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Get a Demo“Everyone who said I was too early, they got on my investor updates.” Can product market fit be created, or can you only position yourself to catch it? William Hicks (Co-Founder & CEO, Magic Mind) joins Mike Beckham (CEO, Simple Modern) and Matt Bertulli (CEO, Pela Case & Lomi) to unpack how a Silicon Valley spreadsheet of nootropics became a national retail brand. This episode gets into the real mechanics of product market fit at scale. Raising a seed round took dozens of rejections. Hicks kept those investor relationships warm for years afterward. From there, DTC gave way to national retail distribution. Merchandising discipline mattered more than ad spend. Subscription retention gets a breakdown too, along with the honest math behind CAC payback and lifetime value. Powered By Fulfil https://9ops.co/fulfil AppLovin https://www.9operators.com/paid-growth https://applovin.com/9operators Shoplift https://shoplift.ai/operators SARAL https://calendly.com/maxx-getsaral/operators ShipHero https://9ops.co/shiphero-titans Chapters 00:00:00 Tasting Magic Mind Max 00:03:30 Mike’s AFib Discovery 00:06:11 Defining True Product Fit 00:23:41 Why Banks Fear Consumer 00:37:58 Chasing a Seed Round 00:46:51 Why It Became a Shot 00:59:31 Cracking the Publix Code 01:10:47 Wholesale Beats Meta Ads 01:25:03 Magic Mind’s Scale Today 01:27:47 The Spreadsheet Mistake 01:33:28 Fixing the Creator Team 01:39:05 Titan 10 Rapid-Fire Questions
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Tell us what we're about to drink.
Yeah. So you're about to have Magic Mind Max. This is boosted version of our mental performance shot. So it's a daily 2-ounce shot for peak mental performance. It's got clinically backed vitamins and ingredients to give you sustained energy and a sharper mind.
All right, let's do this.
Cheers.
Max, dude, we start with the—
I'm guessing this is like an all-at-once type of deal.
All at once, let her rip. And it's going to make you feel great for about 6 hours. So, the caffeine in here is actually time-released. So, it's 165 milligrams, but you get about half of that upfront, and the second half titrates in over about 6 to 7 hours. So, you won't be—
That doesn't taste as bad as you thought. You teed up like this was going to be not great.
I was prepared for something worse than that.
No, we've actually made it taste pretty good. And, when we launched the product, it tasted a whole lot more intense. We've done a lot of good work on that over the years.
Yeah.
Do you have flavor? I'm just curious. Do you have like flavor people on the team?
We have a great flavor partner now.
Okay.
We used to work through other partners and people, but we now have a flavor house we work with.
Yeah. I don't know anything about this. We're going to, I'm, I, uh, I haven't told you this, but I come at this like very selfishly. I'm like, what do I want to know?
What do I want to learn? I'm curious.
I'm hoping other things happen to my brain. All right. Explain to me what's about to happen, like based on what I just ingested.
Yeah, sure. So like, so Acetylcholine will enhance ATP utilization in your brain. Bacopa monnieri will improve working memory and decrease impulsivity. And lion's mane mushrooms kind of works more over the long term, but it's great for cognition as well. So that's sort of the sharper mind stack. And then you got the sustained energy kind of smooth energy stack, and that's time-released caffeine from matcha. It's B vitamins, it's cordyceps mushrooms, it's rhodiola rosea, which is great for endurance. And then, you've got the whole, which is what made Magic Mind different, kind of stressless stack. So, the stress-supporting anxiolytics or adaptogens like L-theanine, ashwagandha, turmeric. Ashwagandha is shown to reduce blood cortisol by 25% over 60 days and gets better and better with time. So, the whole product is designed to improve with time and be better on day 50 than day 5.
So, is it supposed to be a habit-forming, like you should be doing this every day kind of thing? So, like stuff builds in the system?
Yeah, it's specifically built to not be habit-forming. The only thing that has any, um, you build any tolerance to is the caffeine, but it is something that we want customers to habituate to because it gets better over time.
It's not bad if you did it daily.
Yeah, sorry. It's like a healthy habit, not like a—
Yeah, yeah, yeah. Not like drugs. Right.
It's not like a line on the table habit. Yeah, yeah.
It's a different kind of habit.
Yeah. No, it's a great morning ritual to get the most out of your mind for the long term and today.
How did you decide what went in and what didn't go in? I mean, I'm sure that you had probably a billion formulations of this thing that you've gone through.
Yeah. So the whole foundational story is my co-founders and James is the true product and brand genius behind Magic Mind. I'm the 3-screen PC guy. He's an iPad and stencil iPad guy. Do we ever move? But he formulated it for himself. He was drinking 7 cups of coffee a day at a tech startup that he went through Y Combinator with, got over 100 million users to this finance app called Tilt within the first couple years, raised a bunch of money, had 50 employees, no revenue yet. So he's burning like $2 million a month and was stressed out of his mind and drinking 7 cups of coffee a day. And the caffeine compounded his stress, led to a heart condition called atrial fibrillation. And his doctor had to shock his heart back into rhythm. It was going at 170 beats a minute for like a week.
I know about this because I had AFib. I, I, so AFib is like growing up, I always knew when I got really intensely exercise. So like I ran track and I played basketball and I would get really lightheaded when I ran hard, but I didn't really think anything of it. And then in my 30s, I started going to Orangetheory, which they basically, they hook up a heart monitor. And in Orangetheory, the whole idea is that you're trying to push yourself above like a target heart rate of like 160, 170. You're trying to push yourself to like 80 or 90% of your max heart rate. And I was going in there, they have a leaderboard up, like they have a big screen. And so like—
For heart rate?
Yeah, yeah. It's like you would get these things called splats when you were above the heart rate, because for most people, it's really difficult to get your heart rate above that. And I'm just like murdering everybody in this Orange Theory. And I'm like, I'm the best at this ever. And it's like, no.
You're also about to die.
I actually have a heart defect. That's actually what it was. And so like, it was like, why am I like about to pass out all the time after this? And so I started to kind of gradually, like, I started to learn to like kind of take my pulse and feel my pulse. And I was like, okay, this I don't think is right. And it led to a lot of doctor visits and it's like, yeah, you have AFib even though you're in great health and you're 35.
Can you fix AFib?
Over time, it can kind of fix on its own if you take care of your heart the right way. And, I think James can now have a bit more caffeine. His symptoms have kind of gotten better, improved. But, at the time, he was just staring at the doctors like, okay, so can I have 3 cups of coffee? And, they're like, no, dude, less than half a cup.
So, this was born out of like, I can't have caffeine anymore.
They said, half a cup a day is your max. And he's like, what the hell? How am I going to get anything done? And they're like, well, try green tea. It's got longer-lasting effects because the L-theanine will extend your absorption. And he was like, okay, what else can I add besides L-theanine? So, he just started researching and ended up writing a book on nootropics and adaptogens and functional mushrooms and kind of became the nootropics guy in his circles in Silicon Valley to where over the course of 7 years after the book, people are coming to him asking him what to stack. And he just had this Google spreadsheet he would send around, James's Magic Potion, and had the 12 ingredients that are still in Magic Mind today at doses that are very similar to our doses today, good sources on Amazon to buy them from. And, that spreadsheet ended up all over Silicon Valley. And, a group of friends formed a co-op. They loved it so much but hated to pre-weigh and mix all the ingredients.
Yeah.
They got a commercial kitchen in San Jose to pre-make bottles for them. And, that co-op formed with 3 friends, grew to about 60 people before I got back to James. And, he was like, Holy shit. Like, I think this is product market fit before even looking for it.
It's like the most Bay Area thing I've heard. It's like a group of friends got together to make a product just for themselves.
Yeah. Just to Performance Max. That is awesome.
I do love that because I think we talk to entrepreneurs all the time, and especially when you're an aspiring entrepreneur, you just so badly want there to be product market fit. And we've probably, I don't know, in all the startups I've advised and entrepreneurs, I can't even count the number of times that somebody has tried to kind of convince me that they have product market fit when they clearly don't. And like product market fit is obvious. It's, I love the quote that product market fit is when instead of trying to push your product in the market, it's like the market is pulling the product outta you. Like in this case, it was like people wanted it so badly that they're like, they're kind of pulling it out of him and kind of creating it out of nothing. And that part of our job as entrepreneurs is to just be able to identify the times where the market is so desperately trying to pull something out and then step into that gap as opposed to trying to create that. Because interestingly, I, the more entrepreneurship I do, the harder I think it is to actually create product market fit. It's, it's a lot easier to identify.
It's a level 10 difficulty thing is to say like, I'm gonna go create a completely new category.
Which is funny because we don't talk about it like that, but like we should, like, hey, you know, what you should do as an entrepreneur is just try and identify where is product market fit already and then insert yourself there. But we tend to talk about it more like, okay, what's your idea now? How do you go create product market fit? And I'm just not convinced that most people have it.
But in this case, like for your partner to see a bunch of people doing it, it's like, that feels like product market fit. This is my thing with product market fit is it's a feeling. I don't think it's like—
You also have to recreate it at different scales. I think this was like product market fit within the like high-performing Silicon Valley, willing to tolerate kind of a gnarly taste for performance gains. But then we've had to kind of refine product market fit as we've scaled, as we reach more mass.
To grow the TAM.
Yeah, to grow the TAM and reach more mass audiences. I think that's what you were saying about how difficult it is. It's really hard to create a second winning product. And I think you see that a lot.
Oh yeah, I mean, especially in a consumable category.
Yeah, look at Peloton with the tread. It could be, there's countless examples, but there's sort of the Ridge example, just going into big categories like you said, and just try to compete there or really trying to create a new second winning hero product is challenging.
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I think what you just said, the number one downfall of most successful entrepreneurs is hubris. And I think it's easy to understand how you get to hubris because when you're in product market fit, you feel like a genius, but you're not really as smart as you think you are. It's just you're kind of in the jet stream of product market fit. And so that's where you get to the place where you're like, anything I do is destined to work because this is so easy. I must be amazing at this. And then if you keep trying to launch things, eventually you realize like, no, it's, it's actually like you feel like a genius when you're in the, the jet stream of product market fit. And when you're outside of it, it's amazing. Like you're just like everybody else, you know?
We, James and I like to talk, I mean, we're both from Dallas, but both kind of amateur wannabe surfer bros. And so, you know, the jet stream, like we'd like to think of it as riding a wave.
Yeah.
And, you know, you can, you can be on a wave, it's very smooth, you're rolling into it and it feels really good, but all of a sudden you can get some chop that comes up.
Mm-hmm.
And you gotta surf it. And sometimes you need a different board for the wave that you're riding. We've had to upgrade our board many times with Magic Minds. Um, and sometimes the wave kind of falters and you gotta find the next one and position yourself well for that. Um, but you can also help kind of create that motion, that wave. Like, I think we've, I think there's an oncoming wave of cognition and like tied to longevity in particular, but I think like cognition is a wave that's coming. Mental performance is a wave that's probably already here. And I like to think we've helped create that in a lot of ways, but we've also just really been fortunate to be positioned.
I would argue, I still think you're incredibly early. Like the performance, it's like most things are just like little tiny markets. bubbles that we exist in. But because you're in it, you think it's a lot bigger than it is.
Right.
Like, you know, I don't know how many— I look at all of my friends throughout my life, especially like childhood friends, nobody's talking about this crap. It's my founder friends that talk about this crap.
Right.
Like, it's them that are, or like my health and fitness guys, like they're really into it. But if I just go just outside of that bubble, they're not even aware that you can, that something like this exists and that it can help them.
We finally spent money on customer research recently. And, you know, we talked about nootropics for so long and it registers on like the very bottom of the list of our stack of things we can talk about. And so, you know, we intentionally talk about vitamins now 'cause there are vitamins in Magic Mind that help cognition, but that's kind of what nootropics are. But like, don't say nootropics.
And so, yeah, you need to use words that a larger market of people is actually gonna be familiar with.
Yeah. And we hope that mental performance is that, um, it, like you said, having humility is key.
Like maybe it's not, but memory is definitely that. Like memory is that you said this helps with memory. I'm like, oh dude, I, I feel that.
We had Groon's, uh, Chad, uh, was on the pod before they went through their acquisition, and he's talked about this since, but one of the things that they did that was very effective is they said, we are going to find every single possible persona that would buy our product, and we are gonna design flows for them. And so I think you have a product where there are, you know, it's kind of like all roads lead to Rome. Like there's a lot of different ways to get people, like— Even for somebody like me, The mental performance, I typically, like I just showed you my supplement stack, I have a lot of stuff I take, but I typically don't think as much about the mental performance because I don't feel it's not a felt need.
Yeah. And you should be, by the way, feeling the magic mind at this point.
I do. I mean, I feel like I've transcended a couple levels at this point. A little bit of the way narrowing the magic circle.
That's right.
We're going to solve e-commerce today, guys. That's where I'm at right now. But like, anyway, like I do think that the idea of you've got to find the lowest hanging rung to kind of introduce people to your product. product. And then that when they become aware of your product and they start taking it, then you can start to educate them on all the other things. And that's—
I think we could frankly do a better job at that. I think we're looking for one unified brand message, which I think you still need. Do you need to have—
That's so hard to do in this space though.
It is. You need to have one overlying message that you get behind as a brand. But I think the beauty of e-commerce and the ability to build dozens of funnels is to not have to do that. And I think we can do a better job at kind of leaning in. It's been a, it's been a problem for us, honestly, that we have so many things to talk about. We don't always know what to talk about.
We almost have to time release the information and give it to them a little bit at a time. But this is actually super interesting because if you go back and look at the history of D2C, originally the idea was you're going to cut out these middlemen. And so there's more margin. And so this is a better deal for customers. And we've I think definitively proven that is not the case, that because they're replaced, you know, the Walmarts and the Targets are replaced by Meta and Google. But I still think the idea of having a direct relationship with the customer in some cases can really make sense. Like when you're selling them water bottles, it's like, hey, if I sell you, once I sell you the water bottle, I don't need to like check in with you or give you more tips about how to use it. But on something like this where there is more of like a real customer journey, I can see how the direct-to-consumer kind of channel makes more sense because—
Do you think it's an education thing? Is that—
Well, that's kind of exactly what I'm saying. It's like, I think that it provides the opportunity for more education, which is a unique—
Absolutely. And we're going through this now as we've entered kind of the omnichannel era of our brand. We're now in over 5,000 retail locations and you get far less time with the customer in that setting, obviously. And so your label, which in our case is really small, has to do a lot of work. Your case messaging has to do a lot of work, but really just it's the product experience has to do the work. And we've really focused on that functionality. And never halting our investment in the product to make sure it is something that you can tangibly feel and something that you say like, wow, this is something I could really see myself doing every day.
You know, man, I could argue that your, the message that you're talking about is actually the name of the product, like the name of the company, like Magic Mind is the message. I think what you're raising is a really, it's a great sort of line of thinking for a lot of people building D2C companies or e-commerce companies, or even just like traditional retail. And that is like, Today's D2C playbook is to slice up your customer a million ways. It's like, I've got this ideal customer profile. The ad algorithms are demanding that I come out and I create every way that I could possibly communicate with this customer. But then what you lose in that is a common through line, which if you look at the history of brand building, they all had that one single—
And what wholesale demands.
Yes.
You know, like, I think you're right. I think that people are working backwards from how do I make the ad systems work for me? And that's specialization.
That's making us worse brand builders.
But I think that's right. Especially because to, to really build a big brand, you still have to eventually go mainstream wholesale.
Dude, you need your Just Do It.
And yeah, so like, it, it's interesting. Um, I'm very interested in debate. In high school I got into debate. And so the art of making a good argument is very interesting to me. And they've done a lot of research about this and the way that we tend to think about making a good argument. Let's say that you and I are having an argument and I'm trying to convince you that Oklahoma is a great place to live.
You try all the time.
Right. And so, I'm like, well, I've got these 5 reasons that Oklahoma is a great place to live, and I'm going to convince Matt with these 5 reasons. What the research says is that me trying to give you all 5 of those reasons is far less effective than me just saying which of these 5 is the absolute best argument and just focus on that. And, that the way that our mind processes information, that's a much more effective way to do it. So, even though I could say, hey, Magic Mind is great, it can do this and it can do this and it can improve your focus and it can help you to have more energy, that What actually is the most effective for most people is if you're like, this can do this one really powerful thing. There's all these other things, but this is what you need to focus on. And that, that cuts through more effectively.
So is your, are you saying then like, and I don't know how you think about this, but the, the, the art of brand building then is finding that one thing that actually it does apply to everybody, but it, I'm just thinking out loud, like it might not be the thing that brings them to you. but it's probably the thing that they're gonna use to tell other people.
I think it's the thing they use to define who they are by using your product. And so I don't think it has to be everything to everybody, but it has to be broadly appealing enough to resonate with a lot of people.
Yeah.
But it can start pretty niche. I mean, look at Liquid Death. I think they've built an amazing brand obviously. And it's not like you'd storyboard that and say, this is gonna work for moms who are carpooling, but it does. And so, yeah, I think, but I think the benefit of D2C is you get to test all these different angles and kind of find out which ones are resonating. And then maybe that can inform what that headline brand message is for you.
Yeah. And I guess it's, I think the other thing that we tend to forget in sort of like this current generation of brand building is that these things tend to take a long time to create. Like that message usually doesn't come out of the gate with like, this is the thing that's gonna last me a long time.
Yeah. And we've changed our headline tagline multiple times.
Yeah. I mean, dude, it's actually one of the best things to test.
Well, customers lead you to it as much as you lead them to it. You know, like when I think about the evolution of Simple Modern, a lot of our business is kids' products now. I would've never guessed that that would've been, but it's like we start on Amazon, there's a real demand for other colors. You get into other colors that leads to a more female-skewing demographic, you know, and you just kind of like, and then eventually one day it's like, oh, we sell very effectively to moms. That's really our primary customer. And we have this amazing kids business. But to say that I intentionally guided us down that path, I mean, obviously I made decisions, but a big part of it was listening to the market, who was responding to our products and what they wanted. So it's a little bit of a dance where if you get too deterministic, I think you miss the opportunity.
And that gets back to kind of innovation and product-market fit. And I think that's where you can actually find that second hero product is by listening to those customers who still are asking for something you might not sell yet.
Yes. Yeah.
Listen to their problems and like, you gotta figure out, let them pull it outta you as opposed to you give it to them. I think as the founder, the co-founder, it's like, I had this really good instinct that was right for the first product, so I need to listen to my gut. But I think at a certain point you also, you have to take customer data and research and put that above your own gut, particularly for big decisions like product releases and new innovation.
It's really, I've not met a lot of We've talked to a lot of people in this space in consumer. I haven't met too many founder operators who, who have like just a gut instinct for product that doesn't matter what they do. Like they, they, their hit rate is just weirdly good. And it's typically like a, it's, it, the pattern there is almost always they are the customer.
Mm-hmm.
So they know exactly what they would buy, you know? And then they happen to be a customer that is like, there's just a lot of them in the world.
Mm-hmm.
Right? Like, I think Sean's a good example of this. He's really good at picking product categories. He's just picking stuff for himself, right? Like, and, and oh, there's just a lot of 25 to 30-year-old dudes out there that like the same thing.
Yeah.
You know, like it's, he, it just, it's a natural thing. And I think Katie does a good job of this. Like, I do think there are some people who can like take product shots with high hit rate. I think in your category, it's actually, it's like the level of difficulty is really high because you're, everything you guys build, everything I've have looked at, it's like the education required is much higher lift than just like, I sell a thing and you, it's obvious what the thing is. Like, I know what a water bottle is. There's no education here.
Totally.
You know, like insulated steel drinkware. Like there's just, there's a great big market.
I've said this before, but I think the job of a CEO, CEO founder type is to be self-confident enough that often, even if your judgment contradicts that of others, you're willing to trust in it. But knowing when to trust other people's judgment over yourself, if that makes sense.
Yeah.
It's like 80% of the time I should stick to my guns.
Yeah.
I've been here the longest. I, you know, I've built the company. I have the best—
The most context.
That's right. I have the most context that, that, you know, I think about it that way in an AI era. It's like no one will ever have as much context about the business or customers as I do. But there's 15 or 20% of the time where I'm just wrong. And having the ability to discern between those two, because if you fall off into either ditch, obviously if it's like, I'm always right, you know, like we do what I, what I say here, like that's hubris and that definitely goes a bad way. But if you're spineless, and you just let other people who didn't build the company try and tell you what's best, you know, that's, that's a—
You go too slow too.
Yeah, exactly. Yeah. You slow way down and you get risk averse. I think that's the other thing. Like founders are supposed to push the pace and they're supposed to embrace the risk. And if you own the largest percentage of your company, you are not being realistic with yourself if you expect anybody else to have the risk tolerance that you have or to be willing to go as fast as you're willing to go. And that's really where I've messed up. Sometimes I've had great people, like these are people that could be CEOs, CEOs, but like they are never going to think exactly as me because they have a different number of shares and their incentives are aligned differently. And so being able to like understand that, I think 11 years in, I'm getting better at the role as I'm understanding that balance.
Do you, uh, I got a question, 'cause like you're, you came out of sort of come outta school, you go into banking and kind of, I wanna connect 2 things here. So like, do you guys, do you think that the difficulty or the quality of revenue part of consumer, right? So like banking and the whole finance industry does not love consumer companies, right? And usually it's because like the consumer is just really hard to peg down. Do you, as you guys are building Magic Mind, do you think about this? Like, how do we actually, this takes so long to figure out who the customer is that the quality of revenue is never quite there. Like it's, it's a moving target. It's not like the, this idea of product market fit in B2B. Right away you're like, oh, I sell accounting software. I know exactly what you need.
Whereas this is like— So it's turning out for them right now though. It's so easy.
Yeah. I wonder how we actually get around this as an industry, right? Because it does take a long damn time to build these brands. You guys have been around for how long now?
6 years.
Right.
Yeah.
That's so young.
I think it's the case that, I forget what it's called, but things that exist for a long time are likely to exist longer. There's this momentum in life to brands as they exist. And I think that is the attractiveness of consumer I mean, whether it's Coca-Cola or Wrigley's gum, like these brands have been around for a very long time and you can't look at many industries or companies that have that kind of staying power. Yeah. And that's true of tech in particular, I could— you could say. So I think consumer is always— has always served the purpose of kind of the steady return on capital once you establish a true brand and distribution model. I think that's a great perspective.
Like it's the trade-off is they're harder to do.
Yes.
But their endurance—
Exactly why they're Enduring and valuable over time is why it's hard to break through. But we're going through this huge customer perception, customer need shift through the rise of kind of wellness and food as medicine. And that's been driving this whole space and the innovation that we've seen for over 2 decades. And I think we're still kind of in the middle of it.
To take that further, if we really do get some of the medical advances that it looks like we might get, that makes consumer more valuable. in a lot of ways. Oh yeah, I completely agree. If I, you know, become brand loyal to something at 35, now it's like, well, what's the, you know, greatest potential discounted cash flow of that? Like 30 years, 40 years. But if lifespans really do start to extend, it's like, what that means is I can buy Coca-Cola for 50 years or 70 years. Maybe not Coke.
I think in general, like longevity is kicking off like 3 distinct trends that are still very early. And one of them is cognition and mental performance where we play. But, I think it's the same, it's related to the big boom in protein we've seen. And, it's like musculature and the importance of maintaining strength as you age, that's driving protein. But, I think there's also this kind of very early one around inflammation and data coming out about heart disease that's actually driven by inflammation. Inflammation is sort of the meta problem behind so many dysfunctions in our body. And, I think that's a fertile space for innovation.
What I want to know is, Did you jump from finance to consumer thinking about the longevity of consumer and this is a great place to be? Or was it just—
No, no, I got lucky. I mean, I was miserable in banking. I learned a lot. I learned how to work really hard. I learned how to whip around spreadsheets, but I knew that I wasn't making any impact. And I remember the moment I went, I was on 2, staffed on 2 deals at the same time and one was like super intense. The other was this small meeting that I finally got invited to go to. So, I flew to Evansville, Indiana, went to this bank meeting, and the deck that I had worked on didn't even get pulled out of the briefcase. And, I was like, what am I doing? This is crazy. I was going bald. My dad gave me Rogaine for my 25th birthday and I was like, this is not good.
Hey, congrats. It looks like you've made a real comeback from those days.
Shout-out finasteride. But, I was truly miserable and I needed a change and I wanted I wanted to operate something. I really just had this sense that there were skill sets that I had around leadership. And, I'm the 5th of 6 kids. I kind of stand as the bridge between 2 families within that. My dad remarried and I have 4 older half-brothers, but they're full brothers in every sense of the word. But, I've kind of stood on that bridge and my dad's youngest son but a middle child but my mom's oldest and kind of like, oh my gosh. Had this kind of Freudian cocktail and superpower for cohesiveness and consensus creation. And anyways, that led to some leadership skills that I really had no ability to flex in a junior-level banking role. And I wanted to have just a tangible impact on something in the world. So I just reached out to my network and I was like, I want to be in operations somewhere. I don't care what I'm going to do, but I want to change my career path. And was fortunate that my roommate had just joined Aaron, the founder of Brahmi, as his co-founder. And they needed an ops first hire and someone to join the founding team there. And I did that and was at Brahmi for 5 years, but I went from Times Square, Barclays, wearing a suit to taking the Greyhound bus from Manhattan to Philadelphia on Monday morning at 5:00 AM, coming back Thursday evening and living in Sharon Hill, which is not a great neighborhood in Philadelphia. But I loved it. It was amazing. I was wearing jorts and driving forklifts and making an impact. And I was like, this is the path.
And I kind of just felt that peace within me that told me I was on the right track and I just wanted to follow Do you think it's a tangible thing of consumer, like that we're like, you're definitely in the world of like stuff and I can hold it and I can move it around. And whereas banking to me has always been like, what do you do?
So much.
Yeah. Like, I think it is a much easier way for our monkey brains to see impact. I think impact is what kind of matters at the end of the day. And once you're high up enough in the world of finance, you are kind of world moving and doing cool stuff. But I think at the junior level stage, you're really not making that much of a difference. And even just bringing a product life and putting it on a shelf, you know, that's something that's so easy to just have physical proof in the world that you've done something for the last 6 months and here's the result.
Yeah. Do you, uh, I got a question on school because I'm, I'm a dropout, so I don't actually know what happens in university. Um, you went to Princeton.
Yeah.
Does the jump from like university to, uh, finance, is that like, are you, are you groomed to do that? Is that a thing like where you're in school and you're like, look, this is just the best place to go get a job. You should go in finance. Or was there something else that drew you to finance?
So there's, let me try to think about the way I want to answer this. Yes and no. So first of all, I kind of wanted to do finance just because I wasn't educated in anything specific. Princeton's a liberal arts school. I didn't know anything useful. I knew how to think. I knew how to write.
What a ringing endorsement.
Yeah. Like run this school.
How much was that not particularly useful set of knowledge?
I don't know. But it was, no, very useful set of knowledge, I think actually more and more so in the world that we're entering into. But you know how to critically think, you know how to read, read, you know, to collaborate with classmates and, you know, to work really hard. And that's not true for all those types of schools. You actually had to work really hard at Princeton. But, you know, I wanted to do something that was quantitatively useful and like actually develop a skillset. So that was a big draw for me into banking. And, you know, I had 4 brothers, as I mentioned, and 2 of them had already gone down that path. And I'd always wanted to live in New York and do the whole thing. So it was a groomed for me, I would say. But I, you know, my classmates did a bunch of different stuff and, um, a lot of 'em ended up in New York or DC. Sure. San Francisco.
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Go to nineoperators.com/applovin. You're going to get our guide to new channels, recordings of our live expansion events with us and 25 of our friends. nineoperators.com/applovin. Back to the show. When I was reading the, the brief for today, uh, the thing I actually connected the most with at the very beginning of the brief was, uh, your story of like joining the company, not as the person who created the product or the company, but like like, you're clearly running the joint. You've got a partner. I was the same. Like, I came into Pela as the first investor.
Hmm.
I wasn't even supposed to run the thing. I had another company. I'm like, I'm gonna write a check, right? I'll help you get it going. But like, product guy, it's yours. Turns out product guy wasn't a great CEO. So when I sold my la— my first company, I just immediately became the CEO of this one and it wasn't part of the plan. So can you tell us like, how did you guys meet? Uh, how did you decide to like go from, I'm selling, is it beans?
Yeah.
Yeah, so like beans in Philly to Magic Mind.
For sure.
Give us that little bit at the beginning.
Yeah, so I think the Brahmi story is important. I joined as the 3rd member of the founding team and it was a good friend of mine named Dylan and we were both kind of the co-founders to Aaron's founder journey. And, he's still on that journey, he's doing amazing, by the way. They've innovated around protein pasta and are absolutely kicking butt. It's one of the best stories of persistence and longevity. in our space. It's really awesome. But, you said earlier about kind of markets that are well-defined, and I've never had that experience. I've always been doing a lot of consumer education. And, with Brahmi, it was a lot of education. We were going after what we considered a big market in salty snacks. And, we had a product that was the highest protein and fiber density crop on the planet, the healthiest snack you can have. At the end of the day, it was a pickled bean in a bag.
When you say it like that, sign me up.
It's a wet snack and it's really healthy. I find it to be delicious, But, pretty different, a lot of education there. Yeah. Everyone's always like, why is it wet? Was our number one question. We're like, well, it's how it's prepared in Italy and around the Mediterranean. It's traditional. We're adding flavor to it. And, I'm still a huge fan of that product personally, but it was just never gonna be a huge product. And, I think Aaron realized that and started innovating around other ways to incorporate this superfood into Italian food to make it more healthy and approachable. And, he's done that with pasta. But, the Brahmi years were an interesting case study in leadership style. And Aaron and I are still very close and I feel like I've told him this directly, but I learned kind of what not to do and how I was managed there versus the experience I've had with James. At Brami, it was the 3 of us were kind of the 3-headed decision-making machine for everything. And we'd kind of, everything would go to committee and big decisions would be discussed and then we'd make them and then we maybe rediscuss them and it just got to the point where I realized that I would never be making the final decision and it would kind of be relitigated by Aaron.
Mm-hmm.
And so I kind of mentally passed that responsibility off. And Brahmi was not what I was thinking about at 2:00 AM when I woke up to go to the bathroom in the middle of the night. Whereas when I went to Magic Mind, it was James's company, but he was a software guy and he said, you're the consumer guy, you've got the experience, here are the keys, good luck. You're driving the car. And I was like, okay, you know, this is my opportunity and this is, you know, a great opportunity. I love the category. love the products, see so many opportunities here. Like, I'm gonna make the most of it. And I had that sense of ownership from day one because of the lack of micromanaging and just the full responsibility and ownership I was given.
Hmm.
So I think that is the key thing. And if you don't have that ownership, I would encourage you to seek it out if you were in my position. Like, I feel like I've grown so much, infinitely more by having that ownership and fundraising myself and getting my friends and family to invest in the product. and putting my name behind it. So, you know, it's been a huge learning experience for me, but it's really been about ownership and it's changed how I manage people. Like I've taken this to heart for how I manage everyone in my company.
Do you, uh, you, you're, so you guys have actually raised money?
Yes.
We don't talk to a lot of people like you.
Yeah.
That have investors.
You've got a board, I'm assuming.
Yeah.
So it's like you're, there's cap table.
Uh, can you tell us a little bit about how you guys went out and at what point did you guys go raise money? Had you already proved this whole product market fit thing? So like you ran some tests, it's working, it's selling, then you raised money, or did you guys start out raising money? I asked because your partner is a software guy from the Bay Area.
Yeah. Which explains some of it. There's a lot of patterns. I mean, he's coming from a culture where that's what you do, right?
Yeah.
Early on you go and you raise money.
Yeah. Yeah. Yeah. And actually the kind of impetus he had to start the company was, uh, Floodgate and Mike Maples, a, a great Texan investor who's a mentor to James, wrote him a check and said, hey, go do this. Magic Mind thing. Like, I love the product. You should make a brand around this. And so we were funded from the jump and there was this kind of pre-seed angel round where, you know, capital was put in the business. James put capital in the business. I put capital in the business. And then that kind of got us to a seed round.
Yeah.
And I think there's that, this is like the great filter in our space. There's kind of like certain times where you can raise and you sort of should, and there's these different like almost hurdles you gotta get through, but it's pretty easy to get the angel stuff done, relatively speaking.
Yeah.
It's still hard, but like if you have a great brand design and a good story and a really good product, like you can usually scramble together $500,000 to $2 million and, you know, get it off the ground. It's like getting that next round done where there's just a huge gap in the market. Once you make it past product market fit and, you know, there's a pathway to profitability, Series A is what you're talking about. And There's a lot of folks there too, but there's this huge gap at the seed level. And that's, that's where we like, you know, had to take a lot of persistence to get that round done. Um, but, you know, we were able to, and, um, it really helped us continue to grow.
So, okay. Uh, raising money. I want to hear about the experience of this from you. Uh, how many people did you guys actually have to pitch to get the Series A done?
Uh, the seed was the, the long journey and that was about 67, different firms that we spoke to.
Okay.
Yeah. And ended up being one of the first ones that we talked to, ended up giving us the term sheet at the end. But there's just a lot of lessons learned in that process. A difficult time to raise money. We did have traction actually. We were, it was all the story we were hearing was, you're too early, too early, too early. And the thing that made the Series A so much easier after that was just keeping those relationships. Everyone who said I was too early, they got on my investor updates list and I talked to them quarterly. Yeah, that's so smart. And I would ask them, hey, what would you like to see this business look like in a year? And then when it was the next year and we were above that, I'd say, hey, we kind of beat what you said. Like, what do you, what do you think would be like really exciting for us? Like, and for me, the advice that James gave me that was great, and he's raised a ton of money on his own in his tech life as well and Magic Mind early days. But is when you ask for advice, you get money. When you ask for money, you get advice. And that's a trope, but it's so true. And so, you know, I'm hey, thinking about around, you know, what would you consider a business like me to be worth when I'm talking to other firms? Yeah. I know you guys said we're too early for you guys and I can see—
You can't keep product in stock. What would you do?
Yeah, exactly.
If you were me, if you can't keep, but I mean, it's actually one of the things you said that I think is so wise is that people tend to buy into trendlines and not data points. And so this is true not just for raising money, but like as an example, if you're trying to recruit an executive, it is so much easier to recruit an executive over 18 months or 2 years. Than it is to go to 'em with a job offer today. And so like, I think the idea of creating relationships and continually updating them and keeping them informed about what's going on, it's applicable to a much wider range than just raising money. And it's definitely a habit I would encourage everybody to do.
I think it's actually a big part of the job at this stage. Yeah. Is having those conversations that don't feel like you're really moving the needle today, But you're teeing up a relationship that might be highly influential. Sure.
Talk about that. People have this misconception that being a CEO is primarily about telling people what to do, or it's primarily an internally focused role. But a lot of being a CEO is about actually being the chief communicator for the organization, both internally and externally. How have you seen that during your time with Magic Mind?
Yeah, it's been interesting because as the first hire, kind of first GM that became president, became CEO, I was the only full-time employee for over 2 years.
Oh.
So I was doing literally everything and loved it. And I think that's made me a better manager in being able to scale to the position I've gotten to. But there has been this journey of, you know, some days I'm like, I'm feeling useless. Like I haven't done anything to the business. But you're right, it's about telling stories internally. You know, it's internal communication as much as it is external. And it gets back to the kind of micromanagement point I made about giving ownership to people. And we're like, my job is really just to set the goal and the strategy in conversation with my team and the leaders on that team, and then ask what resources they need to get that job done. And then that frees me up to spend time externally building relationships with future talent, future investors, future strategics, and just smart people who can tell me how they're thinking about the world that may inform my viewpoint and may inform my decision-making for important things that we're thinking about at Magic Mind. And I always like to say Like a good CEO is thinking 6 months out and, you know, you're not thinking about the next 6 hours. You're ideally thinking 6 weeks to 6 months out. And, um, getting out of the weeds has allowed me to do that, but it's a new muscle that I'm building and I'm still trying to build.
How much time do you spend, uh, external versus internal then as a, having a cap table, having a board, thinking towards like all this stuff?
Yeah, that's a good question. In general, we are a weird company. We try to really limit meetings. Uh, we have no Slack. We don't believe in messaging. Oh, wow.
Wow.
At all. We have no meetings on Wednesdays that are recurring, at least some slip through, and then no meetings on Fridays. So my Mondays, Tuesdays, and Thursdays end up being pretty packed with calls. I'd say one of those days is typically mostly external. So almost a third of my time is on external stakeholder calls.
You made a point, and I think it's worth emphasizing that it takes a tremendous, you called it a muscle. It takes a tremendous amount of mental discipline to actually do the CEO role because it requires you to say the same messages and the same stories over and over and over again.
It's frustrating.
You know, company mission and vision is all about saying the same thing over and over again until people know what you're going to say before you say it. And especially when you're somebody who is intellectually gifted, that is very difficult because you're like, I want to tell new stories. I want to do new things. I want to show how smart I am. I want to have a diversity of things, but that's actually not what the company needs from you. I remember reading a story about Bezos, and they were talking about one of the things that set him apart is that he had a ridiculous amount of discipline about message. Like, you could just follow him around for a day and he's just talking about the same things over and over and over again. But we really discount how hard that is to do, right? And how deliberate you have to be in terms of being successful and actually being that consistent in what you say.
I mean, what Will is saying is like he spends a third of his time on external, which means he spends two-thirds internal. And I suspect just like watching you in some of our, in a, especially in this one text group that we're in, you're, you're still fairly in the weeds in a lot of things.
Yeah.
Right. So like, I actually think that what you're raising is the hardest part of the job that you do, which is like external zoom out. I have to cast this vision, especially to investors. It's like, where are we going? What's the next thing that we're gonna do?
Internal, uh, here's how the day-to-day of this business is actually going, and I need to be able to like turn dials with Yeah, I think once you build that muscle though, it becomes a superpower because to your point around context window as a CEO, like that's where it comes from is you've been telling the high-level story for one day out of your week. And in my case, and you know, that gets you very accustomed to understanding exactly where this is going in 5 years if we succeed.
Mm-hmm.
So that's really clarifying for what matters today. And let's not get caught up in these 5 different things. Let's focus on this one thing now and let's get it right. So, I think it becomes a superpower to be able to zoom way out and then go into the details.
We've had one version of your product today. How many different— so, when you started, was it one SKU? And then, how many different iterations and how many different products are you guys selling today?
Yeah. So, it was one SKU. It's now called the original Mental Performance Shot. And, that particular product has gone through over 100 iterations itself. And, if you tried Magic Mind 6 years ago, I'd encourage you to try it again because it tastes way better. We started using great technology called nanoencapsulation that not only helps mask flavors of these powerful herbs we use but also helps with the absorption. The bioavailability is higher. The strength is more potent. But, about a year ago, it's always been a one-size-fits-all solution to our customers' needs, which is the challenge with a shot versus a pill or a powder in particular that you can sort of titrate for yourself. Yeah. But we launched Max and Free as sort of the papa bear and baby bear to the mama bear of Original last year in April.
So there's like 3 main products.
There's 3 main daytime mental performance products and we have a sleep performance shot. Very cool. Yeah.
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This product is our online product, so it's shelf stable for 18 months. Oh wow. And there's one interesting thing about the business that's pretty in the weeds that most people don't know about, but we actually have 2 different liquids for each ski So our retail product is natural, it has no preservatives, and it requires refrigeration. We did that intentionally to play in the natural channel. We thought the natural shopper would be the best fit for us as we built the brand in grocery. And we knew that a refrigeration-required product would end up in the cold case, and we wanted to be in the perimeter of the store.
Okay.
So we've intentionally gone that route, and I think it's served us really well as we've launched retail.
When you did this, the seed, so gimme a timeline. You guys had your seed done in what year?
'23.
And then when you do with the A?
Last summer, 25. Okay. 25.
And, you started out D2C selling a shot. Can you talk a little bit about how you guys launched the product into D2C?
Yeah. So, the initial vision was sort of the first D2C energy drink. And, that's why it was a shot form factor. James had this data on bioavailability and absorption of liquid vitamins versus pills and powders. And so, we felt very strongly that it should be a liquid. But obviously you can't ship 12-ounce things around the country. So it ended up being a shot. That's sort of the happy accident of how it ended up becoming a shot. So that was the model we launched in March of 2020. By necessity, it became very much a D2C-only thing after lockdown and COVID hit like right after the launch. But we started trying to get it into cafes in LA and small tastemaker accounts pretty early on and just learn. And we learned packaging wasn't right for retail. We kind of knew that. that. The product wasn't fully there on taste for mass market appeal. We didn't have that opportunity to tell the story to the customer as we talked about earlier in D2C. And so we knew we had work to do and we just focused on D2C, focused on building a big subscriber base. I think the one thing we really nailed early on was the habituation that we kind of instilled in our customer behavior. And 50% of our customers drink Magic Mind every day.
Whoa.
And 92% drink it 3 days a week or more.
Are you a subscription-first D2C channel?
Yes.
Is that kind of what you guys really put Yeah.
I mean, last year new customer acquisition was over 90% subscription.
And did it start that way? Like, did you know coming outta the gate, and again, this is the Silicon Valley, like Bay Area thing where they love recurring revenue.
Was that the— Yeah, I think it was always an early focus. I think we, we were at about 50/50 for the first couple years and then we honestly just increased our one-time pricing.
Okay.
And yeah, that's what I was gonna ask, like tactically, how much have you leaned in? This is, this is something that we're seeing is like—
Like very Xs and Os is like our subscription product was $395. The one time was $495. I jacked up to $595 on a whim. No A/B test. I was just like, we need more subscription.
Yeah.
Let's do this. And it ended up a lot more subscription. I think now it's a little more complicated now that we are available in retail.
Yeah.
Now that we are available on Amazon. So we've kind of brought it back and for higher volume cases and, you know, funnily enough, I don't always love subscribing to stuff, so I understand the friction with subscription and, you know, I wanna offer people a bulk bulk offer on one time where they can just buy up on something they love. So that stuff's constantly changing now. But in the beginning it was very simple. One product, 2 prices, subscription or non-subscription. And we were able to build a subscription business that really sustained us until launching retail and continues to grow today.
So you said something really interesting there about no A/B test, just did it off of conviction. When do you think a CEO should make decisions that are rigorously kind of analytically and data-backed versus strong kind of value conviction-based decisions. How do you think about that?
I think about it in the kind of one-way, two-way door framework. If it's easy to switch back, go for it. Don't be afraid to break some glass on the way to building this thing. But also depends on your stage too. I mean, it was, that was back when I was a one-man shop. I wasn't gonna, you know, I had the debate in my head in about 10 seconds and I kind of knew which side I was on. And so that was the way we were gonna go. And, um, and I needed to do it quickly because I had to address all these other purchase orders and there's a ton of stuff to do. So it was just kind of about moving really, really fast. I think you need to move extremely fast to survive early on. So I think now that we're bigger, there's kind of more to lose. I think there's also more to gain by being, you know, just that extra bit more precise in how you're deploying your decisions that you've made. Um, so it is worth a bit more of our time and deliberation and data.
Can, can you apply that to the jump from DTC to Amazon to re— is that the sequence you went in? DTC, Amazon, retail?
Yeah, we launched Amazon in May of '23 and retail officially in distribution with Sprouts in November of '23.
Okay. And was the jump from DTC to Amazon, was that just a gut feel thing?
We felt very strongly that we wanted to know our long-term cohort sizes and how they behaved and, you know, a lot about our customer. But once we launched Amazon, that didn't really change a whole lot on, on the—
So you, you didn't see any cannibalization from DTC to Amazon?
Hard to say. I mean, okay. To this day, I think there is cannibalization, but there's also net new. Yeah. And we see Amazon, our Amazon business, you know, we, we could do a better job with it, frankly. Like we're not, um, finding our own organic growth with keywords that are growing. We're, we're really seeing Amazon performance track digital spend. Yeah. And so it's your second website. Our second website. It's an extra sail to capture the wind that helps the boat go forward. And, um, I'm glad we have it up. I wish I did it probably a year sooner. Okay.
We talk about this all the time. People are too slow to do it. And it's just like, there's people there looking for your product, even if you're not doing the organic discovery, you need to be there harvesting.
I think it's very much product dependent, category dependent. With the subscription products, I think it's worth really honing in on what is that messaging that really deserves this product to be something that's ingrained in your customer's life? Because you're trying to get that to happen on Amazon too, and you usually have far less time. So like build the story on D2C, build the tactics there, and then take it to Amazon. But if it's a kind of one-time purchase item, or I think like Simple Moderns, I've heard you talk about this, it's like, yeah, you gotta be on Amazon for sure.
I mean, your LTVs have to be crazy. I'm doing math in my head and I'm like, okay, if 90% of people are subscribe and save on the website and if they're taking it daily and it's $3, like that's, those are gonna be really big numbers.
Yeah, they're strong. They're, I mean, I mean, it's north of 400 gross and then profit LTV is north of 200.
Yeah.
Can you, are you willing to talk about retention in your category? 'Cause I'm curious how you guys, like, did you have expectations around like what would like a 1-year cohort look like? And then kind of where did you land relative to your expectations? And then where are you relative to the industry that you're in?
Yeah, I think we went from caring about kind of overall churn to really drilling in on the individual M1 through M24 cohorts and really caring a lot about that revenue retention by cohort. And I built like a model that was very helpful that we still use to this day to like help track that over time and make decisions as a business. But, you know, no matter what we've done through email, through packaging, like there's not a whole lot that has moved that needle more than product improvements. It's product.
Yeah.
It's all product after that. That's well said.
Yeah. Retention is at least 80% product. I think more specifically the value of that product. And so how do you communicate that value? How do you pass on savings to your customer? Like you can't just jack up your prices. You gotta like incentivize your subscribers long-term. And so there has to be real value there on both sides of the coin of dollars and cents and things you're actually delivering to that customer. But yeah, we've only been able to move the needle on retention really with product.
Making the quality of the product better or in how you sell the product at the front Quality of the product's better and just passing savings along to the customer.
Which is very counterintuitive to the way many people in D2C would think. What you're really saying is that once somebody really is locked in on Magic Mind, you actually want to make the value proposition get better and better over time.
And that ties into something we've never done is messed around with the SMS. We have SMS notifications that you can sign up for after the first order. You can change your order, cancel it right away, We don't require refunds. Like we're just, we're optimizing for that long-term subscriber relationship and we've got, you know, several thousand people, over 10% of our subscribers have been around for over like 2 years.
Like, oh wow.
Yeah. So they're just extremely valuable customers.
Well, that's what drives the entire business. I mean, like everything is driven by that top 1 to 5%. And I think everything's power laws basically. Like I've been very interested if that, how true that is even for people like Coca-Cola, but I would assume that it's true for even them that your top 5% of people are buying 30% of your Coke or 50% of your Coke or some kind of crazy amount.
John Daly's gotta be like—
Yeah, exactly. So like, but it's, it's actually a very interesting thing is that it will always be a very small percentage of people that dictate whether or not your brand is successful.
So— That was the alcohol thing that you raised at some point, right?
Yeah, that's exactly right.
It's like the, a certain very small percentage of alcohol drinkers drink like a lot of alcohol.
Well, and you, and you would think it's more some industries than others, but I still haven't found an industry where it's not true.
But it's universal. Yeah. And the sort of promise of a subscription business is that you're creating this annuity machine. But the reality is unless you have those people who are true super fans committed to using it for life, that asymptote doesn't exist and it's going to zero. So if you turn off the ad spend, the revenue will go to zero. So I think if you can create whatever level the asymptote is, the important thing is that you create it. And so you asked about like what's good retention? I think it is highly dependent on the price.
Yeah.
So, you know, we aim for 20% dollar retention at 12 months.
Which I've heard is actually best in class.
And some VCs will say that's pretty low. I've seen this toy subscription box company that's selling a $15 monthly down. Like, yeah, it's $15 a month. Like, it's completely different.
Right.
Yeah. So it's all about optimizing the first few months of that experience though. And really it's about the product, as we said.
How do you think about LTV to CAC?
Yeah, I mean, we think about payback period.
Yeah. What is your payback period you're aiming for?
Yeah. So we have 2 metrics that we look at. We look at ad spend payback and then full working marketing, like all the variable costs of the business that matter. And that's the one that I'm keyed in on, like on a strategic level. And I think the ad spend one is more—
Makes sense. I mean, your P&L ultimately is a result of that.
Yeah. And so we can kind of play with that and understand how our cash flow ultimately looks and our profitability ultimately looks. And that kind of dictates how aggressive we can be based on how much cash we have, how much revenue we're getting from retail, how much scale there is there. And so that number moves. And last year, I'd say we'd target kind of 6-month payback on the full working marketing number and 3 to 4 on ad spend. As retail has grown for our business, those numbers have gone out and have allowed us to spend more. And it's a good thing they have, 'cause our CACs have gone up. We've had a, there's been some headwinds for us online for the last 12 months.
On this topic of like these, this like small cohort of customers that is like the most valuable, right? They stick with you for 24 months. Do you then try to go out and find just those people on the front end of the business? Or are you more of a like, we're just gonna have to acquire everybody 'cause we can't really choose and that they'll filter themselves down and then we'll let the product do the work?
Yeah, probably the latter. I mean, we have done like deep customer interviews and tried to do insights work with those customers and like, you know, what kind of podcasts you listen to and then go do that stuff. And then it just turns out they're like pretty high-value customers. They tend to have higher income. Yeah. You know, they're expensive people to acquire and you just hope you acquire some of them through your— Well, that's, that's sort of the relationship between like this front-end CAC number.
And if it goes up over time, does that just mean that you're actually getting the customer that you really want? Because higher-value customer costs more to acquire.
Hopefully. Yeah. I don't think so.
That's the theory. Yeah.
We hope.
That's what the marketing guy tells you.
Yeah.
Well, you know, CEO kind of sounds like the original marketing guy, so you gotta ask.
I was also the original CFO guy too, so I got the devil and the angel. That's right.
Do your investors influence how far out you'll go? Like, do you ever get—
That's a great question.
Do you think about it through that lens?
I try to think about it through, you know, my North Star goal for the business is profitable growth and, you know, how do we get there in a way that's sustainable on both metrics? Like, I want to be kind of maxed out on growth and showing like increasing profitability over time in a way that tells like a really good story in 5 years. That's especially like kind of like 5-year, 10-year thinking. So, you know, I want to be profitable, so that dictates what the payback can be. And I think the investors have bought in on that story and that North Star goal. But, you know, when headwinds happen and, you know, we lose profitability for a few months, they're not freaking out 'cause they know every reason why and here's what we're doing to try to fix it. So I'd say the decisions and targets are mine. It kind of gets reviewed in board meetings and occasional like catch-up calls and there's a chance for them to give input. but it's really my team's decision.
Goes back to communication. I mean, what really will go poorly is if you go to a board meeting and it's like, oh, hey, we've got a surprise loss for the quarter because we were more aggressive.
Any surprise in general. Investors can handle bad news. They cannot handle surprises. So anytime there's, and anytime there's like a change in strategy that you're considering, you're like, you better pre-sell, you better have pre-conversations and get folks on board so that in the board meeting when it happens, you spend all this time setting the table and then it's like, yeah, let's do it. You already gave your good reasons, like next thing. That's the goal.
You mentioned that in the last 12 months, it's like CAC has gone up. It's got, it's like there's headwinds, right? Is there any relationship between channel expansion and some of that, what you're seeing in DTC?
It's a great question, honestly. So we have like 8 hypotheses and like what's going on, doing stuff against all of them. And that's one of them. Honestly, the data doesn't support that. We've had a very regional, like there's been regional density to our retail rollout. So we launched Publix in July of last year, which is like 80% of Floridians shop at Publix. And there was like a day we were not there and a day we were there.
So there's a huge geo test.
Yeah, huge geo test. And like didn't see CAC in that market change, didn't see ad spend volume, didn't see new customer dollar volume really change. So I don't think it's been that, but you know, it's, and then our most dense ACV retail region is Southern California and that's our best region online still. So that's where we've like built the brand.
So actually on a per capita basis, it's like Southern California.
Yeah, maybe not on per capita. I actually think it would be, we've done per capita for MSAs and Los Angeles and West LA in particular is still like our strongest market where we built the brand. And so, um, I think retail can actually lead to increased brand awareness and hopefully increased success online eventually as people wanna opt into the best pricing they can get, which is gonna be a monthly subscription commitment.
Did you guys go after those geographies with retailers because of what you could see in the DTC numbers?
That definitely helped inform. I think there's a multilayered analysis of like what retailer is right for us now and where is their interest and where are we also seeing signal in our digital business that this is a market that could work for us. So there's several dimensions to that, but generally yes.
Yeah.
Yeah.
I think geography is an underplayed variable for a lot of consumer brands is they don't think about like mark— like in the US, like the US is not one country. It's like there's a lot of them inside the US.
Well, and even like if you take Walmart, for example, and you start to subdivide Walmart's 3,600 doors into groups, for us, you would be shocked at the difference in performance between different subsets of those stores. You have some very rural stores that behave one way. You have others that are in high-income urban areas. You have, I mean, you just kind have, like, when you're as, as big as Walmart is, it's like you get basically a standard distribution of, of things. And so that's one of the ways that we've gotten smarter is that sometimes you go into a situation, it tends to be like, oh yeah, we want to be full chain, we want as many doors as we possibly have. But some of our products don't really make sense full chain. It's like, hey, these 900 doors, they'll do great. If you put them in these 900 doors, that you might not get through your initial fill in a year, you know, like nobody will buy it.
I think in food and beverage in particular, there is a playbook to launching retail and And I think that too many people go way too wide too quickly. It's like the canonical advice that you get in food and beverage that you kind of ad nauseam hear, but like you don't get it on shows like these enough, I think. So, you know, the temptation is you build a big D2C business and if you happen to be a food and beverage, you see your kind of apparel peers going chain-wide in Target, that can work. But I think there's gonna be a lot of brands that blow up with what Target's doing, bringing new innovation to market. And it's really hard to build retail sell-through. And in food and beverage in particular, there's this really gnarly merchandising battle that you have to fight in the store. And I think the secret to our omnichannel success has been the fact that we do have this omnichannel flywheel machine that's the likes of, I know it's sort of Magic Spoon, but in this fast-turning beverage category that's actually refrigerated in the store. But it's also that we go in the store and do the hard old school stuff. that I learned at Brahmi with a backpack on, taking the subway up and down New York, knocking on doors, stocking out shelves. Like that's what you have to do. You have to be literally merchandising every key account you launch for the first 90 days at least. And then doing, you know, pulsed-on check-ins in store.
Are you sending people into these stores then to do that merchandising?
Tell us, tell us about why though, because I'm very familiar with this, but if you haven't sold into retail, you might not be familiar with what that is.
Yeah, unpack this for people.
And I think your category is specifically challenging because every single one of your competitors has people in store and they probably are not averse to moving your product around as well. Like, I mean, you don't think about this, but like the opportunity.
Yeah, I'm not above that.
So talk about how, why is it so important to be a part of actively merchandising your product?
So if you just think about like the shelf square footage, if you got like a hanger full of shirts, you know, that's gonna basically stay in one spot. But with loose cans and bottles and packages like that have really high sell-through rates, there's just a simple issue of the product not being stocked on the shelf that exists at all times. there's probably right now the 5,000 stores we're in, at least 150, 250 that don't have Magic Wand on the shelf just because someone forgot to reorder it or sitting in the back or it's kind of on top of the shelf and it doesn't even move in the back room on its own. Yeah. And you're getting judged by the merchant on total sell-through, your sell-through divided by the store count.
Mm-hmm.
And they don't care about excuses of, hey, your employees didn't pack it out. Their model is actually built to have the support of brands come in and put product on the shelves.
This is so key and people don't think about it. Like, I mean, the, the entire, uh, kind of brokerage industry, I think, is in some ways an extended arm of the retailers. They don't work for the retailers, they're not on their P&L, but like—
They're a gating mechanism.
They're a gating mechanism. And they, one of the reasons that they have access is because they perform a function for the retailers. And in the same way, like you're saying, hypothetically, it's their responsibility to merchandise their shelves, but realistically they understand, and it's kind of like a wink wink that you're going to have to invest resources in that. And it makes sense. Retailers run at very thin margins. Yeah, especially grocery. That's right. So anywhere that they can potentially find ways to offset or offload costs, they're gonna do it. And this is one of the classic ones.
So I think it's very, getting back to the kind of rollout strategy, like it's very important to have a region where you can do that yourself and have either yourself or someone on your team in the stores building relationships, sampling with the manager of your section, getting them on your side, 'cause those people help shoppers find items. And if you get the store to become, even 2 people to become daily users of Magic Mind, that's 10 units per store per week. And that's a pretty damn good number right there. So you try to like convince the staff to love the product. You sell people on it. You know, there's this whole demo thing you can do. I'm actually anti-demo. I think it's not sustainable long-term. It's really hard.
What does that mean, demo?
You're, you know, you see the little table in the store. People are giving a sampling. Yeah. Costco's one thing. You gotta do it there. And I think certain Whole Foods it works, but like generally speaking, if you're having to demo, you're in trouble in a retail store. retailer. So it needs to work with merchandising. The best thing you can do to drive velocity is spend your dollars as close to the register as possible with sales, and then putting the product as many places as possible near the register, around the store to where people happen to run into your product. And so we spend a lot of our budget in our retail P&L on just that.
Where do you find— so what I'm listening to you talk, and I actually, I'm wondering, just as an outsider, does your form factor help you or hurt you in retail and where it can sit in inside the store. So like at register, is it better at like near point of sale? Or is it like refrigeration? Yeah, refrigeration. So like, if I look at refrigeration, I was in a, I forget what grocery store, we're here in Austin. There was like, it's some store here.
Beautiful store.
No, not H-E-B. It was another one.
Central Market.
Yes. Uh, beautiful store. Looking at the whole like refrigerated beverage thing, dude, that's noisy.
Noisy, but it's a destination and the perimeter is shopped at a much higher volume than center of Okay. And the reality is it's hard to get a permanent planogram placement by the register. You're typically winning that store by store. And I don't think that's a sustainable strategy. I think you need to be able to sell well in your planogram position and then layer in additional placements to boost your velocities and strategic accounts that you're really focused on. Um, and then let from there your promotions do the rest.
But if everything's, uh, I was looking yesterday, like everything is sort of like single, like the same profile of canned.
Yeah.
And then there's you guys.
Oh, in that way, like the form factor being next to the big stuff. Yeah, it's hard. I mean, on the one hand, it's harder to find, harder to communicate our messaging, but this wellness shot space is exploding. And the SPINZ data, it's growing at 30% year over year. 2 years ago, last year was 28%. It's carrying all the growth for refrigerated beverage right now as Olipop exits that cooler. And the reason is 'cause 2 things, retailers are waking up to the fact that this is one of the highest dollar per square inch productive items you can put in your store. And second, the category is expanding and becoming the bridge between vitamins and supplements and functional beverage. In the wellness shot space, you can get so much more absorption and efficacy for all the form factor, all the use cases you have for vitamins and supplements, but in a way that you wouldn't necessarily drink in a 12-ounce beverage. You're not going to drink a 12-ounce beverage for heart health necessarily. Mm-hmm. You're not going to drink a 12-ounce beverage for protein. Maybe you will. People are trying to do a lot of that sparkling stuff, but I think shots will see a lot more protein innovation. I think you'll see it was built as a category built on immunity and digestion. We're really the first ones bringing a focus to this mental performance and cognition. Our sleep shot is hitting the retail market this month actually in central markets. It's going to be really interesting to see how that works. It's very different from what's been in the set before, but I think you'll see the wellness shot continue to expand.
Yep.
And then, it's about how do you become noticed within those brands and you got to have great retail packaging that creates a brand block and a story that you tell consistently. consistently, back to our first point, outside of the store.
Yeah.
So that when people see your messaging on your case in store, it resonates and they recognize it.
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Did you guys go into retail? I'm curious how you weight the two, but did you go into retail with the mind of, I want to improve overall economics in the business, like it'll help support D2C, or did you go into it from a, the category should just be in retail because this is where the customer buys most of this stuff?
The latter. I mean, when we launched, shortly after launching the business, we knew that the goal would be to build an omnichannel business and food and beverage I think total GDP is 23% online. I think food and beverage is 10 or 12%. I think beverage is less than 10%, something like 8%.
Yeah.
So the market is overwhelmingly in stores, and so that's just where you have to be. But I think that's where you create real value in the food and beverage consumer world, at least, is like you gotta be able to sell on store shelves.
Yeah.
And if you can't, then, you know, your moat is your latest creative drop in Meta, and that stuff's fickle and tough.
Yeah.
So you need both. And I think having distribution and earning that space through years of success and like buyers continually vetting your product and saying it deserves to be there gives strategic acquirers a lot more faith that this asset's gonna have real lasting value.
Yeah, I've said this before, but like the way that I've come to think about wholesale physical retail is very predictable affiliates. And so if you think about it in a digital sense, what we typically do is we go to Meta and we say, hey, I want to hit this ROAS. And so they're kind of like an The problem is that they are more of a fickle affiliate. Sometimes it works, sometimes it doesn't. Sometimes the ROAS that they're willing to work for changes. And wholesale relationships are kind of like the opposite. It's like, hey, I am going to pay you X and I'm going to pay you X every single time. And you're going to extremely reliably be able to deliver customers day after day after day in very similar amounts at these kind of economics. And the predictability of about of, of that relationship is what I think makes it so good. So like, I think that in general, like your business can't thrive. What you're saying in other words is your business can't thrive unless you can consistently profitably acquire customers. And wholesale makes that so much more predictably achievable because of the relationship with the retailers, because they have all this foot traffic that they generate.
But then contrast that with what Will said earlier, which is that it's very difficult to drive sell-through in a retailer. It is.
But that's why, I mean, because it's so competitive, everybody wants the relationships with those. I mean, he said something else I think is good, which is that like the profit per square inch, like— Yeah.
Yeah.
That's super important.
The way to think about wholesale is it's basically real estate and your product is a tenant and they want the tenants that pay the most per inch they take up, you know? And so you've got to be really thinking about how do I make my tenant the most attractive tenant? Because there's 10,000 people that want to live in this apartment building where there's 800 rooms, you know? And that, like you said, said they're gonna— like Target, for example, is bringing in a lot of digital challenger brands. But for every new brand you see in Target, somebody else went out. You know, there's a ton of churn. It's kind of like LA. We've talked about this with LA, like something like 30% of LA turns over every single year. And it's, it's crazy because it's like people come and take their shot and then they leave. Or I'm sure New York and, and New York City is the same way, but it's like, that's retail.
And to your point about like hard It's hard to drive sell-through. It is, and that's exactly why it's valuable, because once you've proven that you can do that and you have the staying power, that is what is extremely valuable.
How do you guys do that?
It's the same answer as retention. It's product. I mean, there's a lot of what you can do on the edges, and there's merchandising, and there's ways you have to introduce the product to customers in retail settings like promotions and building displays, and that stuff is all totally required and sort of the corollary of customer acquisition. But you're trying to find loyal repeat customers that are buying your product in the same store, putting it on their grocery list every week. And So the biggest way to move that needle is product quality and price.
I'm happy you said that, 'cause I think there's, there's actually a, it is a fallacy to think that ad spend will drive retail sell-through.
It'll drive trial.
Yeah. And it, and the reason for that is that we're actually relatively not spending that much money. Like D2C brands are really not spending that much money. Like if you're watching—
Well, also because you're spending it, you're spending it trying to acquire people digitally, so they've already bought from you.
Yeah. And the algorithm is basically—
Yeah.
Right.
Like if you convert me and I just bought whatever, uh, 3 months of Magic Mind online, which I'm probably gonna do after this, then it's like when I see it in, you know, Sprouts or something, it's like, that's great for them, but like, I've already got my supply. And so, I, I think packaging is a huge part of it, honestly. Like, and this goes back to what we were saying, like, the packaging has to very clearly and very quickly grab my attention and tell me the job that it does.
Yeah.
And, uh, and then, you know, obviously like things like price and promotion and stuff like that, where you're located. Like, I actually think you having a different form factor in that location would make me notice you. You know, like, that's one way to stand out.
Yeah, I think it could actually be a superpower. It's like you are just a completely different form factor.
But it's a great example of strategic positioning. Um, there's a, there's a similar, you know, I'm aware of the protein brand space. I have several friends in it. But there's a protein, uh, bar brand that in Costco they decided we're going to put ours in the refrigerated section, and nobody was doing that, and they were able to win space. Because you've really got to think about it from the retailer's perspective. I, I think in general we talk about this, but it's like the way you make more money is by figuring out how help other people make more money. And a lot of people go into wholesale saying, how can I use this wholesaler to make me more money? Which is basically the inverse of the way you have to think. You have to think, how do I help them make more money? Because if they make more money, they're now incentivized to sell my stuff and help me make money. They're incentivized to merchandise my things. They're incentivized to put it in more places in the store. They're incentivized to take it to more stores. But people don't tend to think about that. They think about their needs first. And I think that that's the reason why a lot of times they approach it flawed.
There's 2 things we put in our retail sales deck that really resonated. So we're going to bring more shoppers to your store, and more shoppers to your category. And within that category, we're not going to cannibalize your other products. We have data on that because we're not selling the 10th immunity shot. We're selling this whole new thing. And, you know, we did some— we saw some data from Numerator. In Publix, 50% of the people buying Magic Mind have never shopped a Publix Wellness Shot set before at all.
Oh.
And once they shop the set, they're actually spending money on, on Vive and Suja, these other shopper brands and adding money to that category. And that buyer is getting bonus on how, how much did your category grow this year? And so they are always trying to look for the tenant who's gonna pay the most, but who's also not gonna contribute and drag down the others around it. So incrementality is really the name of the game.
That, that is the word.
Yeah.
Interesting.
That we hear all the time. And it's interesting what you just said because again, people don't think about this. They don't, too often we don't think about the economics of the people that we're working with and that makes us worse at our job. Like if I'm the buyer in that section of Publix, I, yes, I work for Publix and in some ways every Publix customer is my customer, but practically 80% of Publix customers buy nothing from my section. And so my job is actually acquiring customers, just like our job is acquiring customers. Like how do I convince people who are coming here and just getting suntan lotion and, you know, stuff from whatever?
Tactically, how do you guys do that though? I guess this is where I, I, I hear I hear you.
Yeah.
Makes perfect sense for me. But if I'm Magic Mind and I'm going into a Publix, how am I as a brand gonna impact the people walking through the store and how do I get them over to this section that they've never been in before?
Yeah. So the, the one thing out of store, so we, we have 3 buckets internally, bucket 1, 2, and 3 for how we support retailers. And bucket 1 is trade spend and like truly reducing the price of product and merchandising and online merchandising is 2. So I think include retail marketing spend in that bucket too, of like ways that directly affect sales. And then bucket 3 is everything outside of the store. We've tried a bunch of stuff. There's ways to move the needle temporarily, but the only thing that correlates for us long-term is overall growth of media spend. And we see velocity go up across our geographies as we grow national-level media spend.
Sure.
And there's a reason that Coca-Cola can spend billions of dollars a year. It's 'cause they've got hundreds of thousands of points of distribution. And you're staying top of mind to them. You've got all the mindshare points. And you're seeing billboards everywhere you walk of their little cans and you buy 'em. And so we are focused on doing everything we can in buckets 1 and 2 to give us trial. And then everything we can do to have a successful online business that allows us to continually grow our ad spend year over year, month over month to be able to grow that trial even further from that kind of bucket 3 of outside of store stuff. So We have the advantage of having an omnichannel strategy in a set that doesn't typically have that. If you're a cold-pressed juice shot, you can't sell D2C. If you're a 12-ounce can, you can't sell D2C. And so that's been our leg up, but you only get that trial through everything you're doing outside of the store. It's about back again to repeat retention and product to maintain that over time.
This must tie back then to the geography piece that we were talking about earlier. It's like when you go into a California, into a retailer that's like high highly dense in California, like high density, you can spend more dollars per person in that region. Media dollars.
Yeah.
It might just not all show up in Meta. And then at the same time, you're having people who are having discovery moments in retail, falling in love, telling their friends about it.
Sure.
And so it kind of works both ways and the flywheel can hopefully spin both ways.
Have you had to shift your media mix over time as you open more, more retail points of sale?
You're probably going top of funnel for more top of funnel, right?
We are trying to get more and more top of funnel. I don't think we've been able to execute that yet, candidly. So we're currently working with some great TV production agencies to do some long-form content that will be on connected and linear TV starting in the fall. Um, we've done some tests with connected, um, we've done more stuff with YouTube, more stuff with Meta Reach. Um, it's really hard to attribute this stuff. So we're actually doing our— Yes, we're doing our first national level holdout, uh, to see at the retail level what happens when we turn off media spends. And that's one thing we're trying to be really smart about. We want to be like the smartest about how do our digital dollars flow through the registers at retail, 'cause we can figure out all the stuff online. That's the piece where it's really difficult and we wanna just be really—
That's so hard.
I mean, national holdout terrifies me.
It's a little terrifying. Yeah. Especially in the phase of CAC headwinds.
Channel is scary. Yeah, I know.
Yeah.
CAC's going up. You know what we're gonna do? Turn off half the country.
Yeah, exactly.
Sounds so intuitive.
Yeah. We're in the middle of it right now. Like as you become more omnichannel, I think going up the funnel is the right way to do it. And in some ways you kind of said The dream is to eventually be almost exclusively top of funnel outside of trade spend, the way that Coca-Cola or Gatorade has gotten.
That's why they're doing that.
Yes, but it's hard. I think that that's the ultimate, is to be able to have that kind of allocation of your media dollars where you're like, I've used this analogy before, but like top of funnel is like rain, but you can only do it if you have like a big amount of kind of surface area to soak up that rain. If you've just got a little can, it's not gonna make any sense. And so, but yeah, Like, I think we think about it the same way that like where you want to get is you want to get where the Yetis and the Coca-Colas have gotten, where you can go all the way to the top and just have really big awareness. But that is like the kind of god-tier achievement for a brand.
The level of difficulty to stair-step your way up there.
Well, it's orders of magnitude more difficult than profitably growing on Meta is pretty much what I've come to.
But it's infinitely more durable and that's why it's more valuable.
Exactly. Well, and that's where, and that's where I think like we mentioned with consumer, VCs don't really want to have anything to do with consumer because what they've realized is the percentage chance of you turning into a brand with durable cash flows is very low. But like, you know, Buffett is the classic, I only want to buy things if I went away for 30 years and I came back and people were still using it. And he's investing in things like Coke because yeah, like you could pretty much bet that 3 decades from now, I have more confidence that Coke will be positioned the way they are 3 decades from now than I do in Nvidia or Google. You know, you mentioned technology, like, so when you can get to that highest level of awareness with consumer, it is probably the most durable types of cash flows. It's just incredibly hard to do.
I do think the pendulum has swung a little bit back from an investor perspective on just general kind of DTC. Like from what I'm hearing from both strategics and investors, it's like quality EBITDA is quality EBITDA. And it's just like, it's a little bit maybe more valuable to have retail-heavy stuff because it's more durable, but If you build and establish a track record of consistently profiting from your digital business, I think that's now valued at pretty much the same multiple.
I think it's also swinging back because they just had the light, like the living shit scared outta them with AI and all these companies.
Well, they thought it was terribly high.
Yeah.
It's a, SaaS doesn't look so durable anymore.
Right.
Yeah. And I, I, I think the investor community, like particularly VCs, nobody talks outta both sides of their mouth more than that cohort. of humans, right? So like on one hand they're like, we're, we're, we're swinging for the fences, we're looking for the next Apple, the next Google, the whatever. I'm like, bullshit. You are making investments in SaaS companies going after like a little 10xer, right? Because if you actually wanted an out, like a genuine outlier, you probably would go try to find the next Coca-Cola because consumer brands historically, they are the oldest companies in the world.
Well, the question is, there's no 100x in consumer.
Yeah. Is it possible even to find the next Coca-Cola? Or is some of this like, there was a moment in time where a lot of these brands, kind of like the West being settled, where like there was going to be a soft drink company that was going to emerge and it was going to get to scale. And Coca-Cola, like there's a great Acquired podcast episode about this where like one of their big getting to scale moments was World War II.
Sure.
They were like, they called it like the world's best like sampling program of all time or whatever. The military was paying them to send Coke everywhere and get people to sample it. But so there are some questions about Like, can you recreate some of the things that led to some of the behemoths today?
Yeah, yeah. I think the answer is definitely yes. I think the answer too is like the consumer investor is different from the tech investor 'cause they have to be. Yeah. I said no 100x's, there are definitely 100x's in consumer. There's no 10,000x's in the same way there are. Yeah. No.
Yeah, I guess in tech, like you can put a little bit amount of money in and get like a ridiculous—
Yeah. So people in consumer need to be very focused on protecting their downside, which is why I think you've seen a lot of capital accumulate at the post-product market fit stage, where there's a lot of bidders on marquee assets and a lot of people now just offering founders secondary shares sales to get in on those companies that don't even need money to be raised, which is actually probably a smart strategy. But yeah, I think in consumer it's more durable, but harder to get there. And there's probably a lower ceiling on what's possible there.
Yeah.
I mean, Coca-Cola is a cool, I think the answer to your question is like, can you look at history and pattern match to it? I'm like, didn't Coca-Cola invent the modern day vision of Santa Claus. Yeah. Like, isn't that actually like when we look at like who, what do we think Santa Claus looks like prior to Coke? It was like a very different visual of what Santa was. And then post-Coke, it's like we all have this exact same, this is what Santa looks like, right? And most people, most consumers don't know that, right?
Why would you?
You need to be a nerd for this stuff to know that.
But also, this is how my daughter found out Santa Claus wasn't real, by the way. Oh, come on. Somebody was like, you know, Coke invented Santa Claus, right? She was like, what?
You tell that to a child?
Like, she's 8 years old.
I, I'm judging that person right now, whoever that is. So yes, Magic Mind, make Santa.
Yeah.
And you're gonna be fine.
Maybe we can take the Easter Bunny or something.
Yeah.
Something there. Yeah. You just like hop the Easter Bunny. Yeah.
So we haven't hit on this yet. What, what is the scale of the company at this point? How many employees? Give us some of the top line kind of ideas.
Yeah, so we're, we've got around 30,000 subscribers on our website. Um, a little over 5,000 retail doors. Um, the team has been historically very lean, maybe to a fault. We're now at 18, which feels right for our current scale, full-time employees in the US, another 4 around the world that are full-time, and another couple part-time folks that help out. And yeah, we're fully remote. We have a weird culture, as I talked a little bit about, no Slack, no messaging apps allowed. We have this really cool remote virtual office software called Roam that I'm a huge fan of that makes our virtual life actually work and the remote life really work. Everyone's got their own little office and you can pop in, knock on someone's door. And we have a lot of audio conversations. If there's ever an emergency, you pick up the phone and call someone. Emails are expected to be read and responded to 24 hours later. So anything urgent, pick up the phone. Like, feel like we've lost that muscle. But we want to create as much opportunity as we can for our employees to have deep blocks of time to work and think. And so everything's sort of optimized around that.
Makes sense for a company focused on mental performance.
Exactly.
Well, this thing that you do, which is this, or this philosophy you have, or this approach you have around trailing 90-day average emotions, what the hell is that?
It's probably the top advice I give founders who are starting up who I talk to, and it's really about the mentality and the approach to entrepreneurship. There's just so many ups and downs that you have that are so extreme when you're bringing something to life or managing something like a company that you will truly just get worn out if you follow those ups and downs to their full extent. There could be actual days or even hours where within that same hour you'll simultaneously have the thought, oh my God, this is a unicorn. I'm going to be so successful. And then 20 minutes later, holy shit, we're going bankrupt for sure. This is over. And you cannot follow those ups and downs and survive it for the decade plus that it takes to really build an enduring business. So I tell Most people have a 90-day trailing average emotion when it relates to how you're feeling about your company. If things are trending down for 90 days, you should use that as motivation and you should start to panic and you should use that as fuel. And if it's going up into the right for 90 days, let yourself enjoy that because those periods happen. But you know, they're regularly interspliced with much more choppy waters and it really serves you well to soak that in. So it just plays out as like not letting good news get you too excited or bad news get you too down, but like if things are really going well, you let yourself feel that and actually enjoy that feeling of pride and happiness that comes with that performance. And if it's going the opposite direction, let it motivate you.
So then on the whole up and down thing, what would be a big down? Let me put it this other way. What's a very expensive mistake that you've made that would've been like a, oh God?
Yeah, I think anytime you're looking at your cash forecast and it's going negative, that's the moments that keep you up at night. And we've had our first year of those. We hit profitability last year, but there was 5 years of not running at a profit and always kind of looking at runway and understanding how much time we have to hit certain goals before raising more capital or changing our growth strategy. But yeah, I remember one mistake. It was really a stupid mistake. And from the finance guy, probably a fireable offense. I actually offered my resignation to my partner after this happened.
No kidding.
Yeah. I was running the company model, which is still the model we use today. It's a badass interconnected Google Sheets thing that does inventory and all this stuff.
It's great.
I'll show it to you someday. Maybe a little bit. But I had a very dumb error on how we, we had taken on debt, which is probably the first mistake I made. And now I won't touch debt until we're very firmly profitable. And it's like a retainer, a revolver type line of credit for working capital But yeah, we had taken debt at this time and I had just totally botched the way that the spreadsheet connected into my model and it was adding cash instead of subtracting as we were paying interest. So pretty stupid. My model was built on the negatives being this way and it being sums, and this one was built on subtraction and it being a positive. And so stupid mistake. And I caught it. I came back from my honeymoon and I caught it and I realized that had less than 3 months of cash in the bank thinking that we had more like 9 to 12. And that was a big oh shit moment. And I think the thing that I took from it was one, like obviously attention to detail. You can't, for big things you gotta, and, and, you know, secondarily to that, like following your gut and like the envelope math, trusting that more than the spreadsheet, I think has been an important lesson I've come to learn. But the bigger one was like, I was the only guy at that point really running the company and I needed help. I was just in kind of over my head with the size that we'd grown to. I think we had one full-time person.