than we could do it across brands. And so a lot of the infrastructure that we'd been built to do, um, multi-brand ended up working multi-market. And then you actually do get, um, real investment differences between markets. And so, um, you get channel mix differences, you get, uh, kind of creative differences, you get market maturity differences. Like, I'm sure people have come on your podcast and told you this before, but advertising in Germany is very different to advertising in Japan, which is very, very different to advertising in the UK. And so I actually got what I wanted.
I want to double-click on that just to summarize what I'm hearing you say, because I think it's brilliant. What you're basically saying is that there's a lot of different ways you can diversify. And what you learned is take the most successful thing that you're doing and then find a vector you can diversify on that most successful thing instead of diversifying into several things where some of them are all less successful than your core thing. And in your case, I'm assuming this is GLPs. GLPs are like this massive opportunity. And when you saw that, you realized like, oh, this is the business and I can diversify across a bunch of countries that are going to have different, you know, medical guidance, different versions of like the FDA. And so I actually do have a diversified portfolio, but it's diversified across this like generational opportunity in GLPs.
I want to go back to that. You said something interesting. You said that while you were at Koala, number one, what was your role at Koala? Number two, while you were there, that you could just sort of see that there wasn't enough upside in that business. So like, what did you see that was limiting that company, that opportunity that you had to go solve?
Employee number maybe 5 or 6. So I was like, uh, maybe a bit later than that, but in the first 10, and I was like the first, I was like head of, the founder was a marketer as well. So I, we were, we kind of split the marketing responsibilities, but he was like a, he's a, you know, he's a generational e-commerce talent. So it was great to learn off him. I honestly, like it was, it was just going to be hard to see a single product business like Koala get enough market scale. And honestly, we, when we tried to go and raise capital for it, it was always really difficult to to figure out the story that was going to be, um, you know, a properly scaled platform. Um, you can, you can, you know, you like an AOV of $1,500 is nothing to, you know, like that's the, that's the foundation for a fantastic business. But, um, the US was kind of closed off in, you know, from a, from a competitive sense. Um, we didn't really feel comfortable in Europe. So, um, it just felt like the limits were what we had. And so Um, and I honestly, like, I, I thought that Eucalyptus could be kind of an LVMH or a Unilever, and that was wrong. Like, and, and you just— I think you can't manufacture that many brands quickly enough to actually become one of those. But, um, at least it became a place where, um, when big enough opportunity did come along, we were well set up to take it and we were well capitalized.
Okay, now, is— and the koala thing, just so I'm clear, this is an LTV problem, right, that you're hitting on. It's like we've got one product, they buy it once, they probably don't buy many things after that.
I saw the amount of competition coming to the space. To be honest, the other thing that I used to think, which I'm not sure I do anymore, is that, and I think actually, um, you know, modern great consumer businesses actually have solved this problem in a really interesting way, which is just like really, really focus on the core product. But I, like, we were selling the mattress and the mattress is like, you know, relatively close to a commodity. And Shopify was so good and getting better all the time that I was like, what just stops every unique brand in this space getting eaten from the bottom? And so like one of the things that was really important to me with Eucalyptus was to get away from the Shopify ecosystem, which, um, which, you know, has proven to be really powerful for us. But, um, but, uh, you know, that, that was a, a real, a strong assumption I had going in.
Expand on that. What does that mean to get away from the Shopify ecosystem? I've never actually heard that.
If the technology experience is commodified, right? Like completely, like if you can set up a great Shopify store in, and like a good Shopify store in hours and a great Shopify store in weeks and it costs under $50 grand, then like you're going to have to be a great physical product. And I know that that's what you guys think about with your businesses. Um, but at the time I like, like I've gotten in trouble for saying things like this in the past, but like, um, you know, mattresses are very undifferentiated product. Um, you know, they come out of the same 20 Chinese factories largely. Um, and so if, if the Shopify ecosystem commoditizes technology differentiation, you can't really win on convenience unless you're willing to make kind of incredible logistics investments, which very few businesses do and can. And in fact, that's largely commoditized as well. So, um, I just wasn't comfortable with having to come up with unique products every time I wanted to launch something. And so my bet was more complexity of, of service experience in telehealth was going to be something that could be a foundational point of differentiation. And like that has played out to be extremely true over time, particularly with when it comes to complex regulatory environments.
And when you think about it that way, Tim, because I think you know the answer to this, but I just want to ask, are you thinking, I, I am doing this because I'm thinking through the mind of a marketer, media buyer, and I want to be able to market. And so like I work backwards from that of like, what's going to be able to set me up to use my superpower? And it's this where I can keep more differentiation.
For sure. I can't, I can't actually think of any other way to think about shaping a business's proposition than from the lens of a marketer. Like it just, it just has, I mean, and maybe that's just the grounding that I've had, but it's, it feels like if you can't craft differentiation from an initial upfront experience and then from a long-term service experience or product experience, then it's going to be very, very hard to build a business.
Yeah, I would agree. I mean, I think that what I've learned in my business is that Maybe I would, I would modify that to say, I think you have to start with an acquisition mindset, but I think that that doesn't always have to necessarily be a marketing-first mindset, although maybe we're saying the same thing. But I think, like, I just wanted to pull out the point that you've made it really clear what your superpower is. And earlier you made the point like, hey, don't try and replace yourself. You have the superpower. You're probably not going to find somebody with the same level of superpower that you have, and you should get other complementary pieces. And I think that that's great advice to founders, like, Find out what your superpower is and be great at it. Be a, a 1 in 100, be a 1 in 1,000, and then you focus on that. Surround yourself with talent and work backwards from your superpower in figuring out what products or markets you want to be engaged in. I do this all the time. I mean, it's kind of the idea that you choose what games you compete in and really, really smart people are just very good at understanding their talents and picking only competing in games where they're likely to win because of their skillset.
There's a huge margin of safety. Like, I like huge margins of safety. Like, I like, I like, I don't like necessarily having to win, like, in, in the zero-sum sense. I just like, you know, like, I'm like, make me top 5 player in, you know, the NBA, you know, and I'm really happy. But I like, I do not want to be slugging it out in the, you know, I don't know, I'm going to mix sporting metaphors here and go like the, you know, the, the Division 10, you know, it's just too hard.
Well, and like, this is one of the reasons why we'll talk about on the show, but I talk about it in my company ad nauseam. I'm like, I want to be in really big markets. I want to be in markets where if I'm number 12 in market share, I still have a great business. And it sounds like that's what you're saying. It's another way of saying margin of safety that like the bigger the business, the more the buyers, the more paths to victory and the more cushion, uh, that prevents you from failure. Because like you said, I don't really know what quote unquote winning is, but I know what failing is and failing is when you can't carve out a consistent way to profitably acquire customers.
Yeah, Tim, I think the, the thing that stands out to me is this idea that multiple 9 figures in upside was not enough for you. And I want to know more about that. I want to know if that's because of the role that you were in or if that's because of just the, the like your view of the market and like where you could actually go and participate or if there's something else there that we're just not even thinking of.
I think like what I was thinking a lot about at the time is We are on the, we are in the early, early days of like the D2C era. And, um, I was probably more bullish on the D2C era than the D2C era turned out deserving to be. But, um, but I mean, what I was really thinking about is what do the great companies of 10 years from now look like with regards to building things that ship consumers' products? And I was like, the antidote to the, uh, everything store and, you know, the super long tail is like, highly curated, high quality experiences, um, that feel digitally native. And I was like, well, if that's going to happen and I'm going to do it from Australia, you're probably going to have to do multiple of them to get something of real scale. And I honestly thought that the path was like genuinely unlimited as to what it could be because, um, my view at the time, and I think this is probably borne out to be like largely true, is every category would have new entrants. Like, uh, you maybe put in the show notes, I, my original seed deck is like public on the internet. And, um, we had 8 different products we were going to launch, um, in the first couple of years. And, um, there was like home orthodontics, um, there was men's health, there was contraceptives, there was peptides, there was dog food, there was, um, female-focused iced coffee, um, and there was maybe 3 or 4 more. Oh, and there was prams. And so like, I guess we had this view, and that was like crazy, that the there was like the length we went to. But we had this view that like there was going to be a great holding company that had technology differentiation and marketing differentiation, and we were gonna be at the front of that. And you know, it actually looks like extremely naive on reflection, but I thought the opportunity was there to build something of enormous scale. And I actually, I do think that like the consumer brands that will go on to be, I guess like the holding groups of the next 10 years, like a lot of mistakes were made in the first chapter of the D2C era. But I do think we're starting to see, like, I actually, like, I find the Grunz story, like, so interesting because it was like a formulaic execution of a scaled outcome, which to me seems, if that's possible, then it's possible again. And if it's possible again, it means it's possible 10 times on one portfolio, on one platform. And so maybe we actually, now that the rulebook is a little bit clearer and a little bit better written, Maybe we're actually looking at what will be, you know, the multi, the multi-billion dollar outcomes in the space. And I actually think like Hims is a really good example, you know, to, of a brand that has been able to platformize, you know, it has, it has like, I think they have 6 $100 million US lines or more, something like that, which is insane. And it's because they got the platform technology play right. They got branding incredibly right. And then now they're doing product innovation on their platform in ways that I imagine they never would've thought possible at the beginning. So to round that entire answer out, I thought there was going to be, you know, $100 billion consumer businesses built that sold goods. I was like largely wrong and definitely wrong on my front, but I think like we're starting to see the hallmarks that it might starting to be starting to happen.
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So the only thing that gives me pause and fear about it is brands seem so moment in time now, they rise and fall so much faster than they've ever risen and fallen. And so because of the density of categories now, is there any brand, you know, do we actually, you know, of brands started in 2025, what percentage of them become household names in 2050? I like, it could be zero, you know, I don't know.
And this is, this is actually my thing, Tim. And going back to what we were talking about earlier, this is why I think if you just look at it through the lens of a marketer, the problem increasingly is that the diffusion of the insight happens so quickly. You know, like there's so many tools that can immediately say, okay, give me all their creative, like what exactly are they doing? What are the playbook? What are all the flows? And where I, I'm starting to think a lot more structurally. So I'll give like a, an interesting analogy because we keep bouncing back and forth to sports. So the NBA, and I'm kind of aware of the NBA as a product because the funder is so good. The NBA had the highest viewership in the regular season in 26 years this year, and the playoffs had the highest viewership in 33 years. And the question is why? And I think I know the answer. I think it's actually pretty clear once you do a little bit of analysis. At a surface level, it's not obvious because it's like, well, there's no like dominant storyline. The best team in the league is the Thunder from like the second or third smallest market. The Spurs are the second best team in the league. Again, small market. There's just like no good narrative. Why? You know what changed year over year? The TV deal. And you know why that mattered? It mattered because now Amazon is pushing the games and NBC is pushing the games and ESPN is pushing the games. You have more of these multinational corporations putting a lot of weight behind pushing the games. It's not even easier to watch the games. It's harder, but because of the simple fact that structurally you have so much weight pushing the league. It's taken the league to a level we haven't basically seen since Jordan and the Bulls. And so like, I'm starting to think about consumer a lot more structurally. Like, if you're going to win, part of how you're going to have to win is you're going to have to be aligned with the interests of the 800-pound gorillas. Because if you're not, anything you do is duplicable, and you're not— you don't get built into the structural fabric of the machine. And, and so like, that's what I'm trying to do. And I, I think sometimes like I'm a little bit insecure about it because I'm like, man, it seems so cool when people are and all this stuff that's more kind of marketing funnel dependent. But I think if you're talking about what is durable and you can count on in 10 years, I think anything where you, you get in there like a freaking tick on these 800-pound gorillas and you're part of what they want to sell.
How does that work, Mike? Can you— that's such an interesting theory. There's two theories right now that I'd like to unpack. First, Mike, is yours, that like, how do you sort of like position structurally? And then, uh, Tim, we'll bring it back to you. This idea that you came at things from a technology and an experience perspective, as opposed to like typically in consumer, there's like categories is how people think, right? Like which category or which market do I want to be in? So Mike, I don't, I don't quite follow. Like, I think I get the theory of this idea. I want to position into like these large 800-pound gorillas, these big structural tailwinds. But how, what does that even mean? Like, how do you do that? Tactically for the people listening?
I think the most simple way I could say it is that what you want to do is create something that structurally makes Amazon want to sell your thing for you and makes Walmart want to sell your thing for you. And this is not how most people think. They think in terms of like, what is the hook where I can get people to want to buy it? But if you, if you actually go upstream and say even more than I want individual customers to buy it, I want the mega corps to want to buy it. And to want to push it, because if I'm successful at that level, then they, it is clear that whatever Amazon wants to sell people, they are going to buy every day. We, you know, this is proven out by our lives. Like, why do you buy the things you buy on Amazon? Because they put it first on the algorithm, not because you did some kind of extensive research. You pulled it up, you bought the first or second thing on there, and you bought it because of the reviews on there, which I, I could go on a whole thing about how Amazon calculates its reviews. It's not nearly as impartial as you think it is. Amazon sells what Amazon wants to sell, and then we buy it. It works this way in physical retail even more extremely because there's, there's only limited spaces on a shelf. And so I've just kind of moved upstream and who is the main customer that I want to focus on. And I think that that's how you create durability because we don't have the benefit of time to kind of backtest this, but we do know the consumer brands that have been around, as you said, Tim, for 10, 20, 50 years, this is exactly how they did it. They went through the behemoths.
Yeah, I agree. I mean, this is great. There's this great business out of New Zealand called Zuru, which I think literally all they do is they go to Target and then they go to Walmart and they go, where, where is there a dated brand that you want competition to? So they've got a competitor to, to the nappies in the nappies category. They do really well in toys. I think they've got a few like a competitor to like the Kinder Surprise. Like they're just like little chocolates and things like just like, just every subcategory, they'll go and produce a competitor if they need, if Walmart needs it. And I think like it's turned into a multi-billion dollar business. Yeah.
To take it even a step further, we have had major mass retailers come to us and say, hey, we're not happy with so-and-so, create something so we can buy it from you instead of them.
Yeah.
This is like, this is what really happens is how the sausage gets made and So sometimes it's just like looking at, hey, who's vulnerable, who's not doing a good job of serving, uh, the retail customers, like the big, the big wholesalers. And sometimes it's like they'll literally come to you and say, if you had this, we would love to buy it from you.
I want to jump into the Eucalyptus thing then. So you're at— on this note of like how Mike is thinking about just positioning, right, and, and who you're actually selling to. So Eucalyptus, you're at Koala, you have this sort of like this thesis, right, that's forming. On what limits the upside to Koala. So then you have a new thesis which brings you to Eucalyptus. And ultimately, like, you enter into a series of categories that are actually quite complex, and there is no— there's not a lot of playbooks built, I guess, when you started this, uh, particularly in the, the telehealth thing.
So what was definitely happening was, um, uh, like, the technology was filling the gap between patient prescriber and pharmacist. Um, and so like you had Curology in the US really ripping, um, you had Hims really starting to rip as well. And so it was pretty clear that if you could solve the friction, both regulatory and, um, and consumer of, um, connecting those dots and like being able to, being the technology layer that connects practitioner to pa— to, to patient and then, and then through to pharmacy, that that was gonna be a great experience. But I was more excited about it because I thought it was going to be a platform experience. I was like, this is going to, this is going to scale to, you know, n categories because, um, because they're all going to be different experiences, but they're all going to have the same kind of core fundamentals. And so, um, that was what I guess the original insight when we went in was, and, and, and I really felt like that was going to be big enough to build a really good business.
Where I'm a little lost, Tim, and I don't, I want to just get you to expand on it, is there's a big difference between like prams. And, uh, like schedule for drugs, right? Like the, the, so when you're hitting on like platform, you know, where I'm a little stuck is you want to get away from sort of the Shopify thing, but then like sort of build your own kind of like platform sort of business. Could you kind of give us the, give us the, like the pitch? Why did you think this? Because obviously you've, you've like since changed. Now you're quite focused. Yeah.
Yeah, I've led you down two different versions of the original. So, uh, the prams and stuff was, uh, so we raised, we raised, uh, like $1.5 million US pre-really starting the company. Um, and that was very portfolio oriented. So like we could do a whole, whole range of things in a whole range of categories. Then we built our first brand, which was Pilot, um, which was primarily ED, um, very similar to what Roe and Hims were doing at the time. Um, And then we built our contraception, contraception, contraception management brand, which is called Kin. Um, and then it had kind of some fertility extensions off the back of that. And that's when the platform thesis really started to emerge for us. It was like, oh my God, this was so easy to build. Like doing this again was so remarkably easy. Can we do it again? And we did like skincare maybe 6 months later. And so we had 3 in, 3 in the first 18 months. Um, and so that was. Like this, this realization that, oh my God, like these things can be laid on top of each other really easily. Um, and we can basically break up the, the pharmacy space by kind of specializing the service experience. The, the, the big aha moment for me was, um, when we built our fertility business, um, we had all of these young women coming through getting the contraceptive pill from us, and like 35% of them were having their prescription changed from one pill to another. And that was because doctors were prescribing like old versions of the pill. And so we could essentially build a better version of the experience, get patients like more up to date on what the medication choices actually were, solve huge problems for them, and then have this incredibly retentive kind of follow-up off the back of that. And I was like, oh my God, we've got 3 businesses now with, you know, fantastic margins. Like, you know, 50% plus, uh, 9-month retention. Um, and we were like, I was like, this doesn't look like a consumer business at all. And the cost of technology here is we can invest more engineers than we would otherwise be able to because, um, these things are compounding. And so I was like, this is actually the best shape of consumer business that I've seen because, um, we have different experiences, all scaling, all on one technology platform, all in interesting and different subcategories with like different LTV profiles that will get better over time. Um, and so we thought we'd really solved it and then, um, kind of COVID ended and we ran into like the world's biggest brick wall. Yeah.
So what's the world's biggest brick wall? Just the, like the snapback of COVID Yeah.
Like, so at the same time, um, retention drops, CAC rises across the entire portfolio. Suddenly, um, you know, 3 or 4 month paybacks become 9 month paybacks. The technology platform is fracturing because different experiences are slightly different and it needs more investment than we'd hoped. And, but we were maybe hitting the TAM of some of these smaller subcategories. And so it just, it just, it hit the wall because all of those are correlated assets so quickly. And so luckily what it allowed us to do is we, like, we were able to slow down a little bit, kind of figure things out. And then once we started in weight loss, it was transformative in 3 or 4 months.
There's like 2 businesses on the internet that are, that have all, that have forever been the best. It's like porn and weight loss. Those are like the 2 areas that you could ultimately go into, and they've always crushed. Uh, I am so curious how the heck you navigated or thought about all the regulatory frameworks early on, and like getting into telehealth in like 2019. Like today, I think there's enough people out there doing it that, like, we've had, um, we had Jack on from Muesli, right? And they do it, um, mostly in skincare. How did you know where you could sort of push the, the envelope versus like, uh-oh, like, we're running into lawyers?
Yeah, yeah.
I mean, uh, so we got kicked off Stripe, um, maybe 6 weeks into the life of the business, and like, we're off Stripe for like off Stripe for like maybe 4 months. So it was like near, near business-killing experience. Like day one.
If you haven't been kicked off of a transaction processor, then have you even really lived? Are you, do you even really e-com, bro? We one time had a reserve, Sam, you'll appreciate this. We had a reserve on a business I ran of $5 million. They literally held onto $5 million in reserves because of our chargeback rate.
It's like, What we learned pretty early on was that like compliance could be a real advantage, um, if we got it right. And so, um, we have had a big legal team, you know, from very early on, um, have worked with regulators from very early on and kind of tried to like chart the path to what compliant telehealth was going to look like. Because I mean, you know, and maybe actually I'm wrong here, but I like, I felt like on a 10-year timeline, if you didn't do it in that way, there was no way you were going to be able to do it at all. And I actually think like, like it's been so interesting watching Medvi get the coverage it has over the last couple of weeks and months because like they do a very similar version to what we do, but they make every non-compliant decision as opposed to us making every compliant decision. And so you start kind of questioning, you're like, geez, like that, that business makes an insane amount of money. Have we, have we made the wrong calls here? But then you, you stretch forward another 10 years and you're like, well, no, like these are going to be firstly, like that thing's going to blow up and obviously has. Um, but these, these businesses are going to be very intertwined with governments over the next 10 years. And so, um, to, to have taken the sensible steps early on, um, definitely a sacrifice on what could have been from a speed of growth perspective. But, um, I always felt that it was going to be like the path through this thing being there was going to be a leap that we were going to eventually have to take, which was from private pay, cash-oriented business to part of the system. And unless we had our like I's dotted and our T's crossed, that leap was never going to happen. And so, um, it always felt like the right call, but it's been an expensive call for sure.
What does it mean to be part of the system?
Can you go into that? I think like governments, governments will eventually pay some money for the subsidization of these medications, but they probably won't do that without some care model wrapped around those medications. And so We've built the care model and like, you know, not very many DTC businesses have done kind of 20 pieces of peer-reviewed research. Um, and, and so it's kind of structural bake-in that I'm talking about.
Like, that's perfect example that like, okay, the UK offers subsidies for GLPs, but only if you are on this list. And guess what? You're on the list with, uh, Eucalyptus because you've done the work and you've done it the right way. And now all of a sudden, basically the, the government of Britain is pushing people to buy from you. Like, that's the kind of like structural, like that you're looking for.
Yeah, perfect summary.
And then I guess when I look at the, the whole journey here, Tim, right now there was, I guess, like what, by the time the acquisition happened, there was 2 brands left, right? Are there, are there any that you wish you hadn't spun out or shut down? Like, is there any of the house of brands that you're like, man, that actually was a good one. We should have kept it or gone deeper or something else?
Yeah. So Compound, our men's longevity product, it's like, it, it's, it got a lot of things right when we started it in 2024. It just was gonna be a different technology experience. Like the diagnostic piece was gonna be more complicated than we were used to. So the way that it was working is you would do a DEXA scan, a VO2 test, a blood test, a whole lot of other kind of like a, a mobility test. You, you had a large in-person experience basically. And as a result, the, the AOV was kind of $2,000 a month for the first 3 months. And, um, and at subscale, it was like fantastic. Um, and we were like, okay, let's make the investment to scale this. Um, and we just got a little bit timid and, and to be honest, like one of the hard things about managing a portfolio is, um, our women's focused weight business was going so well that taking any resource away from that felt a little bit insane. And so, um, we were trading doing Germany, um, and our, our German business is now really substantial versus doing this, um, longevity business. And the reality was we just went with the rational short-term decision. And I know that's been the right decision on an 18-month timeline, but like, I think it'll probably be the wrong decision on a 10-year timeline. Um, and, and maybe actually, like, to be honest, I don't have to think in 10-year timelines anymore. Um, but, um, but if Eucliptus had been a standalone entity for the next 10 years, I think we would have regretted not having that thing mature because it's, it feels like where the world is headed.
Is the advice in hindsight then to spin a company out and give it its own space?
Yeah, maybe, maybe. I, I like, so, um, I, I think about this thing all the time, which is like, how do you start new S-curves? Like in a world where, um, you know, like Amazon does it, uh, very few other businesses do it effectively, um, without natural advantages. And so I like, I, I, I don't know the model because I'm like, I've tried, I've tried small discrete resourcing, um, and it takes too long and is too slow and the execution bar's often not high enough because they don't have the resources that they need. I've tried like intentional high talent carveouts. I've tried like platformization. And I haven't answered it. Like, I think like we, the thing that we do really well is roll our main thing into new places. And so I don't know if I have a good answer, but I wish I did because it's pretty imperative if you're going to build a platform business that you're going to have to be able to start these new things. And I think like the great US platform businesses do it right. Like DoorDash is an example of, you know, multiple different S-curves, whether it's advertising, Um, the kind of core food delivery business. I think there's like a logistics platform behind it. Like there's, there's enough there, right? To, to, and that's, that's how you make the leap from billions of dollars of enterprise value to tens of billions of dollars of enterprise value. And I like, we just didn't do a great job.
And so, um, can you, can you go deeper on the S-curve thing for the people listening?
Uh, yeah, yeah, for sure.
I've not heard many people talk about this in the way that you are.
Yeah. So like, if you think about, um, wanting to build a multi-billion dollar business. Um, and you, very few of them don't start with, without the first one being a, you know, several hundred million dollar business, but then you've got this several hundred million dollar business in our case, like let's call it a $400 million US revenue business. Um, and you're looking at it and you're going like, look, this is great. Um, but, uh, it will have a natural ceiling or it will have, um, you know, unit economics pressures and we should be trying to create the next business lines, whether it's from a selling to the same customers, selling to new customers, expanding the brands, like there should be new ways to grow. And those new ways to grow are going to have S-curves, right? Where it's like, there's going to be a pain at the beginning where it looks shit. And then it's going to slowly mature and then eventually it will look great. And so the question is, is like, how much pain are you willing to endure? How are you going to staff it? You know, how much capital are you going to put into it? And I have both been short-termist and timid in my approach to that. And I think like actually being a part of the Hims business, um, well, like not yet, but being eventually being a part of that business, I think like they've actually really thought about it, um, in a, in a long-term and deliberate sense. And the example that I'll give is like, you know, they've bought a whole lot of, um, manufacturing and kind of, uh, lab infrastructure, um, because they've gone, well, Um, over 10 years, it's going to be very important to get diagnostics right or labs right. Whereas, um, and, and it's, it's not a business that's, you know, particularly massive for them now, but, um, as they think on a 10-year timeline, they've made the infrastructure investments to be something differentiated to allow that to mature. And I just like don't think we did that very well. And I think very few businesses do it well. Um, and so I guess like, I think we would have been a better business, or, or would be a better business if we'd been bolder with the way that we'd staffed and funded those bets.
So can you then expand on the—
on that?
Can you expand on the capital raising part? So like you have— you raised a little bit of money at the beginning, and I think you raised $50 million before you guys sold. That was the last round in— $100 US. Okay, there we go. What was the capital used for? Was it just depth then? Like in the things that were working really well as opposed to trying to start these new S-curves?
I mean, we in the capital, in the fundraising decks, we often talked about new S-curves and I think like, um, probably didn't deliver as well as we should have on some of those. Um, I think like if you think of new markets is we, we, we delivered on one type of S-curve, which is a new market and we did that really well. So, um, you know, whether we're the most multi-market telehealth business in the world. By, by some distance. And so I think like that, that one we solved, but, uh, and then the other one, yeah, the thing that consumer founders don't really get when they try and raise money is, um, you cannot spend those dollars on growth. Like you just can't. It's like a, it's a disaster if you do. Nobody wants to fund growth. Like nobody wants to fund a cohort hole. Like you have to have a story where you are investing the dollars for material changes in your unit economics based on a short or long-term investment. And so I'll give you two examples. And so one is like, we have probably the most retentive weight loss program in the world. That's not magic. Like that's a whole lot of technology investment over time. And so what we have funded is the technology investment. And so that gives us a unit economics advantage on the retention side, which gives us an advantage on the CAC side, which gives us the growth that we have. The other example I'll give you is David, the protein people. Like they, they took $70 million from Green Oaks. Like that's not to put more David bars in more stores. Like they bought that, they bought that ingredient that they then cornered the market for. They started doing fish. Like they are looking for margin expansion, unit economic shifts, major capital investments that will yield over time. I see too many decks from consumer founders that are like, Yeah, we're going to, we need this money because we're going to go from $50 million to $500 million. And it's like, well, without a, without a material shift in your unit economics, it's hard to believe that people are going to fund that.
I mean, it's such a good point that if you're trying to raise money just to turn around and give it to Meta, that is an insane idea. And I just, I just want to like triple underline what you said. It's like you have to be turning around and buying something that gives you a durable competitive advantage or you should not be raising money. Do not take money from somebody else unless you know that you can turn that into a durable competitive advantage. You will live to rue the day that you did.
Yeah, I suppose it's so true in consumer too, because we're, it's a hard industry to underwrite in the beginning at the, at the start of it, right? Like our, our margins are not, oh, I guess what SaaS thought their margins were back to Mike's, uh, stock-based comp thing. But, uh, you know, it automatically, we're handicapped and we, we get discounted. So as an industry. Um, Tim, you, you basically went from that last raise to sold pretty quickly.
Oh no, we canceled that. So, um, we were about— we signed it, we signed a term sheet. Um, I've got a good relationship with the, with Andrew Duttm, the, the Hims founder. We spoke all the time. Um, he was like, did you just, uh, sign a term sheet? I was like, yeah, we did. He was like, oh, maybe, maybe now is actually the time that you join us. And so we, um, we, like, they approached really late in diligence. They came pretty aggressively. And so we ended up kind of canceling the round and, um, and getting on board with, with the Hims team, which was, um, which is, I mean, I'm really excited about it. It's going to be like, you just don't get many chances to, that brand is so incredibly strong that I'm just like, it's, it's excited to take it around the world.
Uh, one of the things I heard you use the term, uh, window washing when it comes to fundraising. Can you tell, tell us what, what window washing is?
Yeah, I, this is, you know, um, overly, uh, overly open podcast guesting, I guess. Um, I was, I was, I was being interviewed by two young VCs and I was making the point that I don't think there's a worse job to take early in your career than being a VC. Um, because your job is to lie to companies and the company's job is to lie to you. And so you actually never really see the nuts and bolts and the decision-making that goes on inside a company because you see a window-washed version and you present a window-washed version and the whole thing is a window-washed version. Um, and so, uh, the point I was trying to make was one of, um, essentially, you know, being part of a sales process the whole time, but the way that it was construed was, uh, there's lies all the way down between companies and investors. And I think like, that's obviously not true. It's just the best version of the truth that gets presented in all, in all cases. And so, um, one for, one for learning for sure.
Well, Tim, we're, yeah, I don't know if you know this, but we live in a world where we're not super great at nuance anymore.
Yeah, yeah, it's funny that that's a— yeah, it's a different time, right? I think, um, yeah, and also like the rewards for— the rewards for more extreme, like extremism with regards to like even how you talk about business is just— it's really surprised me how much that's become a thing.
I know, it's why, uh, I think— I don't know, I can't speak for Mike, but it's why I like doing long-form conversations like this as opposed to, you know, 15-second, 30-second short-form content. It just because they those, your incentives are just to make something extreme because that's what gets views as opposed to like quality of conversation and like leaving somebody with something that's valuable.
Yeah, like AI creative. It's just like, it's like, it's all a big, like nobody's making great AI creative yet. Like nobody, nobody's changed their business trajectory fundamentally with a static generated by one of a slew of startups that are wrappers on top of the models. Like they're just not, it's not quite there. And that's cool. It's not quite there. Like it's gonna get there. We should be excited. We should be testing lots of stuff. It's not quite there. And, but you know, if you see the 15-second versions of it, there is, you know, a thousand hustlers on X being like, this is how brand one went from, you know, $1 to $100 million in 9 hours. And I'm just like, it's such a hard, like, I feel for young people trying to figure it out because the lessons are, the lessons are the ones that sell, not the ones that last.
I mean, the, the long form versus kind of clipping culture, I think, is a broader thing, which is if you're going to be successful in the years ahead, you're going to have to be countercultural and develop the ability to hold a thought for an extended period of time. And most of our culture is just not going to be able to. I mean, we— there is research out there that the kind of TikTokification of our brains, like watching TikTok for 15 minutes harms your brain, like There's like not even a lot of debate about this right now. And like people are losing the ability to really think deeply about a thought at the same time that AI is kind of, uh, lulling people into a sense of trust where they don't even think they have to consider the worthiness of a thought and or the accuracy of a thought. And, and so like one of the things I'm telling my kids is like, listen, you think for yourself. If you can look somebody in the eye and have a good conversation with them, congratulations, you're top 1% in your generation, probably. And like, I do like this about long-form content that it's like, I don't know how many people are listening to the podcast at this point, but I would bet if you graphed it out that if you're still listening to the podcast, you're probably one of the more successful people that's listening to the podcast because the ability to hang with things, the ability to kind of really think through things is so much of what I'm seeing in the, in the outlier successful people right now.
Yeah, I mean, look, you're, you're both, uh, it's— I'm gonna tie this back, but I don't know if you guys are aware of this. I guess there was a study done where they actually made AI watch short-form TikTok content, and it actually made the AI dumber. Like, it was like, it— performance dropped by like 17% or something. So this works across like the human brain and neural networks, which, Tim, it does bring me back to this. Uh, what, what are the things that ultimately drove to this, like, you know, step change function in your business and like ultimately getting you to this exit? So it's not, it's not this like short-termism, you know, snack food, you know, that you guys did. Like you clearly did some things operationally that were very important. So like, could you maybe hit on like the biggest, like, these are the levers, this is what we invested in.
Sure, for sure. So I think like firstly, like understanding the drivers of the unit economics of your business are like, it just like, it couldn't be, I mean, it sounds so simple, but it just like could not be more important. And what I mean by that is like different businesses make money in different ways. Like if you're selling a physical product with a, you know, 3 repeats a year or 2 repeats a year, whatever. And you've got to be gross margin focused. You've got to be basket focused, right? But like, The product that we sell is, it has, you know, $150+ of gross margin every month. And the only game in town is, can you hold patients for longer and deliver them better outcomes? And so, so much of our initial investment went into what does it mean to remove as much friction from the experience as possible? And then when you can't remove that friction, meet patients with the support that they need to be able to get them the outcomes that they need. And so like the, the first real milestone of us being a great, um, business in weight loss was when we published, I mean, when we did the first bit of work to prove that we were, um, delivering a better, um, series of clinical outcomes than the clinical, than the trials for the drugs. Um, and then that just feeds into the top of, like, firstly, that's extreme vote of confidence in what we do. And then second, that feeds into the top of funnel and the brand. And, um, and then the marketing side becomes relatively easy, right? You can, then your tactics in the mid funnel have a natural advantage to them because you have something that is very hard to say for others. And so, and then once you've got like, so I guess like understand the unit economics, um, and then from there build a retention engine that drives those unit economics. And then from that retention engine, then you become a brand and you build brand work and you do brand work. And I think where we, because, you know, it's the same lesson I learned from Koala, which is, um, if you create a gross margin advantage and they did it through basket size, we do it through retention. Then you actually get the capacity and the capital to build a brand. And so you can actually start to build, make durable marketing events, uh, sorry, marketing, durable marketing investments into things that exist in ways that the rest of your category just can't do. And so we were the first ones doing the TV, the first ones doing the radio, the first ones doing, um, you know, the large brand campaigns. And so when this debate about GLP-1s and are they safe and who are they for? And, um, and, you know, how do you do them and all this kind of stuff was happening. Um, we weren't running Facebook ads at that time. We were running— well, I mean, we were running a lot of Facebook ads at that time, actually.
That's, that's true.
That's right. We were running a shit Facebook ad. But, um, but we were also running the billboards. We were also running the TVCs. You know, we were making the argument as to if you cared about your long-term health, um, in this category, then the safe, um, durable place to do it was with Juniper, which is the brand that we have. And so Um, but it all comes from, like, it comes from we built the gross margin advantage first. Like, the marketing sizzle came, came very much later.
And, and this clinical outcomes thing is interesting. Like, how did you justify the investment in that? Because there was, up until that point, did you have any proof that that was worthy? Like, that's a worthy place to invest the dollars?
Um, we were seeing obviously, um, some very strong behavioral signal in our retention data. And so the question of then, could we get that published, was a pretty trivial one because it was like, well, it's going to cost us, you know, a million bucks to do the publishing here. You just put that in your CAC and all of a sudden you're like, is this worth it? And, you know, again, you have the margin of safety because you're kind of like, well, this is already worth it and I'm already spending this money in different ways. If I treat this as the cost of production of a high-quality TVC, do I believe it's going to move the needle as much? And And luckily, like our organization, I think is quite good at thinking through big creative bets, big narrative bets. We're probably better at big narrative bets than we are kind of the technical side of channel work. Like we do, we're just good at, we're good at our big, our big, our kind of big storytelling and creative bets. And so this felt like a really obvious one of those and it worked really well.
Do you anticipate or predict that this is going to be a more common I guess, uh, strategy in health and wellness that we're going to start to see far more like actual science being done?
Sure. Because like, I mean, like, like, you know, in, like, in the slopification of the world, you're gonna, you're gonna have to find new ways to speak, right? Um, and, and I think like there are twofold, you know, benefits. The, the, you know, the LLMs and the agents will be good customers for good, good research. And then also it's cut-through brand messaging. And I think it's, it's, it's more about the cut-through brand messaging, I think. There is so much noise in wellness. And if you like, the story of my career, I think so far has been like the cost of setting up these businesses just falling away to nothing. And so if that continues and, you know, AI was obviously only going to continue that, then the question becomes even more important of like how you cut through. And I think the era of cutting through with format is like kind of over. You know, I think we'll continue to see new creative formats emerge, but like the returns on new formats, like if you were the first one to do, you know, Instagram stories, great. If you're the first one to do street view, you know, street interview podcasts, great. But it feels like those bangers are like less common. And actually the rules of the game are kind of known and it's, can you say something unique and have something unique about your product? And so, yeah, I think research is going to be a really, really big lever that people pull.
Yeah. The format was like a, the way I explain it to my team is, you know, you're throwing rocks in a pond and when it was a small pond, they made pretty big splashes. But now that you're throwing, you're basically throwing rocks in an ocean. Uh, you're not really going to notice them anymore. Right. Um, so yeah, completely agree. The, is there, as you sort of look forward, I mean, you've made a bunch of statements as we're talking to you around like how you think about business and how you think about categories and markets and even this technology experience angle that you come at things. I want to know, like, if you were to look ahead 5 to 10 years, is there something about consumer that you just think differently about that maybe the rest of us are talking about all the time? Like, is there some contrarian take that you have where you're like, I just think this is how things are going to be done now? Because, man, we're all thinking about AI and its impact on sort of barriers to entry and then raising the ceiling to success. And I'm just curious how you think some of this stuff is going to play out.
Yeah. The thing that I've been thinking about a lot, and this is like, so there's two things I've been thinking about. Like, I like to think the mental model, I don't know if it's a mental model, but like the way that I like to think about things is if I see a trend, I try and drag that trend to its absolute extreme. And then I look for opportunities on either end of the extreme. And so, I guess like the examples that I would think about now is like, obviously, like if AI is driving down the cost of brand creation and content creation to zero, like what, what lives in that? And I think, you know, heritage is one thing that lives. And so like legacy brands that have been around a long time with products that are really differentiated and solid, I think like they become much more valuable. And I think like that's not a unique thesis because I think Thrive just raised like a trillion dollars to do that. But like I put my money where my mouth is. I've like invested in like a small hotel, a publishing company that's trying to compete with The New Yorker. Um, like I've invested like really outside of the things that I've done. Um, and then the other end of the spectrum is, uh, if the cost of producing software goes to zero, then everything will have software in it. And so therefore, like all of the things that, you know, you, all of the businesses that have been denied, um, software because the cost of engineering is too high. Um, what happens when they get software and what happens when they get automation and the margins improve massively. And so, like, I think about all of the, like, real-world experiences that are currently, like, terribly janky to access. Like, do they get much better? Do they get much, much faster? Do they get much easier? Do people do more of those type of things because software removes the friction from doing them? In the same way that, like, Shopify has done that for commerce, is there hundreds of examples of, like, low-level experiences and things that get much easier? And maybe there is. I haven't, like, gotten to the end of that thought bubble, but I, I do think that's like, if, if everyone has software engineers, if every single person has one software engineer, like what gets made? And, and like, I, I used to really think this way about the no-code movement. Like I used to think that like social experiences that, that had code in them were usually so shit because they'd been made by the least social people of all time, like engineers, because engineers naturally have to be like computers. And so I'm like, well, if no-code comes along and like truly social and creative people can create experiences, then do you get much more social experiences? And that hasn't come to fruition because I don't think no-code actually met to its promise, but maybe AI is the— is what actually drives that to reality.
That's definitely a theory, right? Is that AI unlocks, uh, actual— like basically it's like closing the gap between like real creatives in the world and technology and like when you shrink that gap, then all of a sudden the experiences get better. I mean, I think we're going to see this barbell effect for sure. Like it's going to be like this extreme, you know, everything's going to have software and then everybody's going to want to go to a hotel in the woods that has no electricity. Like it's, that's, that's how we're going to proceed here. And then, and that's going to impact brand building. But I guess, you know, Tim, as a, as a self-proclaimed media buyer, um, if all of this is true, does, does all margin then just not get deployed into more advertising? Like, is, is all this actually ultimately just distribution?
Like, so like, what is distribution, right? I think we've become a little bit, because we, because we lived a 10-year, uh, where Meta was cheaper than it should have been. Um, we've become a little bit narrow with what our definition of distribution is. I think like, um, doing, you know, and we're actually seeing a return to, um, kind of own distribution being thought of as like a really important thing. And, you know, that's why like you see these podcasts trading for huge huge multiples, and hopefully that works out being a good thing for you guys. And, um, and, um, and, and, you know, and, and more, more of that type of thing. But I actually think like, like I, I think about creativity when it comes to distribution and then also investment when it comes to distribution. So like, um, you know, the lazy version of it is every company trying to start a podcast, but like, I think like, what would it mean to, you know, to invest for us, like to invest $10 million a year in events, you know, like, could we afford that? Could we sustain that? Like, is that a distribution channel that will actually work? What would it mean for us to, you know, buy a whole lot of GP clinics? Is that distribution? Should that be thought of as marketing? You know, like I think boldness with, like, if you think of distribution as just like how you get in front of customers in a differentiated way, in a way that they might trust or like, then I think we're going to expand the kind of aperture of what's possible there a lot. And I think we're going to see less Okay. I, the way that I define advertising is like any, any attention, any mechanism to buy attention. Um, so if you take my definition of advertising, more advertising. If you take the classic definition of advertising, probably less advertising.
I tend to be more aligned with what you're saying. Does that, I guess if you look at the evolution of, uh, Eucalyptus, then your channel, I guess like just being super nerdy here, but your channel mix then is just like layering on top of each other over and over and over again. Right. Cause you probably started off like fairly single channel and then like, it's just gotten more and more complex. And now you're talking about buying clinics or places.
The crazy thing about our business. So, okay. So like we've done some incredibly creative and interesting things. Like we were like one of the huge first buyers of Grindr Media, like one of like, um, you know, like we've, we've done some really clever, we've done some really, really clever stuff. Um, at different times in different ways. But honestly, like in a category like ours, the biggest thing that we've had to do is get search right because the category went vertical. And so like, and you know how we're talking about discipline plus creativity and execution plus creativity right at the start of the conversation, like our story is one of incredible discipline on the search side. And then wide ranging creativity on the bets that laid on top of that. But like, it would be, I, you know, it's, it's very easy for me to, to say like, oh, it's been a story of, you know, really interesting media buying. It's been a story of really interesting landing page work. Because, because the category was growing and it's been a, it's been a really interesting story of like, you know, knowing when to listen to Google and knowing when not to listen to Google. Like, yeah, like in the category we've been in, it went vertical so quickly that discipline, discipline and execution became the things when you were just trying to hold on. And now that it's stabilized more. Creativity and experimentation and big bets are back on the menu. But, you know, I went to a dark hole of discipline for like 3 years.
Mike has talked about this many times on the show, like the— it's all these boring things that you sort of have to get really, really right in order to get scale in any— I think in almost any category.
Yeah. I mean, we talk about it on this podcast. Everybody gets to hear kind of the highlights, but really, I mean, Success is just hours and hours and weeks of grinding away in obscurity at stuff. Like, I mean, that's the cost of excellence. The cost of excellence is that you're just willing to pour really large amounts of time at something to become truly exceptional at it. And, uh, you know, like, I, to me, this is kind of like you mentioned Tim earlier, young guys that are kind of coming up in the industry. I think this is like how we do them a disservice. I've heard this analogy before and I think it's a good one that like you can't, if somebody wanted to learn how to swim, they could read all the books about swimming. They could listen to professional swimmers talk about swimming, but you know what? That doesn't help them to swim. You learn to swim by getting in the pool. And like, that's what's true about any of these disciplines we're talking about with e-com is that it's like the way that you learn it is by doing a freaking ton of it. Hours and hours and hours of it. And it doesn't, I'm not saying don't listen to people, but like also like you get out there and do stuff, right?
I try and really avoid talking about the tactics that made us successful because the tactics that made us successful are not the things we do now. And like, but I do really think that like a durable understanding of unit economics, like I find it insane, insane how much coverage there is from like the big agencies, um, on, on Twitter or on X being like, here's how to think about marketing efficiency and here's how to think about cohort economics. I'm like, if you don't have that fucking nailed in the first 6 hours of having your business and you're relying on an agency to tell you how to do it, you're not, it's not going to work. Like get that foundation before you even make an ad.
Oh, this is totally a hobby horse of mine. And like people want to outsource thinking all the time. It's like, hey, You know, who should I use as my Amazon Ads agency? And I'm like, there's nothing wrong with using an Amazon Ads agency, but don't do it until you've tried to run Amazon Ads for a while, because how are you even going to know what a good agency looks like? How are you going to evaluate their performance if you don't understand anything about it? And people all the time, they're like, oh, here's this new thing that I know is important, but I don't know how to do. I just want to outsource it. I want to outsource the thinking. I want to outsource the understanding. And you just can't do that at all. Like you can certainly have people operate parts of your business, come in and help you, but there's no substitute for learning it. And like you said, like, man, unit economics, like some of these basics, and maybe that's, you know, like maybe we're getting religion around this stuff more and more because we're not in ZIRP, but I think it's, it's a great point that like some of these things are just fundamentals that transcend time.
And knowing, knowing what you want, like I just think most people, most companies are the function of like one number. Like being better than anyone else at one number. And like, you can be gross margin, it can be retention, it can be acquisition. It's probably not going to be acquisition. It's very hard for that to be the case. But, um, but really, really knowing where you're religiously spending your time and investing to get things better, I think like such an important skill.
So ultimately you guys figured that out for Eucalyptus, leads to the exit. You've described this as like full circle, uh, for you, right? Coming, coming into the Hims, um, company. Is there, like, I'm just curious, is there like a version of this story that maybe, uh, Full Circle might be simplifying it? Like, are we not doing it justice with what you've built? Like, it sort of seems like you went into a lot of places and were very creative, uh, while being extremely disciplined.
So, so I think like what we got right, um, the main thing that we got right, and this is the main thing that we got right and very, very few other companies get right, is like We realized very early on that like the best professional services talent was about to leave professional services in huge numbers. Because they, it was huge dissatisfaction, like the startup world had changed the way that people worked, but like professional service firms hadn't really changed. And so we put a proposition together to employees that incentivized them on the upside, gave them a new model of working. Drop them into countries that they never would've otherwise gone to. So it was like, it was like the Uber, um, the lessons of Uber at the time applied to, applied to our business. Um, and that durable talent advantage going all the way back to like the salary cap thing was actually the thing that like made this business interesting and then made it good. And then that, that's what everything else was laid on top of. And so like, as I think about like the, what we were staring into was either $200 million incremental capital into the business to essentially fight Hims on the global scale, on the global stage, or, um, you know, join them and, and, and, and lock in, uh, you know, some version of that success. And I think, um, I never for a minute thought the better path there was to fight them because, um, the thing that was really true to me was that like, promise that I'd made to those staff members who joined us early on was like, if you take a big bet and you kind of do something creative and come and join us, then I'll do everything I can to turn that into an outcome for you. And so when that outcome like kind of appeared and was real, um, it seemed like the very, very obvious move to make. And so now like we have this global platform that we can build from, but also a locked-in outcome for, for people that spent 5 years like really, really pushing for that.
So is that, uh, does that then sort of dovetail into how the deal was structured?
Right.
So like, I guess with what's publicly available is like some part cash, um, and then like a whole chunk of stock, right?
Uh, no, not stock. There is, there is stock. There is stock. So there's like, um, there's, uh, $100 million US of, um, of stock over, over 3 years that's kind of split among the team. But the bigger thing is that, um, a large part of the team are, um, being paid like approximately half their, their their amount upfront and then half in the earnout over 3 years. Um, and I think like honestly, that's what, that's what Hims are really buying, right? Is like a team and a platform that has like learned the hard lessons about like, I can't tell you how complicated it is to run a telehealth business in Japan. Like I can't tell you how it's like, it's very, very complicated. Um, and so that's the thing that we had and that we built to real scale. And so it's funny because like the brands, like I'm, I'm a, I'm a marketing guy and yet like the brands that I've built The marketing systems that I built, they're not going to exist in 3 months' time, 4 months' time, you know, like they're going to get folded in and, um, and we're going to build their thing. But what will exist and what will continue to be really valuable is like the investments we made in the team that were capable of building a, you know, a retention engine and running that retention engine at scale.
What was, uh, in all of this, man, I just, I have to ask, like, what was something that you thought was impossible in maybe the industry that you were in that that ultimately proved you wrong?
I, so there's lots of things along the way that are like changed really quickly about this industry. I think like, um, to be honest, like one that really shocked me was, um, how willing people were going to be to like honestly go to like the lowest common denominator version of accessing these medications. Like I thought, um, I like, I thought there was going to be a much more durable advantage in safety and security of that. Like, like I thought it was going to be, our big competitors were going to be like established clinicians, established clinics, you know, like the, the, the normal path to getting care. But actually the emerging dominant players for a long time were like the Medvis of the world, you know, like the ones that were willing to cut all corners. And so like I was, I was shocked and I'm still kind of processing this shock at like how price sensitive people actually are, even when it comes to medication. Like there is no category exempt from, um, from people willing to shop to the lowest possible price for things. And so I was like, um, I, I never internalized that and it surprised me, you know, like right up until reading the Medvi article, like in my mind I was like, these like bottom, bottom of the barrel compounding opportunity options in the US, they're going to be like some to maybe a couple of hundred mil. And there's probably 5 of them that have done 400 mil or more, you know? So it's like, um, it's insane to me that that's how it played out.
Dude, you know what shocked me most about this whole industry is that people are willing to give themselves injections.
For sure. Like just that behavioral thing, like the idea of giving myself a needle is like Have you, have you seen what a, um, like a non-properly administered compounded setup looks like as well? It's like you, you like extracting the vial from the liquid. You then like, it's a big needle. Like it's crazy. Crazy.
Like there's on-brand medications. And it's also very bullish because like right now you can make an argument that there's all these barriers, right? That like there's, we're on first, second generations of these drugs where the side effects are higher. You've got to inject it. And like you look at all the stuff that's coming, man, it is going to be, I mean, everybody's going to be on one of these, right? It, and it's just like, yeah, you're going to be able to take it orally. I mean, like I was talking this, uh, this week with some people about, um, the myostatin inhibitors that they've combined with these. They, they're pretty close to basically finding a way to give you something that like it just burns 100% fat, which is wild. You know, like that's basically not even humanly possible. Like even if you fast or you like do things like you can't. So like we're, we're getting to like superhuman what these drugs are going to be capable capable of. And then, you know, the research says, hey, you're less likely to drink, you're less likely to smoke, you're less likely to gamble, you're less likely to get Alzheimer's, you know, and you just go down the list. So it's, it's just such a revolutionary— for sure, it's such a revolution. I mean, it's probably the, the best product in the history of the world, and we're in the early innings.
Yeah, I know, it's— everybody talks about AI, and it's like, well, have you seen this other type of technology?
Have you seen where they put AI revenue next to it? The GLPs and you're like, guys, the big story is GLPs.
Yeah.
And like, yeah, the impact is incredible.
It would be, it'd be interesting to see on a 10-year timeline what has more impact because like, I, like you were already seeing the life extension, right? It's going to be like, it's going to be the anti like amphetamines of what, of what like the, the opioid crisis was to the, um, to the U.S. Like it'll be life extending in the same way that was life shortening.
Yeah, I think that's a great point. I mean, like. I think that to continue to push yourself in business past a certain point, you have to believe in like the greater good, that somehow you're part of like the greater good in some way. And like, it's pretty easy to convince yourself of that with GLPs because it's just like you're making people's lives better, you're extending their life, they're more likely to, you know, to have all kinds of good outcomes. Uh, making, making, uh, the world hot again is a great, uh, a great endeavor to be a part of.
Yeah, yeah, yeah. It's one. Yeah, it's been just super interesting to me, like It's like, I think about this point a lot and I, um, like to what, to what level of responsibility do I have for making sure people go about these things the right way? Um, and like, there's the balance of like the commercial and, um, and like the, the, it's not even the clinical, right? It's like, because like I can use behavioral tools, you know, like I can use like our most used feature is a weight tracking graph. How do I design that weight tracking graph? So to get people the best chance to get the best outcomes. And I'm kind of lucky. Well, I mean, I've convinced myself that I'm lucky that my incentives are very aligned with the patients because outcomes equal retention and retention equals gross margin and gross margin equals marketing. But there is another way, right? There's like the, the, the MedVie way of doing it. And it's, um, and you've really got to convince yourself and be patient. And actually that's where venture capital has been really good because it's allowed me to, um, play the longer game. Um, which, which, you know, has led to me being more convinced that we've done the right thing. But, um, it's, it's certainly not written in stone that that will be the way that it plays out.
I think this is where like an understanding and appreciation of compounding is so critical because you look at some of the all-time great categories and it's just like, yeah, you could see the growth and you could see meaningful nominal sales 5 years in, 10 years in, but then you go 30 years in and it's just like, it just dwarfs it. And I think that that's what's going to be true in this category that like so much there, I'm sure there's people doing the black hat cash grab right now. I mean, it just feels like everybody's a compounder now, but I think that you're right. 5, 10 years from now, reputation is really going to matter. And the size of the prize is just going to make today look small in nature.
It's, yeah, it's going to be, it's going to be, it'll be fundamentally behavior changing for a lot of the world. And so it's going, I mean, I saw the, I saw the, um, like, uh, Instagram time on, uh, the meta time on site, uh, metrics down for the first time ever. And I'm like, it's, it's hard to, it's hard to look past that, that at least may have been somewhat impacted by GLP-1s because it's just like such a dampener on addiction.
It will, there's, there's kind of, uh, you know, Peter Thiel has this idea in Zero to One of like every great startup is built on a secret, you know, that you know about the world. And I don't know that it's really that much of a secret, but like, That the world's going to be dramatically changed by GLPs might be the single insight that, you know, the insight that GLPs and AI are going to change the world in all kinds of different ways is probably the only central insight you need to build a successful company. Now you got to figure out the exact offshoot of that, but like, I mean, that is, that is like the most obvious thing ever, as we said here.
See that on that? I love that secret quote. And it's like, it's one that I've thought about a lot. I tell you where I often, what I often think about with regards to it is that secrets stay secret much longer than you expect them to. Like people, things are often out and like available as insight. And so you think someone will be doing that, but then the actual explosion of the category takes years. And so the secret can be held by hundreds of people for quite a long time. And then you just, by the matter of staying at it and staying relevant, you can, you can arrive relatively late and still take advantage of it. So if the secret's big enough, which like GLP-1s obviously have been, then it's not about being one and done with who wins on it. It's like, you know, there are thousands of winners as long as you commit to, commit to the insight.
You know what I think that is, Tim? It's like, if you think about the stock market, if you knew a secret about somebody's earnings, right? Like, and, and that got diffused, everybody would act on it. And so like it gets arbitrage away in no time. But the reason why that's not true in entrepreneurship is because it's really freaking hard work. And so like, even for me, it's like I'm running my business over here. I'm doing electrolytes, I'm selling water bottles. I'm like, man, I bet I can make a bunch of money in JLPs, but it's like I'm preoccupied, I'm busy. And, and like, and then for every one of me, like there's a thousand people that are like, yeah, I could do that. I'm going to get back to TikTok, you know? So like there's just so few people willing to put in the work required to take advantage of it. And so I think that that's the reason why your insight is so true. You think, I mean, the classic misunderstanding of entrepreneurship is that the key is insight and it's not. The key is execution. Like the insight plus execution is what creates the outcome, but insights are not scarce. It's actually the people that are willing to do the execution.
And commodity and insights are becoming commoditized, right? Like that's actually, yeah.
And execution is, I think execution often gets a bad label as like, uh, one practice done. It's like, it's the, it's actually the balancing of a thousand things. I find like that to be often misrepresented. Like people talking about like, well, if the cost of execution goes down, I'm like, it's only going down marginally. Like you, you've got to go and do a thousand, you know, the number of things you have to do to succeed just changes fundamentally. And so it's like execution across vectors, not down one that ends up being the challenge.
Maybe the word is coordination. Like even more than execution, because we tend to think about like, oh, I executed this task. But like so much of building a business is like I'm coordinating, you know, I'm herding 500 kittens at once, you know, and I'm coordinating all this crazy stuff.
I love that. And bet sizing across all of that coordination.
Yeah. Tim, do you, do you, then on that, do you think that, uh, it's like, cause you're transitioning into SVP International, I guess is the, is the formal title. Do you see that's still the job as you move from, you know, building Eucalyptus to now part of Hims? Like, or is something, are you anticipating a lot of change?
I think my time horizon just shifts shorter. Like, I think like, like the same way I think about the responsibilities of my C-suite, like their job is to make sure that the business hits its numbers this year. And I think when you're a founder, you've kind of got next year in your mind. And I just don't think I'm going to have as much of next year in my mind. I think I'm going to have like a bit more discipline, more complexity because I'm going to get a bigger P&L, um, but more