Jake Miller (Fellow) - Designing Products Around Customer Experience

Narrator: This is the Entrepreneurial Thought Leaders series brought to you by Stanford E Corner and the Stanford Technology Ventures program.

Perry Clabon: So welcome. So it's a pleasure to be here. Um, my name is Perry Clabon and I'll introduce our amazing guest, uh, Jake Miller. Um, I teach here. I teach a program, um, called Launchpad. And we'll, uh, go in the Wayback Machine and talk about. I'm, uh, sure that'll come up as part of Jake's experience, um, doing that program. That's where we met in 2013. Um, Jake is an amazing individual who built a product company called Fellow. He'll walk you through a little bit about, um, what he makes. How many people know Fellow products? Okay.

Jake Miller: Opportunity.

Perry Clabon: Yeah. And so what do you think? What are Fellow products?

Jake Miller: I just think of coffee.

Perry Clabon: Yeah, coffee. So, coffee products. So if you haven't looked, you'll see quickly. We'll walk you through. But he's, um, he's a founder that's developed skills in MBA from here and is an amazing engineer as an owner right now. He's amazing at id, he's amazing at people, he's amazing at all these things now. But we'll hopefully tell a story. He actually put together a couple images where we'll talk about the journey from the very beginning. I'm super passionate about passing on, um, and understanding to you about what it's like to start. And that'll be definitely one of the topics we get into. Um, and Jake's a friend, so it's just really, it couldn't be more of a pleasure to be here with. Hm.

Speaker D: Him.

Perry Clabon: So with that, let's hear a little bit of your story.

Jake Miller: Well, hi, everyone. It, uh, is an honor to be here. Um, first, just want to say thank you to Perry. Uh, I started Fellow out of Perry's class, uh, 13 years ago. Fellow would not exist without you, without Launchpad. So, uh, thank you. Thank you. Um, who here wants to start a company someday?

Perry Clabon: Oh, come on. Raise them high. Raise them high. You should be here because you want to. It's an amazing experience.

Jake Miller: Yeah, yeah, you're in for a ride. Um, and we'll try to kind of paint a picture of that ride, at least my ride, uh, over the last 13 years. Um, first, I mean, some of you know Fellow, many of you don't. Um, we're trying to build a global brand. For the last 13 years, we've been laser focused on coffee and espresso. Uh, as a brand, we really stand for all style, all substance. So beautiful products that, that work incredibly well, think, um, like Dyson in the kitchen. That's the comparison.

Perry Clabon: So why coffee?

Jake Miller: I love coffee. For those of you who want to start a company, you better start a company in a category that you're personally excited about. Um, we're in year 13. The first seven years were miserable, and I got to wake up every single day and at least work in a category that I was excited about. I love product design. I love coffee. Smash those together, uh, you get this brand.

Perry Clabon: Yeah. I remember, um, meeting Jake early on and, you know, why are you doing this? Why did you pick this? He said, I just want an amazing cup of coffee. I just think this can be so much better.

Jake Miller: Personal, unmet need.

Perry Clabon: Yeah.

Jake Miller: I'm like, this should exist.

Perry Clabon: Yeah. Yeah. Well, show them a little bit about what you do, and we'll go in the Wayback Machine.

Jake Miller: Um, so this kind of gives you a feel for our assortment today. We're based in San Francisco. Um, we've got about 100 employees. There's. We make products right now just focused on coffee and espresso. So, uh, we just launched this espresso machine. We have coffee makers, kettles, grinders, um, storage, drinkware. Um, kind of the story of fellow. On at least the product roadmap side was, um, design around a customer, design around a job to be done. So we centered that coffee lover, the person who wanted to brew incredible coffee at home, and said, what does that person need? They need a grinder, they need a scale, they need a kettle, they need a coffee maker. Someday they're going to be excited to get into espresso. So we're going to give them espresso machine. So it was very focused on, um, that individual. Um, I think when I look back at the last 13 years, that part of our success is that focus again. We put the blinders on. Um, I remember probably seven years ago, I designed a mixology set. I'm like, this is beautiful. And then we prototyped it, and I'm just like, we're not ready. This is not our customer. Today, uh, in October of this year, we're going to launch that mixology set. And I'm like, really glad that we're launching it. And I'm really glad that we waited seven years because we have to be known for something. Um, so that's where we are today. Um, where were we?

Perry Clabon: Okay, this is 13 years ago. Okay. This is 2013. Okay. Um, the product. So I went back to my midterm, uh, grades, uh, Jake and his friend who helped him start the company, Matt, who Matt started a company, Tentcraft. Totally separate, but you guys are an amazing duo. They started a company called Profile. It was the name of the product, the profile brewer. Um, he'll explain in a moment. Um, and I looked at my midterm grades. Michael Dearing, a fabulous individual that helped me start Launchpad, and I worked with for five years. We wrote up grades and we said, jake, um, we think you're doing great. You need to work harder. And maybe you shouldn't consider, um, letting somebody else do the industrial design, because what's in his hand, we thought he really was challenged. And here he is. How many design awards have you won as a company?

Jake Miller: Don't listen to your teacher. Totally.

Perry Clabon: But you've won every international. They are known for their design. So he has an amazing eye. And it's like. So it's like, don't listen to your professors is right. It's like, okay, um, but let's talk. So this is midway through the class. We have this event. It just happened.

Jake Miller: Ah.

Perry Clabon: One of our students here, Nolan, just went through it is midway through the class.

Jake Miller: You've got to sell your product. You got to do this stuff.

Perry Clabon: And they had this idea for a product. And we're going to go a little bit deeper into this because I think the story of this is a total surprise. What happened with their first product? Um, there's a great idea behind it. The mission of the company is very clear in that first product. Um, but here they are selling coffee, selling these brewers, um, and then take us from there. And I've got the next slide queued up for you, too.

Jake Miller: So for those of you who want to start a company someday, how do you go from idea to company? Like that Jump is really hard. And Launchpad, um, supports that. So in Launchpad, you try to go from idea to, should I start this company in, um, ten weeks? Is that.

Perry Clabon: Yeah, ten weeks.

Jake Miller: Ah, so for us, for me, that was. Can I actually design a product that someone gets excited about? Is their product market fit? We prototyped, ah, a bunch of different coffee makers. This is the Duo Coffee steeper kind

Perry Clabon: of V1, which is a combination, what, French press.

Jake Miller: French press and pour over. So how do we get the best of both worlds? Um, I graduate, we finish the class, and then you're stuck with this prototype and you're like, what do I do here? How do I take the next step? N of one. Um, so we put it up on Kickstarter. Um, this is 2013. Is Kickstarter still a thing? Yeah, less of a thing. So this is, this idea. You put up an idea. And I told myself, if this gets funded, I'm going to start this company. I'm going to say no to this high paying job and I'm going to quit Crackdown. I'm going to do this.

Perry Clabon: Yeah, you got it.

Jake Miller: So 30 days later, we had raised $193,000, uh, for the product. That's the kind of close to final id. Um, and I remember thinking, man, I am rich. This is easy. Everyone should start companies. Um, it took me another 18 months and $300,000 just to deliver the Kickstarter units. Like this Kickstarter project was a massive failure. Um, but it started the brand, it got me going, and then designed product 2 and 3 and 4 and tell

Perry Clabon: them about the product. Is this a product that's still in your product line?

Jake Miller: No, um, this product failed. Like it did well on somewhat well in Kickstarter. We sunsetted the product probably in year four or five. Um, you know, I designed this set myself, engineered it myself. I'm not a designer or engineer, classically trained, um, and made a bunch of design decisions, but learned a ton in the process. Like, figured out.

Perry Clabon: No, mine broke it. Like literally at some point sometimes the

Jake Miller: glass would fall out the bottom, it would shatter. Uh, we cut a cat. I had to pay legal bills, vet bills for a, A cat.

Perry Clabon: So what I think is amazing about this is here he is, um, successful. And if you go back in these founder stories, we talk about failure sucks, but instructs and all these things. And I think you still hear a lot of stories about, hey, everything kind of worked out. Worked out. I think this is your least successful product.

Jake Miller: Yeah, by far.

Perry Clabon: So your least successful product is the product he launched with. I hope that's a huge lesson you can take and the perseverance. I think I saw you at that point, you were in a. Maybe this was the time you're upstairs above a brewery.

Speaker E: Mhm.

Perry Clabon: Okay. And you were alone, largely, you know, toiling away with all these things in this one room. And it's like. And why don't you talk a little bit about that journey? Because that was, that's kind of the, that's starting. Which is both glamorous and I would argue, incredibly unglamorous at the same time.

Jake Miller: Yeah, I think so much of it is like, what do you want to build? What is the vision, the North Star that. That ultimately like you're committing your life to. And for me it was designing this portfolio of products for that coffee lover. And so I didn't view the first product necessarily as a failure. I'm like, this is the first step to this product portfolio of 10, 15 products. And that even when I had launched this like I had, the roadmap was defined um, for what I wanted to build next. So each day was just get closer to completing this, this roadmap. Uh, the roadmap is now complete. So there's big question marks about what we do next. But it took me 12 years to build the roadmap. I thought it would take five.

Perry Clabon: So talk to me about what that was like, being alone. Because a lot of people think you come here and I think at Stanford, uh, people have a startup, you talk about startups, you're socializing, you can go to classes. I think there's 160 classes. You could go and take a class about a startup. You can do all kinds of things. And now suddenly it would be very different. I would think is you're at the gsb, you're talking to your friends, you got the startup, it's super fun. Your best friend Matt's like helping you out in the class, which is a cool strategy. Just had a really close friend of his actually take the class with him. He wanted to learn, he just helped you. He's an amazing guy.

Jake Miller: And then after 10 weeks he moved on.

Perry Clabon: But what's that like?

Jake Miller: Yeah, I think um, and right then you've got all your classmates who've got high paying jobs and you know, I'm sleeping on an air mattress.

Perry Clabon: I hear the WhatsApp group and the GSB goes from like founding companies down to just a couple people quickly.

Jake Miller: Yeah, I think again it's like designing in a category that you're passionate about. Wake up every day excited about what you're working on and then like what are the tiny milestones that you can celebrate that keep you going?

Perry Clabon: So can you talk about some of those examples?

Jake Miller: Shipping this first product right. 18 months later, like shipping 3,000 units to real people. Those are moments of just like, mhm. This thing didn't exist and now it does. And people across the world are using these products.

Perry Clabon: I like to say it's non Newtonian. It's like something out of nothing.

Jake Miller: Yes.

Perry Clabon: Exmahalo. Yeah, it's amazing.

Jake Miller: Um, and then kind of our journey from here, Kickstarter, um, we were able to raise um, a few small angel rounds. So we tried to go out and raise money from professional investors that failed miserably. People kind of looked at us and said I'm not going to give you money for Your low potential coffee company. That was probably the right decision on their part. Um, I think I met with 72 people and got no's from 72 people. Uh, meeting number 73. Talked to the right hardware, uh, investor, angel investor and he had invested $150,000 that funded the delivery of that first product and then most importantly, um, allowed us to hire that first employee launch product number two. Um, and then internally the goal was can we double every year and how many products we need to launch to achieve that? What does the team need to look like? And the ramp was. These ramps are somewhat exponential. You go year two it was three employees, year three it was four, then six, then nine, then 30, then 50. Now I think we're at 120 or so.

Perry Clabon: Yeah.

Jake Miller: And how did you.

Perry Clabon: So you're really, you're. What I found with product business is at some point you've got to get a breakout product.

Jake Miller: Yep.

Perry Clabon: So how did you get from um, a you know, a product that was a moderate success but quickly was very clear it's not the future you had hoped for to doing what stag was. Which stag is a kettle that warms. And I think it's to say that it's like, it's so much more. It has beautiful touch and feel. It has a handle that's weighted a certain way so it feels a certain way when you pour. It has a beautiful, I think it's anodized color. It has this really cool feature to set the heat to a certain level. And if you want to make perfect coffee, you actually want it, you want that subtle control. So all these things are true. But how did you get from kind

Jake Miller: of big breakthroughs for us. This was product number two. It's our Steg kettle. I never thought I would be a kettle entrepreneur, but uh, so we had uh, there's actual world barista, uh, championships like people compete and who can brew the best coffee. So we early on.

Perry Clabon: So can I just say, like that's something we should all like. Look, a YouTube video. It's actually a pour over contest just to say. And that's right. They literally pour over coffee.

Jake Miller: Yeah. There's a whole presentation around it and it's already. You're selling these competitors.

Perry Clabon: Yeah, totally.

Jake Miller: So how do for. For this one? We got the best, uh, baristas and brewers in the world to use these products in competition. We got the best cafes to use these products in service. So people were coming in ordering great coffee and they sell our products in the best cafes around the world.

Perry Clabon: Just Because I think it's so powerful to the audience. How do you get. You're still alone, largely.

Speaker F: How do you get.

Perry Clabon: When we say we. It wasn't we at the beginning, it

Jake Miller: was three at that time.

Perry Clabon: How did you do that? How do you get. Yeah, on a plane and like where do you even know where to go? Like, how did you.

Jake Miller: Distribution.

Perry Clabon: You're getting so much smarter, so exponentially faster, right?

Jake Miller: Yeah.

Perry Clabon: How does that work?

Jake Miller: At least on the distribution side, A lot of it is just hustle. Like you are like we are calling cafes. We're going to trade shows in 2015 or so. Like it was really hot to be a direct to consumer company. And the model was you'd raise a bunch of money. This is the aways Warby Parker's of the world. You'd raise a bunch of money. You'd then buy customers with paid ads and you hope that that customer has an LTV high enough to pay off over time. Remember, we had no money, so like that was not an option. Um, so we said very early on like Omni Channel is the business model. Retail expansion is the business model. So getting that product and a lot of it is just hustle. But getting that, that product got into every Williams, Sonoma Sur La Table, Crate and Barrel, you know, the SF in New York, MoMA started selling it. So it was just this slow omnichannel build. Build those relationships. And then once products, 3, 4, 5 are launched, then those pipes are in place and you can push those new products into those channels.

Perry Clabon: And then if you go to the timetable, so we'll look at product, but also talk to me about or talk to the audience about what are the skills. So you have an amazing set of skills. And I think people here maybe got a sense of like, you're a worker, you got a great work ethic, you can go directly out there and sell it and all these skills. What are the things you think is behaviors that have served you well the whole time? You know, as a founder to a fully scaled company with so many employees and what are the things you've had to maybe take off that list and what have you had to add? So maybe behaviors that are. These are amazing and have served me well. And what are the new things that come on?

Jake Miller: Yeah, I think the founder's journey is early on. You've gotta be pretty good at a whole bunch of different things. Whether it's designing a product, setting up a supply chain, selling the thing, dealing with customers. That for me that was probably the first five years and the team built over time, um, the last five years has really been this idea that as a brand, as a company, we're only limited by my ability to attract incredible talent. Like, for each of those jobs to be done within the company. If I am the best person doing that job, like, that is. That is not good for our future. So who is the best mechanical engineer? Who's the best salesperson? Uh, who's the best marketer? Uh, and that's a huge shift from early on, trying to find product market fit, just trying to survive to, like, okay, now what does. What does future look like?

Perry Clabon: And how does that talk to us about how that works? From, you know, three people? You're still largely. What are we doing today, Jake?

Jake Miller: Right.

Perry Clabon: And I would think if I was working, I'd be like, what are we doing? Okay, great, I'm gonna go help you. When you get to 20 or 30, like, give. Give us a sense of, like, how's that. How's that transition happen? Was it. Was it suddenly skills from the GSB that you're like, oh, I've learned this, or is it. Is it. How's it work that you become a. I, uh, would say, largely we've described is like, I'm leading the work as opposed to do it. And that's one element of it.

Jake Miller: How does that work? I think for me, it was probably just like, I eventually broke. Like, you're just like, I can't actually do all of this. I am the, uh, one holding this company back. And then it was giving up control and trust and then hitting a certain scale where you're actually able to pay experienced leaders enough to join. Uh, like, early on, all the first employees were just really talented, but very junior. Uh, and then you level up, I

Perry Clabon: think, is really insightful. Say. Say more about what you mean by breaking, because I think that is actually what I saw in you for sure, was you had to give up. You kept things until you had to give them up, which ended up not being a bad way to do it. But talk about some of those transitions.

Jake Miller: Yeah, I think as founders, it's really hard to give up control of certain parts of this business. Like, this is my everything. It's everything. I've. The last 13 years, this is all I've thought about. So you think about, um, engineering decisions or design decisions, and of course, I still have influence on that. But, um, it's really looking in the mirror and saying, like, if I actually don't find incredible people to do this better than me, we're going to Stall.

Perry Clabon: Yeah. And, um, as you go into the next chapter, sort of, what do you see as the, maybe the, what's the next hurdle for you? You talked about a little bit about revenue planning and growth and all this kind of stuff, but.

Speaker E: Yeah.

Perry Clabon: What do you see as the big challenges? Um, both maybe personally and also for the business.

Jake Miller: Yeah, I think like evolve or die is a leader. So can I. Yeah, can I grow and lead a leader, lead a bigger team as a brand? Um, we're at this really fun point. Like I talked about that roadmap that we had that I had kind of written down 12 years ago. It's complete like so now where do we go from here? Um, so our, our vision is to really design across the kitchen. So we've been known for coffee. Um, and now over the next couple years, you're going to see us launch products in different categories across the kitchen. And when I launch that next product in a non coffee or espresso category, does that customer say, what the heck, Jake, you're my coffee brand. Why are you playing there? Or do they say, finally fellow decided to give me X or Y or Z? And uh, I hope it's the latter. And we've got reasons to believe that will be true. So that's the big anxiety moment for me then.

Perry Clabon: Um, I very much believe, um, you've transitioned and I see many founders do this is you've transitioned from that first product was a product with a key feature and a benefit. And you, you know, you, you sold it on Kickstarter. I sold this thing on Kickstarter, went in a box and people, the box is beautiful, the unboxing experience is beautiful. All your products have been beautiful. But I see even more so now. I see you think about experience along with uh, product and I think that's an interesting transition because, you know, I know when we're close to the ground launching, it's like we need to get this thing out the door. You know, it needs to do this thing, it needs to solve this thing. It's like it's very, yeah, it's ah, very tight. And when you have a product, you're talking more and I think you're maybe share a little bit about how that transition happened and maybe what you think of when I say it's not a product anymore, it's really a product and experience.

Jake Miller: Yeah, the transition there. It's like we very much thought about what is the experience the customer has with the individual product. Um, does it feel magical? Is it easy to use? Um, and then the next step is what's their experience with the other products that we design. One big breakthrough we had was if our goal is to help you brew incredible coffee at home. Even if we design the best coffee maker espresso machine in the world, if the coffee that you're actually using is not good, uh, or you don't know how to use it, like at the education piece, the outcome is going to be bad. A good design can't solve for that. Um, so about five years ago we pushed hard into actually selling coffee to our customer. Um, and that's been a really nice business for us. Um, and what happens there is you buy coffee from us. We have three Q graders on staff, so these are the sommelier equivalents of coffee. They taste hundreds of coffees, they pick their favorite. If you buy that coffee from us, the recipe or profile for how to brew that coffee, time, temperature, pressure is automatically pushed to your machine. And then you can brew that coffee or pull that espresso shot, uh, as defined by our Q grator or the roaster. And so that now the experience that we talk about as a team is the holistic experience that leads to the great cup of coffee or espresso shot or eventual other product in the kitchen.

Perry Clabon: Yeah, I think it shows if you spend time in uh, Jake, you look at his website, it's interesting. And I also think um, your vision also in understanding how non present in that first Kickstarter thing where it's you know, it's thing on a counter. But your products now I think are really an aspiration for like you're really fulfilling this experience around like what's my kitchen look like? What's my coffee area look like?

Speaker D: Mhm.

Perry Clabon: I think, I don't know. Maybe a question that comes to mind for me is how do you figure out like where, where are you and your team seeking feedback now because you're uh, I don't even know the features of your new coffee espresso maker are so far beyond imaginable. And what I see a lot of young founders do is they ask customers like what would you like? It's like that's for a number of reasons. I think that's flawed because they can't imagine a future. Yeah, but how do you get inspiration to figure out? I mean just maybe give them a sense of like a couple of things the espresso maker does that have never existed in the espresso market. Everyone's had an ordered espresso. So imagine this espresso maker, it sits on your counter but There's a lot of features that are new to anyone's imagination.

Jake Miller: Yeah. So if we think about the design process, like of course we look at competitors and market size, read reviews of uh, uh, competing products, try to pull out nuggets, but the magic really comes back to those one on one interactions with customers. So going back to the D school, this idea, it's empathize, define idea, prototype, test, repu. Like that is the model.

Perry Clabon: You did get an A.

Jake Miller: Like it doesn't, it's not rocket science. Like spend time with your customers. We do coffee meetups all the time. Um, and again, you can't just, I hate surveys. You can't just send a customer a survey and say, what do you want? You need to understand needs, wants, desires, pain points. And even on express, pain points.

Perry Clabon: Just explain to them the complexity of that product. You did your most complex product, it, it's in market, it's amazing. I wanted to make sure with them there were no bugs. I've confirmed no bugs. I'm ordering one. Um, but talk a little bit about some of the features because it's. A lot of things came in.

Jake Miller: So one big insight that just came from talking to users, basically every competitor espresso machine that exists we have at our headquarters and we'll invite users in to use those products or we'll talk to them about the espresso machine that they have at home. So our espresso machine, I'll um, nerd out a bit. It's a boiler system. So boiler machines are great temperature, um, stability, pressure. They take 10 to 15 minutes to heat up. And that is the reality of a boiler system. So you talk to a user and they're like, okay, walk me through your morning.

Perry Clabon: I had one of those Pavonis. It looks pretty, but it's like 15 minute heat.

Jake Miller: It's terrible. They're like, well, I get up, I turn my machine on, I brush my teeth, the machine's still not ready. I let the dog out, the machine's still not ready. And then I pull, uh, great espresso shot. They didn't say, oh, I hate the wait up time because they think, they think that's all that's possible. So what we did, so I pushed the R and D team and I said, you get two minutes. It's a boiler machine. You get two minutes. Then it took the team six months and they came back and said, great, Jake. We cracked the code. We figured out, we launched what we call the boosted boiler system. It's globally patented, it's a Boiler machine that heats up in two minutes. Uh, and then now the user sees that and it's like, oh my God. And then comparison shop that versus that 15 minute heat up time.

Perry Clabon: Yeah, that's amazing. Yeah, yeah. So now are you thoughtful about your time? Like how do you stay immersed and also maybe talk a little bit about those that have an experience of selling through retailers. Like how much are you working with them? The same way you're working with end customers or things have to now sell through on a shelf too. So there's also, I'm sure mechanics to how you design for that.

Jake Miller: Yeah. Um, on the time point, I think that my point of advice there is simple. It's just like that's like the most important decision you make is how you spend your time. And that's really hard to figure out. And I'm still figuring that out, but that's the unlock for me.

Perry Clabon: Well, and tell it one story about Jay because I think the last time I saw you in San Francisco, he's got a beautiful office. Um, he took over a space on Alabama street and there was, we were meeting and there was also an event. And I remember you're kind of like, well, I'm going to stick around and like launch the event with these guys. It was with the espresso maker and you're having a bunch of people come in and a bunch of people are tasting or like you're pulling shots. You're like, this doesn't taste right. Like, wait a minute, like what do you think? What do you think? What do you think? And that was seeing you sort of operate, it's like you're all in still. It's like if there's people here that want to try this, I want to be around, watch their expression. Which that was a great example of what we're talking about.

Jake Miller: Yeah. So how you spend your time is everything. I'm not great at it. And then the second part of that question is just retailer relationships. So now 60 plus percent of our total sales are through retail partners. Um, so we just got into Best Buy, we just got into select Target stores. Um, and so there's two challenges there. Like can you sell it in? Will they take a bet on you? And then you celebrate that. But what really matters is velocity and sell through. So every single week we get sales data and we're pouring over how many units sold by store units per store per week. And then success is like very rapidly responding. Is it okay? I need to run more geo specific ads. I need to do different in Store merchandising. Uh, I need to.

Perry Clabon: It's a whole education. After you got the education directly.

Jake Miller: Yeah. So we, like, for example, we're in Williams Sonoma, so I'll do a weekend shift or I'll go to Saturday and work a store. So I go into one of these and I'm standing there and next to me there is a Breville, a Delonghi and a Jura sales rep. I'm like, what is. So Breville employs 180 people to just work these retail stores for other retailers.

Perry Clabon: The evil Empire. Never by their products.

Jake Miller: Yeah. So now we have four. There's four people now.

Perry Clabon: Can't say that I can say that I'm going to take. But, um, yeah, um, the other thing, um, maybe one other thing I think that's really relevant. Then we'll, we'll open up to questions. I guess there's a lottery. One of you is going to get the first question. Um, you talked a little bit about the excitement. I remember. We're always. I'm totally excited. Like you've sold a couple coffee makers at night launch. And then you're like, and we love drinking the coffee. Right. It was amazing. M Coffee. And then you got the Kickstarter. It's like this. Oh my gosh, this is so great. Talk to these folks about the other side of that, which is there's absolute lows and you have these amazing, exhilarating highs. But then you have also like, you know, you get a call and somebody's cat died because the thing broke or whatever happened tragically. But you know what, talk to me about that experience and being a solo founder.

Jake Miller: Yeah, I think the solo. I think if I did it again, I'd have a co founder. Right. Well, say more.

Perry Clabon: Why?

Jake Miller: Um, I think with entrepreneurship and M for those who will start companies and those who have, you know this, like the highs are higher than I imagined. Like, I'm a pretty steady guy. But like the big wins were like, wow, the, this is awesome. The lows were lower than I ever imagined. It's just these emotional swings and right or wrong, especially in the early days, that personal happiness is tied basically to the performance of the company in the prior week or how much cash you have left in the bank account. Um, and those are fun stories to look back on, but countless examples of oh, crap accounts uh, receivable is late. I calling up my, my one investor. I'm like, we have to do lunch today. I drive to the, the East Bay and I'm like, I need $50,000.

Perry Clabon: Yep.

Jake Miller: And we write Jerry, or Jake owes Jerry $50,000. And we sign. Both sign this piece of paper like it's.

Perry Clabon: And he can't imagine you slept much the night before.

Jake Miller: No. You know, and you know, because he believes in this. Like, yeah, he wrote that check. But like, those feel those. Those were like weekly like M moments.

Perry Clabon: Like those, those lows and those close proximity.

Jake Miller: Yeah.

Perry Clabon: Well, I think that's great. Um, thanks for sharing that stuff. That's so personal. Um, with that, I think if you go to the next slide at some point, we'll get a seat number here.

Speaker G: That's good.

Perry Clabon: So we've got a seat number. And if you have, uh, questions, the microphone's here. Um, we would love to open it up for questions for the remaining roughly 15 minutes.

Narrator: Actually, I can ask one question that is the really traditional question, uh, coming from Tina Selig, and that's called what you wish you knew when you were 20. So I want to ask you, is there anything that you want to remind your 20 years old self?

Jake Miller: What I wish I knew.

Speaker E: Um,

Jake Miller: what I wish I knew. I think if you guys, for those of you who start companies and please do, it's incredibly rewarding. Um, it's like from day one, plug into a group of other entrepreneurs who are going through this with you. I remember this first year, first two years, it felt, you know, very isolated. And I'm like, I'm dealing with all these problems are unique to me. I'm failing.

Perry Clabon: Yeah.

Jake Miller: And then I joined a CEO group. Just Stanford friends. I'm like, we got to start meeting regularly, met with, you know, so there's six of us that got together. All six of us had the exact same problems.

Perry Clabon: Yeah.

Jake Miller: And it was like, I'm not alone. I'm not. It's like, this is a. This is just the journey. And then we could kind of solve those problems together. Well, I think it was.

Perry Clabon: You were different. And I mean, traditionally with at least Launchpad and Outlier. Starting a hardware company.

Speaker E: Yeah.

Perry Clabon: So it was also like, I'm doing something different. You know, I wonder how much that factored in. You're a hardware company and a software.

Jake Miller: I mean, financially, like, I mean, you know, Doordash was started by my friend out of the gsb. Financially, I should have started Doordash. Uh, but I wasn't passionate about food delivery.

Perry Clabon: Right. Yeah.

Jake Miller: I wanted to build things.

Perry Clabon: Yes, please.

Speaker F: Hey, uh, I'm not this lottery winner today, but I was going to ask, do you ever use these products in your day to day or at Your own home. And do you test them, do you demo them? And if you do, do you evaluate them and give that feedback back to your design team?

Jake Miller: Yeah, yeah, yeah. The dog's got to eat the dog food every day. Like my kitchen is just every product that we've ever designed.

Speaker E: Yeah.

Jake Miller: Ah, yeah, yeah. And then we, so we're using it every single day. And then at our office, I mean we have a 35 foot coffee bar that has all of our products. Right. So all the entire team is constantly making coffee, matcha, espresso tea, um, providing feedback. And then on that coffee bar, we've got a bunch of early prototypes, like pre release products. Like, do you like it? Feedback, let us know.

Perry Clabon: Do you still have the store on Valencia or is it store?

Jake Miller: Yeah, we have three retail stores. Um, the first store is in San Francisco. Um, we office out of the back. There was eight of us in the back room, one bathroom, no window. But we signed the store lease so we could get closer to the customer. So I made each of us work shifts at the store and then talk to customers every single day. It was one of the best decisions we made.

Perry Clabon: I really think that was a fabulous example for me M to hear is, is you found a way to have your customer literally 10ft away. Which so many times with founders, they say, oh, it's kind of hard to get access to my customer. I gotta line them up. I gotta like do this stuff. And I thought that was a genius way to be. Like, somebody wants to brew a cup of coffee. You literally would bring stuff out. I remember being in the room, the

Jake Miller: answers are not in your office. All of our first products were black, like the Henry, uh, Ford approach. And then we're like, maybe we should launch a white one. So I'm like, I don't know, do people want white things? So I spray painted one of our products white and I just put it in the retail store. And then we kept track of how many people brought up the spray painted kettle and were like, I would like to buy this. And we'd be like, oh, we're sorry, it's sold out or something. And I'm like, oh, we should, let's launch a white one. Like this stuff is not that hard.

Speaker G: Thank you.

Perry Clabon: Yeah, of course.

Jake Miller: Instead of sitting in your office being like, should we, you know, debating for weeks of like, should we launch another color? Just like spray paint the thing.

Perry Clabon: I watched that doing a survey.

Jake Miller: Yeah.

Speaker D: Um, so first of all, thank you both for being here. Um, so right now the marketing landscape seems to be really competitive in terms of direct to consumer. If you had to kind of start over, how would you gain initial traction?

Jake Miller: Yeah. And so the direct to consumer business is still critical for us. It's probably a third of total sales, but it's those deep relationships. So the customers that buy from us typically buy, you know, coffee and multiple, multiple products. Um, I think we. The omnichannel approach from day one was the right one. Like, now you look at brands today, like, they're like, we got to get into retail. We got to get into retail. And those, those D2C brands have pivoted to the omnichannel model that, you know, we've been. That playbook that we've been running for 13 years. Yep.

Speaker D: So what kind of, like, marketing challenge would you start with? Like, let's say it's just you and you don't have, like, too much money. Like, how would you approach that?

Jake Miller: Yeah. Um, for a paid ad specifically.

Speaker D: Yeah. Would you even start with paid ads or would you go, like, more organic content?

Jake Miller: I mean, I think, um, if you can get it press. If you can get close to influencers, uh, thought leaders. We spend millions of dollars every year on paid ads with meta. Um, so I'm not against that. Just very early on, being very careful because you can blow through so much cash so early.

Speaker D: All right, thank you.

Jake Miller: Yep.

Speaker G: Hi. I think you guys both touched upon this, but, uh, rather than surveys, um, watching and observing user behavior is probably the best for user feedback. Um, but once a user finishes using, uh, the product and you're done watching them were, like, the first few questions that you ask. And the second question is, what's your favorite type of coffee?

Jake Miller: Yeah, yeah. Um, I think just observation. The questions. What did you love about that process? Uh, what annoys you? Um, having them talk through each specific step, live. Like, I'm doing this now. Here's what I'm thinking. I'm doing this now. It's through those observations that you can have those insights, those aha moments. Um, and then favorite coffee. I think, um, uh, I remember, like, many years ago having an Ethiopian yoga chef, like, natural coffee that tasted like blueberries. And I tasted it. I'm like, wow, there's. There is something different about this coffee.

Perry Clabon: Yeah.

Jake Miller: Are you from Minnesota?

Speaker H: I'm not unfortunate.

Speaker G: Oh, cool.

Speaker H: Shirt cancel. Um, not to be too literal, but I wanted to ask what fills your cup? I guess, moving forward, what keeps you going in this field after over a decade? And then a second question is how you found the target demographic and how you marketed Outside of it.

Jake Miller: Yeah.

Speaker H: Thank you.

Jake Miller: Um, no great questions. Um, what fills my cup? Ah, I still get ah. Although kind of probably the design piece is a smaller part of my day to day I still get really excited. Like my favorite days are in the product studio in the lab working with our engineers and product designers. Like that's. I started this company because I love design and that's what fills my cup. And then I do all the other stuff so we can fund the more cool design stuff. And what was this? The second question was target demographic. Yeah and I don't know if this is the right approach or not, but I just designed for myself early on there is a lot of people I want elevated coffee gear that looks great, that functions really well and there's gotta be more people like me. Um so thank you.

Speaker I: Thank you Jake. Um, so I heard that fellow actually had a quite tough time raising funds especially in the early days. Right.

Jake Miller: Big time.

Speaker I: So how could you distinguish those useful rejection signals let's say versus those uh, noise that you simply need to push through.

Jake Miller: Great question.

Perry Clabon: I'm glad you asked. Uh, that.

Jake Miller: Yeah, yeah. Looking back on it, I think I was talking to the wrong investor early on. I was talking to the venture capitalist, the software investor, the person who needed the potential unicorn outcome. And that wasn't fellow certainly at the time. Um, the feedback I got was really like this feels like a really nice lifestyle business. Just pursue it as that um, like there wasn't a path to like this is a venture investment. Um once we started talking to the right product investors, the right hardware investors, angel specifically we did, you know for the first 10 years it was only angel investors. Like these are people, they cared about design, they're personally passionate about coffee. Like they're investing in a personal hobby of theirs. And that fit really, really paid off. Um, and now we don't want to raise any more money and we're in a good spot. But yeah, thank you. Great question. Yeah.

Speaker E: I was wondering what is your pricing strategy? Like are you selling lifestyle brand or are you saying like uh focusing on high end market. For example some German coffee makers like creating Mili and people, people just buying like as a Mercedes Benz.

Jake Miller: Yeah.

Speaker E: Some, some customers. For example my mother have a collection of smeg fridge smeg mixer. So she just you know ended up buying a just cheap coffee maker from smeg.

Jake Miller: Yeah.

Speaker E: And I've seen a really great uh pot like a red one on the first slide. I recognizing that that red pot vacuum pot made by I think German designers. So are you focusing on the designer coffee making machine or are you more focusing on the selling a feature? I have similar. Oh yeah, that red one.

Jake Miller: Yeah, that's just a, uh, it's a Stelton. We just use it for water.

Speaker E: Yeah, so. So I was wondering what would be your brand association, like relating with competing with what brand? Like what would be your, the best competitor? And there is no American actually coffee machine brand if we go to the high end market. So I was wondering, it might be a most famous American brand. And what do you think on this? Thank you.

Jake Miller: Yeah, yeah. Um, I think, I mean for me, price is what you pay, value is what you get. So we obsess over the value we provide at a given price point. Um, I care about building a global brand. I care about having most of the world giving them access to great products. So I don't want our products to be. There's five, six, $10,000 espresso machines. That's not us. Our espresso machine is $1,500. It performs like to get the feature set that that has, you'd have to pay 5 or 6 or $7,000 today. So the value that we designed into this, as we said, okay, um, $1,500 is the price point that allows us to have to invest in the bom, the components that give us innovation and true benefit to the customer at a price point that a lot of people are going to be able to um, actually afford. Um, so I don't want to take this crazy premium think like affordable luxury. I want to like we're in Best Buy, we're in Target. Like that's where I want to be, that's where I can reach the most people. Um, but I also the same side, I'm not going to just crater price. You're not going to see us launch a $300 espresso machine. Um, because at that price point we can't offer real magic in the product design. Like it's going to be cheap, it's not going to perform. So it's trying to find that right balance where it's a price point that allows us to provide value. Um, to the investor. Question. One other thought is the investor feedback is really important. Like listen to it, absorb it. These are really smart people who've seen a lot of different pitches and then selectively ignore when you think they're wrong. Like a lot of investors get it wrong. Um, so, you know, don't take all feedback as truth.

Perry Clabon: Well, and now as far as, do we have a few minutes still? Okay, um, now Also you've made the transition to self funding your growth.

Jake Miller: Yep.

Perry Clabon: So you no longer are dependent on outside capital.

Jake Miller: Yep.

Perry Clabon: So can you talk a little bit about that was a um, transition and something that was hard fought. I know to make it work, physical product companies have inventory. They have to order the inventory, they have to stock the inventory, they have to pay for the inventory. A lot of times you probably are selling out fast. But it's still, it's. The cash flows are incredibly complex and I can't imagine. I remember with your product pipeline it's like these new products you have to figure out like can I afford the inventory of like an expensive product because the inventory is a lot more. And all these things factoring together.

Jake Miller: Yeah.

Perry Clabon: How do you get out of the loop? More and more many people now the venture market's different. It's going to be very different in the coming future. It's like if you're not a uh, AI that the VCs think can be a billion dollars in their infinite wisdom. It's like there's not really much many dollars out there.

Jake Miller: Yeah. I mean hire m an incredible CFO that helps you with this. But yeah, we're, we have 4 distribution centers around the world currently $25 million in inventory that we've paid for. Right. Like that's real cash tied up um,

Perry Clabon: in seven million or something like some huge number. And you're going to get refunded.

Jake Miller: Yeah. On the profitability side, I mean again what. Because we weren't really able to raise significant amount of money early on. Like the focus was profitability.

Perry Clabon: Yeah.

Jake Miller: From day one we didn't hit profitability in year one or year two, but we were profitable earlier than most startups because we had to be. There was no other choice. Yeah. Um, do you see that now in

Perry Clabon: hindsight as a, as a benefit you can't change your journey. But is it a benefit?

Speaker D: We.

Jake Miller: If someone, let's say we would have successfully raised 5 million bucks 10 years ago, we would have failed. I would have uh, I would have launched a product that we weren't ready to launch, that the market wasn't ready. I would have just tried to figure out how to spend it. So we. There was an amount of discipline that having no cash forced us to, to, to really pursue.

Perry Clabon: And is there a dark side of that too? Are there things that. Do you think it costs you more time, do you think? I think if.

Jake Miller: I think, I think we could have probably year five or six. We probably could have raised more money to accelerate the roadmap mhm. But we, you know, we're, you know, first year 10, you know, profitable. Um, uh, year four through 10, we were profitable. Then we said, in 2022, there's all these cool things we want to build. I actually can't fund them today. So in 2022, we, we went out and actually we raised our first real institutional funding round. We brought in $30 million. Uh, the espresso machine is one of them. We're sitting there in 2021 saying, the world needs a fellow espresso machine. This is a huge opportunity. That machine was millions and millions of dollars of R and D. So then we went out, raised $30 million and said, no, I have a plan. I can't execute on that plan without cash. Brought in cash, hired 50 more people, next two years lost money, planned, but scary.

Perry Clabon: Yeah.

Jake Miller: And then that turned back to profitability and scale.

Perry Clabon: Yeah. You're one of the rare ones I've seen that the discussions about even profitability and margin were sort of built in from the start of like, is this viable? Is this viable? Is this viable? In a way, it laser focused you on stuff like the debate about. I remember your debate about the cattle, like, am I going to be a cattle company? It's like, you do cool features, but it was also like, oh, this really does work.

Jake Miller: Yeah. And because we didn't have the cash to take on the complexity of a product like a coffee maker, an espresso machine, we did have the cash to take on the complexity of the kettle.

Perry Clabon: Good idea.

Jake Miller: Launch kettle. It turned out to be successful.

Perry Clabon: Yeah. Yeah. Well, how are we doing on time? Okay. Um, so any.

Jake Miller: I.

Perry Clabon: It's kind of an interesting question. So these are all. They're all folks who are leaving, you know, and going to start businesses or in here to learn about it. You know, what do you, if you look back at those first couple days, are the. What are the sort of, um, stepping stones that you thought were like, these are the things as I put my, these couple first steps into, fellow, that you sort of see now being things that were critical about your success and sort of getting your trajectory right.

Jake Miller: Yeah, I think everything goes back to the customer.

Speaker D: Right.

Jake Miller: Uh, businesses only exist because we have customers that are excited about what you're selling. Um, you know, we make something for X, we sell it for Y, and it's, you know, it's that customer who buys it for Y. I think so many companies forget about that customer. They forget about that reality. M. Um, so the advice is like, obsess over those first five customers, 10 customers. 100 customers. 500 customers. When we launched the espresso machine, just an example, we had a customer, um, in LA who bought a machine. Uh, the machine failed. It was dead on arrival. For whatever reason, it got damaged in transit. We have a store in Los Angeles on Abbot Kinney, one of the store associates took a machine from the store and drove 75 minutes to that person's front door a day later and handed him the new machine and picked up the old one. Yeah, like that, uh, math doesn't work. Yeah. But that person said, this weekend I'm doing this coffee event. I'm going to have friends over. It would mean the world to me if I got it. We're like, we'll drive it.

Speaker G: Yeah.

Perry Clabon: Because it's what you stand for. It's a great example.

Jake Miller: Yeah.

Perry Clabon: And the employees tell that story, I'm sure, completely.

Jake Miller: And that person is. I bet that person has told 100 people. They're like, you're not going to believe it. Someone from Fallow knocked on my front do Dorn.

Perry Clabon: Yeah.

Jake Miller: Handed me a machine.

Speaker G: Yeah.

Perry Clabon: It shows. That's a good example of what I would call product to product experience. Like the experience they had with it. They're going to. Every time they pull a shot, they're going to be like, I have to tell you a story about this espresso maker. Yeah, that's a great example.

Jake Miller: Okay.

Perry Clabon: Okay.

Jake Miller: Thank you guys so much.

Narrator: The Entrepreneurial Thought Leaders series is an original production of Stanford E Corner and the Stanford Technology Ventures program. To learn more, please Visit us at STVP Stanford. Edu eCorner.