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Get a Demo“If someone can do the same revenue in 12 hours, basically out of nowhere, it does lower the value of brands.” What does the collapse of traditional brand equity mean for founders still building toward an exit? Roman Khan (Co-Founder & President, Peak21) joins Sean Frank (CEO, Ridge) and Matt Bertulli (CEO, Pela Case and Lomi) to make one uncomfortable argument: the playbook for building and buying ecommerce brands is broken, and most founders haven’t figured that out yet. After three years acquiring DTC businesses, Roman stopped. The reason cuts to the heart of where dropshipping, ecommerce logistics, and brand valuation are all heading. His Hong Kong summit surfaced the shift in real time: Meta partnership ads back at the top of the stack, Applovin minting operators spending six figures a day, and TikTok-first brands doing $12M months on skeleton crews. The conversation covers why dropshipping from China is nowhere near dead, how Quince is building the AWS of ecommerce logistics, and the one thing Roman tells every founder under $100M in revenue: take out dividends, stop waiting for a buyer, and get honest about what your company is worth. Connect With Roman https://roman-khan.com/ https://x.com/RomanEcom https://www.linkedin.com/in/raisuddinkhan/ https://www.petraspark.com/ Powered By Fulfil https://9ops.co/fulfil Aftersell https://9ops.co/4i3bb5 Richpanel https://9ops.co/richpanel Northbeam Saras Analytics Postscript Operators Newsletter Chapters 00:00:00 Move To Hong Kong Now 00:06:46 Dropshipping Isnt Dead 00:13:15 Chasing Bigger Deal Sizes 00:20:42 Is This Sustainable 00:26:29 Cheap Public Targets 00:33:56 Supplements Win TikTok 00:40:01 Going All In On AppLovin 00:45:48 The AI Creative Explosion 00:52:17 Meta Vs TikTok Ad Wars 00:58:23 Inside The Quince Machine 01:05:07 Everyone Is An FBA Seller 01:11:17 Cut Costs Pay Yourself
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Roman, tell us why Hong Kong is the capital of the consumer world. Why should I sell everything and move there? I love it.
We jump straight into it. No intro, nothing. Uh, I think for e-commerce operators, I do think it's the holy grail and the mecca. I feel like 8 out of 10 people watching this pod is probably making some shit in China or close to China. And nothing beats being close to your supply chain. Number one. Number two, I just think Hong Kong is such a livable city compared to most other cities. You have incredible beaches, insane nature, really good international schools if you have young kids, and amazing childcare. Yeah, it's just very, very good. Every time I come to America and I see my like rich friends with young families struggling, I'm just like, oh my God, like I have people with half your income living like kings in Hong Kong, right? Like, so I think that's my sales pitch. You should totally move to Hong Kong.
What I'm really interested in is you just threw a big event in Hong Kong, hundreds of brands showed up, billions of GMV. And I think you're right that if you're making stuff in China, like Hong Kong, people speak English, it's very livable, it's very safe, and you are 20 minutes from your supplier and not 20 hours. So I think it makes a ton of sense. But I want to hear what's been going on in your world. You're buying brands, you're selling brands, what's new? What does Roman want to talk about?
Yeah, quick context. I used to buy brands for a living and then I grew them and then I sold a couple of them, DTC brands. I paused that late 2024. So 3 years ago, I started hosting big e-commerce summits around the Canton Fair. So maybe people don't know what the Canton Fair is. It's a biannual trade show in Guangzhou. where factories come together across multiple categories. It's so big that there's 3 phases to the Canton Fair and all of my mentees from Enterpass or my friends would pass through Hong Kong on the way to Guangzhou because the direct flights to Hong Kong are so great from, to Hong Kong. So I started hosting this event 3 years ago trying to find acquisition targets. That's how it all came about. And by the end of the first event, I was just like, you know what, this is really fun throwing a party in my hometown. And it just became a thing. So I paused buying companies in 2024. I've been hosting these nonstop since post-COVID. And it's just become a thing where it's a party for myself and my friends in Hong Kong. So we get together for 3 days. I just had one last month where we had 65 e-commerce operators show up. maybe 20 non-e-commerce operators. We had like Ali Abdaal and Izzy, the YouTube influencers, and then we had a bunch of like private equities show up and we had a 3-day summit where we just kind of ran through workshops, enjoyed Hong Kong. We rented a huge boat, took it out on the water and just had a good time.
What are you hoping to get out of this, Roman? It's like when you, like you're going through all the work to bring all these people together, you're no longer buying companies. So it's fun. I hear that. But the content seems pretty awesome. So like what's the plan for you?
Yeah, I'm hosting another one in October. Actually, I should do the plug right now because probably by the time people watch this, I'll have a URL on peak21.io. So go check it out, sign up for the summit. What I get out of it is like an incredible network. So for me, every time I come to New York or San Francisco, I always leave super inspired. And I want the same impact in Hong Kong. For me, change starts at home. So I wanna have a real impact on my hometown, like Hong Kong. That's actually the primary driver for me right now. But the second thing is like, I just learned a shit ton. So the average revenue among the participants was $72 million US. All of them were bootstrapped except for one, like Suri, this toothbrush company, maybe 2, 2 were not bootstrapped. The rest were bootstrapped. The average age of a business was 4 years. The average person attending was like 27. So it's just an incredible group of people, exceptional operators who are really in the weeds of things. So I just learned a ton. So like, you know, we can go through the agenda and who we had come talk. Like, so I had Steve Chen speak. He's in my chapter in YPO. He's the founder of YouTube, like in the PayPal Mafia. So he was one of the keynotes. It's pretty incredible. He lives in Hong Kong. So incredible opening event talking about how it was working with Elon, the early days of YouTube, how the acquisition came about, post-acquisition at Google. But then we had a bunch of other really cool people attend. So we had like probably 3 of the top advertisers on AppLovin. So we had like one guy called Tom Sagi. I'm not sure if he's comfortable talking about what his brand is, but he's spending, you know, $100 grand a day on AppLovin. He was talking about how he was able to unlock that scale. We had Paul, who I know everyone knows from Twitter for Moringa Rosabella. He was talking about how he scaled to $180 million in year 2. So we just had a great group of people get together and share how they've grown their brands. And the playbook is so different than when the 3 of us grew our brands. And I just find that very fascinating. So I think there are 2 order of events. One, I want to have an impact on Hong Kong. I learned a ton just being in the room.
Could you unpack some of the, like, if you're willing, like, what are some of the things you learned from this? Because I saw some of your posts on X afterwards and I'm like, there's clearly some alpha that came out of this room.
There was something, it was really interesting. Let me actually pull up what I posted about it because I think number one was just like, which is very obvious, right? But like Meta is so back. I feel like the numbers, I'm pumping this year on Meta. Last year was horrible. Like the year before was even worse. But this year in the last 12 months has just been an incredible ride on Meta. And the punchline, I think overarching punchline is that partnership ads and what under Meta is doing, whatever they're cooking at Meta is working really, really well. So it's a combination of those things that I would say is huge. I think what's surfacing now As a second order effect, I think is everyone has seen what Comfort has done and Hudson has done with TikTok and the discourse in affiliate funnels. I think instead of getting like a high level understanding of it during the event, we went very deep and truly understood what it takes to be TikTok first. So we had like a handful of TikTok brands and attribution on TikTok sucks. The ad product is not that great, but it's the best platform for impressions. And that was really proven at the event. So I think like me and the team at my companies at least have really slept on TikTok and that's now become a high priority for us. And that's been a very high impact, very high leverage work stream for us coming out of that event. The third thing is just like how alive dropshipping is. Dropshipping is just like, we thought the removal of Section 321 would kill dropshipping. That has not been the case. People are dropshipping large volumes from China. I don't know, like, you know, I do everything by the book. So, you know, my margins are, you know, everyone who's not American and who's out in Asia or in Europe or in Dubai, like there's so many kids from Dubai, right? Like, They moved to Dubai, they live there for the low taxes. We had some kids from Panama. It's such a fun group. They're all dropshipping with these like under the belly service providers from China into the US. Fun fact is like the 3 or 4 biggest providers in China, I just tweeted about it because like I'm an advisor at Quinn's Logistics, right? So I started going a little, a level deeper on like how much is being dropshipped. So among the 3 top providers, I'd say like UniExpress, the 4PXs of the world, there's more than a million parcels coming to the US every day, you know, every single day. So that was like another very big takeaway.
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Yeah, I think it's a great question. I think number one, I felt like I was spread too thin. Number two, I got really scared with the evolution of AI. I just thought like, okay, things are going to change really dramatically the coming year. I should pause and think about whether or not buying versus incubating is a more efficient strategy. I actually think incubating now, like I think the terminal value for some of my brands actually went to zero. with AI. Like if I extrapolate and take a 10-year view, I think a lot of the things we had in the piper and the M&A pipeline were just so weak from a brand equity standpoint. 3 is like I had a lot of success with the public markets, like with, you know, whether it was AppLovin or what I did with Prenetics, getting in early on like iMate. So I just thought, let me just pause slow down a little bit and try to see where I can generate the most alpha. I'm still looking at brands. I bought one in 2024. I think I told you both about the brand, like June 2024, about this brand that does just shy of $30 million in revenue, $3 million of EBITDA. There's a clear roadmap to getting to $10 million of EBITDA. It's going to be a great acquisition, but I think I need to aim much bigger and higher and try to buy something that's north of $75 million. So I think it was a confluence of many things. And I think I was focused on way too small companies and my pipeline was filled with like sub-$50 million companies. I think I'm now trying to build a pipeline of $50 to $100 million pipeline revenue companies, and that's a lot more interesting. So I paused and slowed down, but I'm probably gonna resume it at one point.
Let's, so let's really unpack your thesis, right? So from 2020 to 2024, the idea was you were going to buy e-commerce brands, you were gonna find founder-led brands or slightly distressed brands or something, and you're gonna get them at, you know, a fair market value, but nothing crazy like PE was offering in 2021. You weren't paying 10 or 15 or 30x EBITDA or whatever these companies were paying. And you made a handful acquisitions, I would say, you know, north of 10 or whatever, right? You rolled all these brands in and that was the whole thesis behind Peak 21. And so starting in 2024, what did you start to see that'd be like, that really, you said something very interesting there. Terminal value went to zero because of AI.
Yeah.
What did you see that made you think, oh, these brands are bad assets?
I think I started being more active in Mentor Pass. I did the events and I just saw these young kids spin up brands getting to like $10 million in monthly revenue in no time. You know, the stories of Paul and like Tom Sagi and all these kids. So I just thought, okay, these guys can ramp up so much quicker than any of the 3 of us have ever done because of AI. So it made me think more carefully and more conservatively about the businesses I was looking at acquiring because of just seeing this ramp up of these new brands, which were really AI first, I'd say. It was also the trade war. Let's not forget that, like tariffs and duties was just ramped up like fucking crazy. There was a lot of stuff going on, right? Like late 2024, early 2025, right? Like, so I think it was a confluence of many things that just made me pause, to be honest. I was just like, you know what, my existing brands are in such a great position now. It's a very clear likelihood that I can add 9 figures of revenue annually if I just focus on what I have organically with my existing portfolio of brands, right? Like, so it was a mix of many things.
Roman, do you think that, like, it sounds to me that it's sort of like a pause and evaluate size of bet for you. So like, some of the success you had both privately, then public markets. Do you suspect going forward that that's going to be something you have to actually do, is, is, I guess, like regularly look and say like, am I actually, uh, making a bet that's per like, uh, reasonable for the size of my like worth or sort of company size now? Like at some point, are you basically, are you thinking I'm gonna have to buy like $100 to $500 million revenue companies, otherwise it's just not worth my time? Yeah, I think it's, it's hard, right?
Like I feel like I'm It was really fantastic, right? Like my genesis story was I started Linear, got a lot of street cred because we maybe raised $2 million on Kickstarter. Ray Li, right? Like at this Raycon office reached out to me when Raycon was doing $100 a day selling e-bikes online, right? Like it was just like, I think of myself as an honorary co-founder. It's like 100% sweat equity. I own as much of this business as a co-founder, right? Like, so, you know, it's a startup. Nutrition Kitchen was like $1.5 million in revenue when I bought into it. And then we scaled it to $20 million. So there was, these were tiny companies when I bought into them, right? Like with my balance sheet. I think to answer your question, Matt, it needs to make a lot of financial sense for me. So let's take this company I bought in June 2024. I think personally, maybe I'll make like, let's say we take it from $3 million EBITDA to $10 million EBITDA and we sell it for $100 million. I'll probably make, after paying back my investors, because I had LPs funding the acquisition of that business, maybe I'll make $30 or $40 million over a 5, 6-year period. That's like the bull case. That's amazing. And I don't wanna sound out of touch and like arrogant, but like it's just not enough for me to want to replicate again within subsequent 1 or 2 acquisitions. I think I can take the same time, effort, and energy and just go bigger. The problem is like you start rubbing against like people like the guy who came to my event was Chris North. He runs all of Primera in Hong Kong, like in Hong Kong and Greater China, like Asia. He has a $17 billion fund and he buys businesses that— he bought Dr. Martens, took it public. He bought Reformation. He's bought a bunch of shit, right? Like that does like crazy amounts of revenue. So I think like for me, buying something that's between $100 to $300 million of revenue, I'll start rubbing against people like Chris who might leave Primera and like go down and like wanting to launch his own fund. And I think like what I'm spending a lot of time on now is like soul searching and trying to understand where do I actually have an unfair advantage and where can I actually create crazy value as a solo shareholder to some extent. And I think I got very jaded because I did like, the AppLovin investment, I did Prenetics, and Prenetics meaning IM8 really early on. I just saw like, okay, there's a whole new universe here where I can do public markets. And there are many, many other ways to play this game, to put it that way. So yeah, I'm doing some soul searching.
Yeah. So the transition from Private equity, buying brands, putting leverage on them, growing EBITDA, and then selling it to somebody else. Now it kind of sounds like you're a hedge fund. You're going to do that. You're going to create brands. You're going to do public market investing. And I think the past couple of years have been so unique in public market investing because there are asymmetric upsides. Like you brought up 2 great names. We watched all the semis and all the memory stocks. Literally 15x in the public markets. And like, why waste your time with things that are locked up, things that have debt, things you have to operate when there's 15x opportunities in the public markets? So that makes it, that makes a ton of sense. But let's talk about this, this what happened 2024, 2025. You're buying brands, you're making offers, you have companies that are doing $3 million in EBITDA that they want $10 or $12 or $15 million for. And then you get a call from a kid. who's just launched on TikTok and he's gonna do $15 million that month basically, right? And you're—
Exactly, exactly.
And you're like, what am I doing? Like why, why are you—
That's exactly what happened. That's exactly what happened. The June acquisition, I forked out 8 figures, low 8 figures for that business, right? Like I've wired the guy like $9 million on closing. I had another seller financing note of something and I bought the business, right? But then I started getting these calls on MentorPass of kids who are doing like, I'm gonna produce $12 million of EBITDA this year. Like, and you know, the guy barely has his diapers on, you know, probably this guy's listening to it, but I'm just like, yo, listen guy, like you barely know how to put on your pants and you're just crushing it. So yeah, that's what happened basically.
'Cause you said they're AI first and I'm gonna push back on that. I don't know if they're AI first, but they're definitely, Small teams, highly leveraged when it comes to, you know, new tools. And then they're TikTok creator first, right? These people are just way better creative and launching stuff.
Yeah, correct.
But do you think AI is a big part of it?
They were not AI first when I talked to them. So it's like, I'm mixing up the timeline. At the time, they were really TikTok first. Now it's like, okay, we have an army of like 100 fake AI influencers promoting my products on TikTok or on IG Reels. But they were very lean, right? Like zero OpEx, fully remote with like people in Pakistan, India, and Bangladesh and Philippines. Now I'm seeing somewhat AI-first brands. You know, we had a bunch of them at the summit. Like all the creatives are made with AI, all the workflows are somewhat automated with AI. They barely have any North American or Western European employees anymore because They have a lot of the hard heavy lifting stuff done with AI, I'd say, you know, procurement, obviously customer service, a lot of that stuff. So they can hire more junior, less affluent heads of ops and heads of finance. But like trendline-wise, I feel like these businesses are just getting leaner and leaner.
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No.
Over time?
No.
Or are they just like, uh, it's just great arbitrage in the moment? But they're not like, are they largely not building anything sustainable?
They're not building anything sustainable and they know that. They're very intellectually honest about it, but like it's free cash flow and enterprise value and they're just maximizing free cash flow. But like the biggest mentee I have did $25 million of EBITDA last year, you know, and it's real. Like I have access to the management accounts. I'm like coaching them on like how to read management accounts. how to hold their head of finance accountable. It's not like fake. I'm like in their dashboards and stuff. It's real. And it's like, do you need an exit if you're making $25 million a year? Not really, right? Like, you're not even 30 years old, right? Like, so I think they're not building anything of value, but they're capturing all the value upfront, right? Like, it's, that's what's happening.
How are these companies getting to that scale so fast while still capturing cash? Because like we talk about this all the time, like, Shawn, these companies, like product companies are notorious for just eating cash, especially if they grow fast, like inventory just crushes you. Is this the dropship story or is this something else?
This is the dropship story. So the classic setup would be that they have a sourcing agent in China. That sourcing agent will maybe float them. Let's like, I'd say 3 out of 4 cases, the sourcing agent will find the product, have a really nice padding on the product, be a local Chinese person, go to the factory, source the product for them, take care of all procurement, but then take the personal liability risk of floating the payment terms to the dropshipper. The dropshipper will then scale up TikTok affiliates, Facebook ads, AppLovin ads, whatever it is, and then they'll dropship the product from China directly to the consumer in the US. And that's a classic setup. So they never run into the working capital constraints that we have because we do like ODM products that are really unique to our brands with like our logo stamped on it in a really unique way. So they iterate from 0 to 5 million with like very generic products, then maybe start stamping them once they have product market fit, but they're not doing anything breakthrough. And they have a really incredible working capital setup, frankly speaking. Obviously at one point when they scale to 9 figures, which very few of them do, but when they do, They start parking that cash in inventory. But the genesis is, it is a dropshipping story, Matt.
All of us have built all of our equity in the value of having a business that could be sold, right? Like Rich has some value, all, you know, you know, uh, Raycon has some value. Matt has sold brands and it is a phenomenon where like our brands are valuable because they've been around for 10 years or 20 years. Exactly.
Exactly.
And they've, and they've done, you know, $100 million a year with $10 million EBITDA or whatever, someone— so we expect someone to pay, you know, 10x on that. But then if someone can do the same revenue in 12 hours, basically out of nowhere, it like, it does lower the value of brands, right? And it just—
It does. You have to be intellectually honest about it. Like, it does lower the value of original rate of return. And like, if you don't have recurring revenue, like if you're not like an iMate, like pure subscription groans kind of thing, and you are like fully discretionary spend category, like a wallet or AirPods or whatever, it does lower the value. It does. It does.
Is, does it not all, it's at the same time, it's like, is there also not an opposing force where it does raise the value of a brand? So like, if you are willing to go build that kind of company, because the ceiling is so much higher, can you not argue that the, they are worth more now? Because of this other play?
Only if you're willing to pass through the filters. It's like, look, yeah, Groon's, like Groon's has, you know, subscription. Also, it grew faster than anybody with less capital than anybody. Like Groon's did $300 million before they sold in one annual year. So it's like, yeah, it's incredibly valuable, but also they have the best growth story, right? And what really sucks if you're a slow-growing brand, who has low EBITDA and has been around for a long time, because that's when you get taken off the board.
That's the ocean of my M&A pipeline, right? Like, so we, like, let's be like, let's be super intellectually honest about it. I'm not gonna pretend my brands are any sexier. Let's be real. Like, I have double-digit EBITDA margins, but I'm not growing at like 300% a year. I'm not, I'm not a Grunz. Like, you know, like, you know, if I was a Grunz, I'd be flying from SF to New York in a private jet, right? Like, I'm just not there, right? Let's be real. But like, like the, the, that, that was my M&A pipeline going into this, right? Like, so yeah, it, I think it poses the question of like, how do you underwrite these things? How do you think about them? Who do you, who would I sell these brands to 3, 4 years down the line? And I think I just had to refocus.
Do you guys on this then, like Roman, are you saying, to my understanding, it's right, like you're both saying that Sort of like the traditional path to building a consumer brand is largely going to be replaced by this new crop of, of like how you do business. Like you stand up, it's more dropship direct from manufacturer. It's basically an arbitrage play. The brand actually has no value. Like, so brand equity as a value driver isn't a thing. And that really the only people who get to go play that game are gonna be like maybe certain categories. They need to have like other characteristics like growth rate, like subscription, like quality of revenue. Like, is that what I'm hearing from both of you? Like—
No, I think what I think is gonna happen is it's matured so much. So think about, you know, when I started Linear, it's 2013, like I'm a dinosaur in this industry, right? Like, so back then there was no AliExpress, there was no AliExpress plugin to Shopify where I could click a button and be live, never meet my supplier and drop ship some shit from China directly to the consumer in the US. We, the 3 of us built this industry. This is why this plugin exists because we built so much GMB and created an ecosystem on Shopify, AliExpress, and all this stuff. So I think what's happening is that it's just, there's just going to be a lot more noise. And I like Sean's word filter. Like it's just going to be very hard for an acquirer to filter down to like, what is the core value of Ridge and Raycon and Pela? It's very easy with these 3 brands because we've been around for so long and, you know, Raycon has like 5 million plus customers, you know, like it's a huge brand. So bad example, but like if you have like something a third of the size, it's really hard to justify buying it. You have to be 9 figures or bigger to merit like even being in the selection filter, in my opinion. And that's why I want to go up in size. I think what would be really interesting is actually talking about public companies that I passed on. Like, so, you know, I did Predictix with iMate, but like if you go through the swath of like public companies I looked at, we can just take a couple of examples. Like look at pets, for example. I just tweeted about them, 1-800-PETS.com. They sell like pharmaceutical for pets. I think they do $200 million a year. Don't quote me on this. 86% of that revenue or something I think is subscription revenue. They sell like pharmaceuticals for dogs. Market cap is $35 million or $40 million or something like that. Yeah, it's like nothing. Maybe with debt on the book, like maybe the EV is like 50 or something. Don't quote me on this, but like it's tiny, right? In the pet industry with like probably single-digit EBITDA and millions of dollars of EBITDA potential in the short term. It's like that, you can buy something like that, right? With $50 million, let's say you have to pay $75 million for that. Another DTC company that's publicly listed that no one talks about, I don't know why people don't talk about it on X, is like Brilliant Earth. It's a jewelry company that's huge, has like 50+ stores in the US, $120 million market cap. They have $60 million of cash on their balance sheet, no debt. EBITDA of probably $10, $15 million and $400 million of revenue. So you can buy a company like that for $60 million, right? Like obviously you have to pay more if you were to try to take it private, but you get what I'm getting at, right? Like, so I have a number of these examples that we can go down through the list of, but when you're seeing that in the public markets, it almost makes more sense to buy one of these in the public markets and take them private. or do what I did with IM8, like Predictix, like buy a part of it, let it be listed, then go around and buy these private companies at higher multiples. Like it's, we're in a really weird space now for DTC multiples, in my opinion, very, very strange place.
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Let's use the Brilliant Earth example because if they have $60 million in cash, they're worth $120 million. That means the effective multiple on that EBITDA is 4 or 5 or whatever. For a public company, company that you can sell into and sell out of whenever you want, right? As long as the market's open, you can always execute that position. And what you're describing is the bid-ask spread, right? So what, you know, I just talked to a top banker. So, you know, there's like 4 or 5 really strong mid-market banks, right? So there's Jefferies, there's Raymond James, there's Moelis. I won't tell you which one, but I talked to one of them and they said 75% of deals that have gone out in the past 12 to 18 months have not got a single bid. Okay? So think, if you think about that, that's people who went out, that means they have a banker, that means they did a book, that means they did all of this work and they went out and did roadshows and 75% didn't even get a bid. Right? And it's because what they're asking is they have 2021 or they want 10x multiples on their EBITDA and the growth is only 15 or 20% or whatever. And people don't want to buy that because there's public opportunities that are so much stronger or different industries are ripping. You could have bought Micron stock and it's up 15x or whatever, right? My business isn't up 15x in 18 months. It's just not like I'm lucky. I'm lucky if I double in 15 months, right? So yeah, it is, it is a crazy time. It makes sense why you wanted to pivot outside of buying brands. But then you said you might incubate brands. Have you started that process?
Yeah, so I think like, I am incubating to experiment. So my brands, suck for the TikTok funnel because I'm not solving a pain point, right? Like some of these brands—
I love the honesty.
Yeah, some of these brands like show like a cure for cancer, right? Like they're just like, well, they'll be like, take this like orange pill and like I'll get rid of your cancer. I can't do that. I have too much ethics to do something like that. But I don't think my brands are the best laboratory to learn and to actually really hone in on the TikTok funnel. So obviously we're doing it with Raycon, we're gonna do it with Linear, but I just don't think it's gonna be an astronomical success. So I'm incubating predominantly to just hone in and learn the skill and to understand the platform as an operator. So yes, I am incubating 1 or 2 supplements brands just to test the funnel and to like really wrap my head around how you build a TikTok-first brand because I genuinely intellectually just want to replicate the success of my mentees and understand it. It's not even FOMO-driven, it's just existential. I really need to learn it because if I'm going to be in e-com until I die, I can't just not have this in my toolkit, right? Like, so I want to learn it.
So, Robin, you and me are 2 brothers from different mothers, man, because we both have horrible categories for TikTok Shop and what Hudson is talking about. Maybe for the audience, explain Explain why Raycon sucks, Ridge sucks, and why supplements are so good. Like, what, what, why is everyone making a fortune selling supplements right now?
Yeah, first of all, with supplements, I think on TikTok, what I'm seeing from all the portfolio mentee companies is like, okay, the female audience on TikTok is really, really strong. So let me just start with that. Ridge is very male. Raycon is also predominantly male, very future-driven and very commoditized red ocean type of product. The reason supplements are ripping or even forget supplements, like QVC is ripping on TikTok is because they're selling solutions. They're selling solutions for problems that appear in the everyday. So supplements obviously is ripping because you're curing bloating, you're curing testosterone, like what Zach is doing, or you're curing all these problems that are really, your willingness to pay and try is very, very high. And that works really well on a platform where you have to lead with an impression-based marketing effort. And it's a thumb stopper if you have a problem. But if you're being like, hey, buy this shiny gold wallet or these earbuds, that's just not a thumb stopper on TikTok.
How do you explain comfort and Crocs and Portland Leather and like, whether they're not, they're not problem solution products and they are, but is it just because they're so female forward and like price point?
I think so. I think it's female and price positioning and the value anchoring, the offer anchoring, right? Like, so comfort, I think, is like an outlier in all senses. So like, it's just like Hudson is a genius, incredible operator. You know, it's crazy. He came to me, he was in my M&A funnel really early on and like I passed on Hudson. Can you believe that? That's like the Anthropic of D2C, you know? It's like, What did I do? Like, I passed on Hudson. He got introduced to me by Davey Fogarty. I haven't talked to him since actually. It's crazy. I was like, bro, like you're exploding with this hoodie brand. What are we talking about here? I can't do it. So I'm so glad I was wrong. Like, I'm like, this is like Hall of Fame. I should actually print out that email chain and just hang it up in my office at the M&A. Like, this is what happens when you're 40 years old and you build up way too much bias and I should fire myself. But yeah, so like Hudson is just like anomaly. So I think like Portland and Crocs are good examples. Female, super female, super strong brand equity, right? Like they're taking brand equity from built on Meta and transposing it into TikTok too. But it's really rare to find something like a Raycon or Ridge crushing it on TikTok, right? Like it's just hard, frankly speaking.
Hey, I'm doing about $200,000, $300,000 a month right now on TikTok, bro.
I'm doing the same too on Raycon, but that's like, I mean, compared to my Meta They're doing that per day. They're doing it per day, right? Like, so I'm just like, we still suck, Sean. I hate to break it to you.
Every time Sean posts a screenshot, I'm like, what's Hudson thinking right now?
Hey, I'm trying, dude. I'm Gen Z too. Okay, so I think it's really interesting. And I, and let's look, so going back to 2024, 2025, you brought up something else at the beginning of the show that Meta was bad and now you think Meta's back. So now let's talk. 2026, the opportunities you're seeing. We're going to end this show talking about logistics, dropshipping, all the new cool stuff you're doing. But what's working for you right now in 2026? Because I'm having a great year too, but I talk to people and they say that it sucks and it's horrible out there. So maybe, you know, help everybody out there. What's working with Meta right now and overall what's working outside of this TikTok method?
I think, you know, Meta sucked for us too, like massively in 2024, 2025. And what I see as a common thread for the people it sucks for is that they're still leaning on their hero products from that era, post-COVID era or COVID era, and they haven't launched enough new products. So I'd say like 60% of my success in these brands that are crushing on Meta is because we're launching new products and bringing newness to our audience on Meta. That's very similar to the core offering we had in 2022 to 2023. it for. So that's number one. Number 2 is partnership ads. When I talk to my mentees who have experience on Meta and I ask them, how much of your account is running on partnership ads? The answer is usually sub-5%. My accounts are running at 60%. Like anyone can go into my ad library, right? You can go into my linear ad library. We're running maybe 500 ads now during a sale, we're running 1,000 ads. So we're not like huge on Meta. We're not like—
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like iMade or Comfort or any of these big brands, but we're, we have a decent amount of ad diversity. Half of those ads are partnership ads. 60%, I'd say, of that spend is going towards partnership ads. So I think what's happening, if you take 2, 3 steps back, this is a thesis I have, is that Meta knows that the feed is going to be filled with AI slop. So when you launch a partnership ad, with someone with an IG account that's more than 10 years old, right? Like, you know, it's a legit person, has 100K followers, is super active, super trusted. You get 2 things. One, Meta will prioritize it in the auction because it's authentic, it's real, it's validated. Number 2 is you bridge the trust gap because it's like an influencer shilling your product instead of like a random UGC creator. So I think The biggest lever I have, the biggest message I have to founders is like, okay, maybe your product has gone stale and you have to do something new. I think like Moïse did it really well back in the days with Native. Like he would launch new scents, he would do all these things to just bring newness to Native, like a deodorant stick. I think you need to bring newness to your product. But number 2 is like just run a fuck ton of partnership ads with real Instagram accounts, with real followers and just spend on it.
Can you then go into like, uh, contrast that with your comment on AppLovin and how you're seeing people spend 6 figures a day there? Because I think that I just want to understand like the landscape. We've talked TikTok shops and like the whole Hudson thing, and then now it's like Meta partnership ads. Even at the Performance Summit this year, it was like they just basically drill that into your head when you get there. And then you're saying there's people who are spending 6 figures on AppLovin. Like, is there a common thread here? Like, or is it just a completely different playbook over there too?
Yeah.
So I think I'm spending like 5 to 7% of my budgets on AppLovin. I'm not even that big of a spender. It's pretty crazy. I mean, it's meaningful for us, but like, as a percentage of our US spend, we're probably spending north of 10% because AppLovin doesn't work in Western Europe. We're very global. So like, In the US, we're spending more than 10%, but it's not like 20%, right? So the main takeaway for us from the summit was we had Tom Sagi talk about how he ramped up to $300K a day during Q4, right? Like it's crazy, like crazy. And the punchline I came up with was, He has no sunk costs. So when he spun up his brand, it was, it's like 2 years old or whatever. Like it's very fresh off the boat. He had the path of going with Meta, AppLovin, TikTok, yada, yada, yada. And he just happened to make AppLovin work first and just doubled down on that channel. And I think for us, like at Raycon, at Linear, AppLovin still today is a little bit of an afterthought. We create the creatives for Meta and then we upload them on AppLovin hoping they're gonna work. It's like this, right?
Yeah.
And that approach works if you want to have it be 10% of your spend. But if you want it to be 90% of your spend, like some of these kids were like 90%, like we had 3 people in there spending 6 figures a day on AppLovin, which is really meaningful, really material. And you have to be like, I'm obsessing about AppLovin. I'm obsessing about the end cards. I'm like going all deep. Like the end cards were interactive, like gamified. Like they were just like all in on—
Yeah.
on AppLovin. So I think that was the biggest takeaway, like no sunk cost, AppLovin first.
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Do you guys have brands that, you know, that do each platform, like, except like top 1% on each platform?
I know one brand. Um, I know one brand that does it.
How? Like, I've wondered this, like, you know, uh, Roman, I guess a good comp for me is like, we've never made Amazon work, but we've put, like, if I look at it, it's like we've made Amazon work to the level that we've obsessed over it and invested in it. Which has been like an afterthought, if I'm being truly honest. I've never really chased it in any brand. And I'm like, I'm so default a meta guy that that's where I spend all my time. And I'm just wondering, like, has anybody mastered— has anybody figured out, like, is it feels hard to hire, like hire a person who's gonna obsess at that level over AppLovin or TikTok?
I think it's, There's one guy I know that's made both channels work, like where it's like equally weighted, I would say like maybe 40% Meta, 40% AppLovin, 20% random stuff. But beyond that, I actually don't know anyone. That was the other takeaway from the event. It was very binary. So everyone is spending like 5 to 10% on AppLovin. Like everyone is in my camp of spend, but then there were these outliers, like these 3 kids that are spending like 6 figures a day. So it seems very binary, maybe because the platform is new, because people are acclimating to end cards and all these things. I think that's going to change over time personally, but I don't actually know that many people in that bucket, Matt.
Well, I think every brand just has strengths, right? Like if it's channel from a sales perspective or a spend perspective, like I don't do wholesale well, I suck at wholesale, like cannot get it to work. We have a whole team spending time and effort on it, but then you have somebody like Mike who crushes at it. Right? Like we are D2C, we are Amazon, we are Meta, and we're in the 5 to 7% camp on AppLovin and TikTok like everybody else. Matt, you had a point you wanted to hit?
Yeah, I got a few actually. I think I wanna come back to on this sort of like making these platforms work. Like Roman, you start, one of the things you said earlier is like you're noticing that some of these newer generation of brands are also like AI first in their Not just the company building, but it almost sounds like there's an AI creative trend that you guys saw at this event. And I'd love to just like, where is that working? Number one. So like, is that on all platforms? Is that what you heard? Or is that more concentrated in like Meta or AppLovin or TikTok?
It's just such an—
it's a fascinating topic for me.
There were 2 kids at the at the event. They went from $1 million to $7 million a month purely on the back of just scaling up AI creatives. So there's 2 levers. One, they launched a bunch of new products and they brought them to market with an automated AI flow. So they would have a sourcing office in China. China would like take, you know, a picture of the product against generic white background. They would then have an AI workflow render it, turn it into PDP on their site, then turn it to create ads with that picture and then run ads automatically. The workflow was like literally like, okay, generic white e-commerce pictures coming from China all the way to PDP to the ad account, all Meta first. So I can't answer your question on where it's leaning into, whether it's TikTok, Apple, or Meta, but this is like the best prime example I got from the event and they were showing us the workflow at the event, which was really eye-opening to me. So that's becoming more and more of the standard. It's very hard to implement at Raycom just because of the size of the product, very hard to implement at Linear, somewhat easier to implement at like the other companies I have, but we're nowhere near, like if you look at my ad accounts, 5% of my creatives are enhanced with AI, you know, and maybe 15 to 20% of my working ads are pure AI and they're predominantly statics. They're not even video. But that's, that's becoming more and more this trend. So this brand in particular, 90% of their ads were AI created.
I'm actually more interested in what you said about how OpEx is lowered, right? And we've seen OpEx go from 15%. And, you know, you brought up Reformation. They were probably at 25% of revenue going to OpEx. And then we watched it go down to 10, then we watched it go down to 8. And what do you think best in class for 2027 is going to look like? Yeah.
Good question. That's what I'm asking myself too. Like, what is best-in-class OpEx on a move-forward basis? I think it's gonna be sub-5%, personally. I think it's gonna be sub-5%. You want to cut as deep as you can and spend as much as you can on paid marketing. I think it's gonna be sub-5% at like $100 million of revenue per year.
Right, because creative costs go to near zero. Right. You know, people cost, you're gonna have 5 people running these entire companies, but what are, are there softwares you're getting value out of or is it just cut everything, put every single dollar into Meta because that's what, or, or TikTok or Apple, 'cause that's what drives people? Like, is it just burn all the bridges, go all in on paid ads? I'm just curious how radical the future is.
I, I, I do think it is like burn all bridges and go all in on paid ads. Unfortunately, I wish I had the better answer, but I think it is that simple. I think it is really like how lean can you go and how much can you spend against LTV? I think it's, it's, it's, it's, that's what it's gonna come down to, to win the race. And then I think evolution. So we went to Casetify's office during this event, right? Like, so for context, Casetify, this is this behemoth of a phone case company, behemoth, like Hexclad big, right? Like maybe bigger, to be honest. And it was so inspiring because Wes has like OCD. Like he's like an incredible, like Steve Jobs type. Like everything is just like, the office is just like insane. We have videos of it itself. Like it's just like, it's crazy. So we went to his office and the topic was how to scale retail. So he's gone from 0 to more than 70 physical stores globally, and they're murdering with their stores. So I think if you can get to 9 figures in revenue on your .com, step number 2 to really be AI-proof and to build a brand is to go offline and open retail stores. That's my—
Or go into retail.
Yeah, or go into retail wholesale or yeah, exactly. Either wholesale or if you're in, you know, non-discretionary, like if you're in like non-essentials, you probably have to open your own stores to really build a brand with a moat.
It's like we're entering a world where it's just extremes. You know, like on one hand you've got, like, we're talking about the hollowing out of everything in a brand except for paid media, right? And the factory and everything between the factory and paid is like literally, it's all up for like just moving around and shrinking. And then on the other side, like what you're hitting on is as AI gets more prolific, offline, analog, real also becomes more important.
Exactly. I think the best example, like whenever I'm in New York, I mean, I think we all know Buck Mason. Sean, I think you introduced me to the founders of Buck Mason, right? Like, because I want to learn about retail. Yeah. I just signed my first lease for Linear actually in Hong Kong. Like, I'm really excited. I'll come back next year after we open.
Dude, jewelry is a great place to do retail. Like, they, they freaking, they work so well.
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Like Buck Mason store in SoHo. has like a coffee shop, right? Like it's like, it's an experience. It's like a living room with like this. Everyone should kind of Google Buck Mason SoHo. It's like such a cool store. You wanna go in there, hang out. I think that's the future. And I think if you really wanna evolve and kind of move forward, you have to think about that when you cross $100 million in revenue. One thing I wanna add, like, it's like, I think GMV target for Shopify in 2026 or 2027 is $600 billion. right? Like $600 billion or something. And back in the past, I'd say 30% of that would be spent on ads. I think in the future that's gonna be 40 to 45%. Like I spend 40% of my revenue on marketing. I think the average is lower because I've just seen so many companies in the M&A pipeline spend 20, 30% and rip a lot of profits. But, you know, the brand I bought in June was spending less than 10% unpaid of total revenue, right? Like at $25 million, just to give an idea. So I think the future is just, you know, that's gonna go from 30% to 40%, right? Like, so we're gonna go from like $150 billion of ad dollars on Shopify, like $120 billion maybe now on ad dollars powering Shopify stores to probably $200, $250 billion, right? Like over the next 2 years, it's gonna be dramatic, I think.
And people always say, oh, Meta should buy Shopify. That was like a common thing. But they don't have to because like half of Meta's revenue is coming from Shopify merchants anyway. It's like—
Exactly. Like for me, if you take Meta, right? Like $180 billion in revenue, 55% operating margins, right? Like it's a fucking behemoth. It's going to get to $300 billion in revenue in the next 2 to 3 years. with the higher operating margins because they're firing everyone, right? Like they're just firing, like they're doing, like what's happening in DTC is happening everywhere, right? Like, it's just like, it's like obviously they're cutting people, they're spending it on AI. At one point the CapEx is gonna stop and they're gonna like rein in on CapEx spend. We just know that, that's a truth that's just waiting to happen. And as that happens, I think players like TikTok will follow because if you think about TikTok, why does the ad product suck? I think the product sucks because they have TikTok Shop. The ad product, Spark Ads, is just optimized for like really short attribution windows and it's made the ad team at TikTok a little bit lazy on building something that replicates Meta, which is basically creating a marketplace where people bid for LTV and not short-term transactions, right? Like that's it.
And the power and beauty of Apple when it came out is it was the only company that figured out how to make as good of an ad engine as Meta. And if everyone else does that, I mean, it's a boom for e-commerce, but I do want to say—
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And what you're talking about is perfect state capitalism. It's like there's the people who make the products and then all the money goes to get the attention and everything else gets cut out. And we've all seen these VC-backed companies and we're friends with some of them who they still spend 20 to 25% of revenue on people. And I'm like, what the hell are they doing all day? I talked to a brand. This brand's not VC-backed. It's a new brand. Very, very fast growth. First year they did $20 million. Second year they did $40 million. It's a physical goods company. And I was talking to them and I'm like, yeah, so tell me about your team structure. They're like, yeah, we have 40 people. And I'm like, why? I'm like, what do they do? Like, you're doing $40 million. Why do you need 40 people? It's like they don't make the product, they don't ship the product. Like, what are you doing with all those fucking people? It could, it should really be 5 or 10 is, is the reality of the future we're going towards.
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Yeah, I, I think it's hard to argue that, that I, I, I don't think you can actually take the opposite side of what you guys are saying, right? Like, I do know some, but I know a guy, actually has probably $55 million in revenue, lots of product. So like SKU variety is pretty high. I think there's 6 employees in the whole place. Like it is really, it's like, it's a perfect example of like, and there's young dudes that have just figured out how to do things in a scrappy way. It's like very technology first. And I think Roman, what you're hitting on with the TikTok Shops Meta thing is like they both have the inverse problem of each other. So like TikTok Shops doesn't have an ad platform because they figured out how to monetize shops. Meta has never figured out commerce. Like guys, we're old enough. We've been around for every iteration of Facebook Shopping and they've all failed. But I think they fail because Facebook has like the highest revenue per user monetization ad platform in the world. It's really hard for them to turn anything else on. And outcompete that thing. So the bar is just so high for both of them to kind of cross over. I mean, it'll be interesting to see if there is an iteration of this with like maybe Instagram TikTok Shops copycat. Like maybe they figure out a dollar per user number that's higher than their ad product.
Matt, you are 100% correct. How can they build a better thing when they have the world's greatest business to ever exist? It's like, It's like, why is Google scared of AI? It's because they are— they have a crazy cash flow money machine that like finally somebody might take a slice of. Um, but okay, this was good. What's— so I'm going to summarize the episode up until now. What we talked about is you got to move to Hong Kong because that is where it's the center. It's the center of commerce. Everything's made in China. It's just the reality of the world. And you want to be as close to those factories as possible so you can negotiate better prices. You can work out any issues. You could see samples faster, and it's a very safe city. It's a very fun city. There's a lot of things going for Hong Kong. The second thing is Roman was buying a bunch of brands, and I think everything he said applies to every single private equity group. They looked around and they said, "Look, the public markets are ripping. AI is over here. Why would I tie up capital in assets that are overvalued? And why not just launch them themselves?" The third thing is we saw this new generation, this wave. Hudson is the poster boy of it, but TikTok shop-powered brands that get great creative. They put 'em over on Meta and they scale the hell out of 'em and they do $10 million in their third month. And it just, it makes us look stupid for sitting around for 20 years trying to get a brand to do $10 million a year. The fourth thing is, the fourth thing is what's working right now. He is, it's partnership ads on Meta. It is diversifying into more ad channels and is taking the UGC creative or the AI creative and scaling it up everywhere. Now let's get to the fifth part of this podcast. Roman, you are now an advisor for Quince. Everyone thinks of Quince as the place to buy nice sweaters, but they just raised $10 billion and no sweater company can be worth $10 billion. So what is actually happening inside of Quince? Why is it going to be $100 billion?
Talk about this manufacturer to consumer.
I think Quince is the poster boy of manufacturer to consumer, right? Like, so Sid, the founder, who is very reclusive and secretive, I've convinced him to come on Operators to talk to you guys. So I won't butcher his story. I'll let him tell it himself, but I've known him for probably more than 5 years, maybe 8 years. We use the same 3PL in Hong Kong. So that's how I got to know Sid. And I just saw this business go from zero to like an insane amount of billions and billions of dollars in revenue over a very short period of time. Incredible company that actually embodies the whole MTC principle. So all of their suppliers actually consign products with them. So it's like suppliers agree to be FBA sellers basically on Quince. And then Quince takes care of the rest, acquisition, fulfillment, all that stuff. And I think the business works so well because their retention curve is just next level. So they built out this like incredible capability of dropshipping their own products from India, from China to the end customer in the US using a crazy logistical setup. So they built that out. They then decide to externalize it. They asked me to be an advisor to Quince. And, uh, the value proposition is just so good that I want to use it myself for Linear and Raycon. Um, because you're able to ship a product from China to the end customer in the US at the price of a, at a fifth of the price of FedEx. So insanely cheap, um, which helps us not tie up working capital and inventory by sea freighting it to the US. unbundling it and, you know, shipping it through a 3PL. So it's faster and cheaper, and they basically just decided to externalize this capability. And I think that's the future of commerce, like just get closer and closer, cut out every middleman and all the fat between the Chinese factory and the end customer. So this service is just like insane. I've never seen something like it. I actually tweeted about our first client on Quinns Logistics, they're selling stuff to suburbia in the US, like 1,000 suburban moms every single day are ordering their product. And on average, we're delivering the product in less than 6 days door to door from China, including Sundays, right? Like, so it's super fast. The founder can now turn inventory much faster. And it's, I think it's like what all these other dropshipper providers want to build, but they just didn't have the speed to match But these guys have kind of solved it. I think even for Raycon, when we move over, it's gonna be faster because Quince flies these planes all across the US. So they'll have a plane go to the West Coast, to Chicago, to Middle America. So they just get much closer to the customer because the parcel moves like a human. So if you think about it, when I board my flight in Hong Kong at 2:00 AM, I'll land in New York the same day at 6:00 AM. And I'll just walk through immigration, right? And get to my office at 10 AM. They've basically done the same for a parcel. That's basically what they've sold. So it's just insane. And it's been fun to watch this scale up. I think just from my Twitter, we've gotten a $200 million ARR pipeline, which speaks volumes of not my following, but like how much of a product market fit they've kind of hit, right? Like it's insane. I couldn't believe it when I saw this spreadsheet. I was just like, what the fuck is this? This is insane. You know, it's just like insane.
Okay. But like this whole like thesis that you have that you posted about, which is like, we're like M2C is the future, right? Can you unpack that for people listening? 'Cause like you put this thing up on X, I think I messaged you right away. I'm like, Roman, what the fuck? And I'm like, we gotta talk. So like unpack the thesis 'cause like Quince is a good example. But like, why do you think this is going to be the future?
I think the best example is like my keynote speaker at my first event 3 years ago, Angus Kong. So people can Google him on YouTube. People should obsess about him. He's like the Hudson of China. Okay. So the guy does like crazy numbers. I don't know how much he wants me to disclose, but we're going and touring his factory and his setup.
[Sponsor Content] Okay.
In China on my summit. So if you come out in October, you can see it. So he's basically an affiliate marketer. He doesn't own the factories, but he works directly with the factories. He'll literally go in and launch 100 products per day, like 100 per day. I'm not exaggerating. Like he'll do 3,000 products per month, approximately 2,000 to 3,000 products per month, spin up landing pages, run ads, pump them. As soon as they start declining, he'll stop and move on to the next product. And they're just running the whole machinery for profits. His HR structure is really crazy, but I think that's like the actual future of commerce. You'll have like super powerful affiliate marketers partner with factories in China directly. With AI, the language barrier is much lower. Like these guys can write fluent English, they can write scripts, they can do all the stuff they use American copywriters, Westerners like myself for, and then go live and sell their products directly, dropshipping from China. Obviously you can't dropship a big piece of furniture, but like some earbuds or some jewelry or a Ridge wallet, super easy, right? Like super easy. So I think that's the future, frankly speaking. I think we're gonna see a lot more of that.
Where does brand come into this then? Do you think that the like brand builders are also gonna do this or do you think—
Maybe, but like if you think about it, like 80% of, sorry, I'm exaggerating here, but probably 60 to 65% of my consumption is like stuff like this, like this roll of paper, right? Like—
Yeah, like unbranded, who cares?
I don't even know what the brand is, right? Like, I don't care. Like, it's just a pure commodity to me. And I hate to say it, it's probably gonna be the same for like wireless earbuds and some jewelry. Like, there's gonna be like things you just buy purely for style, price, and convenience. And I think like, obviously, a lion's share of value and profits will be captured by real brands, But I think there's a whole swath of this like Amazon FBA style businesses done in a D2C way. Why have they not been done in a D2C way before? Because it's operationally complex to sell on Shopify or on .com. And I think the ability to sell on .com is gonna be as simple as an FBA listing. You're gonna have to put in minimum listings, right? And they have to have a good product, but I think D2C is going to be FBA-ized, right? Like it's just going to be like completely Amazon-like eventually.
Roman, I'm glad you brought up Amazon because this idea of externalizing a resource is Amazon. Like Amazon AWS is a $200 billion a year wing of the business that they externalized. And I've talked to senior VPs at Amazon and they're trying to externalize everything right now. So Amazon Pay is Amazon OneClick, like Amazon Logistics, they're trying to get money for. And what QUINT is doing is the advantage Temu and Shein had of going directly to vendors and then airing it into America. QUINT is like, we will let everybody do that, right? And that's why, 'cause people are like, why is QUINT worth $10 billion? It doesn't make sense. It's because they're trying to be the AWS of logistics from China to the US. So, and I think it's, I wanna pitch you guys an end state. The end state of commerce is whoever can spend the most on attention will win.
Yeah.
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And that's why OpEx is being cut. That is why, you know, you're removing warehouses, you're removing creators, you're removing everything because every dollar that goes into attention is the— whoever can do that at the end state wins. And that is the world we're in where every single dollar needs to go to marketing. And it sucks. I love my team. I'm gonna keep them. I love everything. I love, you know, building a brand and culture and vibing. But the brass tacks is capitalism is whoever gets the most attention is gonna win and whoever puts the most money into it is gonna So that's what I—
I don't think it's—
I think, Sean, it's just all you're saying is there's likely a lot more companies, but with just fewer people per company.
Right.
Uh, and that like more and more money goes into distribution.
Okay.
The world is everyone's an FBA seller. So—
Well, I was going to say, like, are we all just like, uh, running like 100 different, you know, what is the brands on FBA? It's like, if I just mashed my keyboard like a cat, that's my brand name on FBA. Like, it doesn't really matter.
I'm going to take that copy of what Sean just said. Like, it's a world where everyone is an FBA seller. It's 100%. Like, that's hitting the nail on the head. And that's actually so well distilled because that's what made me pause in 2024 is like, I could kind of, I couldn't articulate it back then, but I was like, something is profoundly changing now. I've been doing this game for third, at that point, maybe more than, definitely more than 10 years. And I was like, something has changed. This, this, this was an inflection point.
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What's your take on Shopify then, guys? Like, Roman, I know you've had some takes on this, but like, where does— and I guess like, it's maybe a different way to answer this is like, where does the dot-com value lie, right? Like, and Shopify's role in this ecosystem is pretty substantial right now.
I'm a super bull on Shopify in general as a stock. It's very expensive, right? Like it's priced on a sales ratio. It's not priced on an EBITDA ratio because people are extrapolating that at one point it's going to go to $1 trillion a year instead of $600 billion a year, $1 trillion a year in GMV, and they're going to have a lot of pricing power. I think what's at risk now is their pricing power. Like, so if they came to us today and said like, hey, your Shopify Plus is going to go from $2,000 a day to $10,000 a day, I think most of us would just suck it up and pay it. But, you know, is—
A month.
A month. Yeah, a month. Sorry. Yeah, a month. Sorry. Yeah.
Yeah.
Unfortunately a month. Yeah, exactly. So we would suck it up and pay it, right? Like, let's be intellectually honest about it. That being said, what I think is going to happen 5 years from now is you're going to have what like these kids that came and are spending on AppLovin instead of Meta is you're gonna have this potential of like just clicking one button on Medusa and, you know, have a front end fully loaded that Shopify like with an order system like Shopify. So I think they're gonna have a lot of competition coming the next 3 years. There's gonna be a Medusa, like Next Wave, whatever those platforms were that I wrote in my thread are gonna come up and really give Shopify some pricing pressure. That's my 2 cents. I do think Shopify is a little bit weak at a couple of things. Like I've been with Shopify for more, for since day one, right? With my brands, like going global on Shopify is a pain in the ass. Like it still is like localizing all that stuff is really tough. And like my brands are really global. And number 2, I think is like, it is not truly AI first, right? Like if you think about one of my mentees, that I wrote about, he's actually Norwegian of all places like myself. So he did like $45 million in TTM revenue on track to do $100 million this year. And his whole setup is, you know, Claude terminal, just like launching products in a very similar fashion like Angus, not 100 a day, he's doing like 50 to 100 a month, but he's spinning them up using Claude once they work in the US. He just has it translated into 50 different markets, spinning them out. Replicating that workflow in Shopify is extremely difficult today. So if you want to think about in the world of where everyone is an FBA seller, I don't think Shopify is the best tool right now. Would I bet against Toby and Harley? No way. We've met them both. Like, I would be like, I'll run for the hills before I do that, right? Like, I wouldn't be that dumb. But right now, if you were to ask me, I think they're at risk and they have to make some big changes to accommodate the future of e-commerce, in my opinion. Yeah.
You know, one worry I have about the future of all SaaS, all services is in 3 years with unlimited compute and unlimited tokens, if I asked Claude, hey, I wanna sell something, it would just build its version of Shopify, right? Like, you know, Dario, the founder of Anthropic's idea is that there's a country of geniuses inside of every single server rack. And if you really had 300 million PhDs, if I asked, hey, what's— make me the best-selling whatever, it would just do it and it would create entire workflows and systems and thousands of lines of code. And then that's what it would— I would just be sitting drinking a fucking smoothie or whatever.
So, um, yeah, I think, Sean, I'm with you. I think like, I I think that that's like directionally correct. I think the timeline is just way off. I mean, I think we are like decades because what Roman is saying, and which I think I agree with both of you, I just think it's like 20 or 30 years away because you're talking about connecting like everything is code, Anthropic, to factories and that everything in the middle is like not valuable because everything in the middle can be code or it can be pushed over to the factory.
Like, that's kind of where we're at.
Like, even the media buying is like, well, Facebook's got all the demand. That AI is going to talk to this, their AI, and it's going to hook up to whoever owns the factory. And that everybody that used to do all the work to facilitate all that stuff is just gone, including Shopify. I just, it is so many moving parts.
I don't know though, but because Matt, like I built, like, so, you know, for me, like right now I'm really focused on picks and shovels, right? Like, so I think my equity at Quince is going to be worth Like cities—
I think it's a great play.
Yeah, it's great. Like, so I did something where I thought about it like what Sean did, right? So at Linear, we upgraded our packaging and we've had like a huge LTV lift. So I started a packaging supplier. So I'm now selling packaging because like all my mentees need packaging. And the interface I'm building for the packaging is an AI-first interface. So you can render all yourself. I'll send you the demo link once it's ready. But then I'm taking on like first principle of e-commerce, like, okay, Sean might be— my clients are new to the game. They're new to e-commerce. Like they're kids fresh off the block and they don't understand if you shave off like 1 cm on the side, you can save a dollar with USPS, right? Like, so I think service providers are going to build things that can interact with agents. That's what I'm trying to do, at least as a thought experiment, because I think like going back to Sean's thing, The reason I think, Matt, you're extrapolating the timeline is because you're still dealing with humans on the other end. But if you start having vendors build really agentic first, I think it's going to be very, very different, right? Like, I think so, right? Like, I would work with my— if I was like a jewelry factory and it was like truly AI first, I would 100% like work with me, right? Like, so yeah, I think that's like—
Dude, totally. But you know, like, I guess my argument is always, We're a bunch of dudes and you have to discount dude logic. And because like the way that we move through the world is very different from like more emotionally intelligent beings. And like the way that we consume is very different. Like, yes, yes, I am happy to have robots buy most of my shit with like some amount of exceptions. And I am happy to not interact with any other humans. That's not true. For a lot of the other people in our species. So I just, I think it's like we have to remember there's like a lot of participants in the economy and a lot of like incentives that are competing. As much as I love this like future.
All right guys, Roman, I love the idea of starting picks and shovel businesses. Like I'm thinking about starting more manufacturers. I would love to get some equity in your packaging companies, so go ahead and just send the advisor agreement over. I'd love to get that. Okay, so we just unpacked where we think commerce is going. It is going to be more money spent on marketing. It is going to be close relationships between manufacturers and end customers. And how does a brand sit and navigate that? If you're a brand doing $10, $20, $30, $50 million a year, that's our core audience. This is gonna be a negative episode for you, but you should, like Roman has said countless times, be intellectually honest. Like, where do we think the world is going with AI, with all these kid brands? Like you, you called them 18-year-olds wearing diapers, basically like coming out and doing $20 million a month, punching you in the face. And they have different rules. It's a different game. Don't get left behind. Roman, what's the one tip you'd give to a brand owner? They're stuck, you know, they're not one of these fast-growing kids. They're doing $10, $20, $30, $40, even $50 million a year. They were praying for an exit. What's, what's the lesson you would give to them?
Cut costs and take out distributions every single month. On the 30th and 31st of the month, you send yourself a calendar invite saying dividends, and then you take half of the profits in your business and you split it out yourself. Then you ask yourself, how can I double that dividend in the next like 60, 90, 180 days, whatever your timeline is, but just start saving up money. And take it out the business and leave your ego at the doorsteps and choose lower growth for more dividends. Dividends first, always. That's my core message because I still talk to founders who are drunk sailors who think like a private equity is gonna come in and scoop them up. It's not happening anytime soon unless you're crushing it and you have recurring revenue.
So it's basically operate like your brand equity is zero.
Yes, correct.
And then all you have to get is cash out the company.
Yeah, plan for the worst, hope for the best.
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