Brand Is Not Branding, And Other Mistakes in Consumer

Speaker A: Foreign.

Speaker B: Partner at Listen Ventures, a Chicago based consumer only fund that manages $130 million across four funds and has backed some of the most recognizable names in modern consumer Calm, the meditation app now valued over $2 billion. Factor the prepared meals business acquired by HelloFresh. Listen was actually the first and largest investor and helped build the brand from inception to exit. They're invested in Dame Interior defined good bacteria and a growing roster of brands are what Listen calls the tipping point of consumer behavior shifts. Rick tells us the model is deliberately contrarian, no spray and pray, a hyper concentrated portfolio of 12 brands per fund up to $5 million per check. The thesis is simple. When you take Listen dollars you get all of Listen capital, creative brand expertise and consumer insights all under one roof. Today we get into how Rick thinks about brand versus branding, what he's learned about founder psychology from years of watching companies win and fail, and why TikTok now is the Facebook of circa 2014 M and why scrappiness is the thing you have to protect most aggressively as you scale. Welcome to in the Money, an exploration of whether you can still make money in DTC and CPG. We talk to some of the most interesting $5 million to $50 million founders, operators, investors in the space to ultimately answer the question is DTC and CPG still a good business? Hope you'll enjoy the show Rick.

Speaker A: In pre recording we were talking about that Listen looks for great brands brands at a time of change. Brands at the cusp of a new trend, a new frontier.

Speaker B: But I just want to focus on

Speaker A: this word brand because I love talking to investors about brand because it means different things to different people. I was actually listening to Moise Ali of Native fame on a podcast he did recently and he said that he thinks that founders make a mistake by building a brand too early. He says that Native was a single skew solving a problem that had good channel fit on Meta. And even at 100 million in rev,

Speaker B: it was a product first that had

Speaker A: the opportunity to evolve into a brand. And now today, you know, multichannel bigger scale, investing a lot more in brand marketing wants to create emotional connection between kind of the scent of what's in the stick with warm fuzzy feelings about your family.

Speaker B: But it started as a product first

Speaker A: solving a specific problem. Maybe just riff on brand.

Speaker B: How early do you need to kind

Speaker A: of see those brand cues in a target or a portfolio company?

Speaker C: Yeah, it's a great question. Native, uh, is a great example because what they did in such a capital efficient way so early on became like the north star for so many others, but not replicable because they hit their moment in time and he executed it flawlessly. And everyone who tried it after as well, that was no longer, you know, someone else had done that, done that. It was no longer the right path. Um, brand for us is, I think classically it's the sum of experiences between consumer and company. That's the brand. So the experiences you have, whether it be historically, the way it makes you feel, the way the people in the department stores talk about it, the, the packaging online now, the social media, the customer service, the actual product, all those are experiences. Um, and I think it's the sum of that is brand. What we've gotten wrong historically or in the last 15 years of this run up of D2C is that brand and branding have become synonymous. And I think branding is, you know, the red antlers of the world making a great something look really, really good. You know, they would call it, you know, affordable luxury. Everyone should have this luxurious experience with the company. And that's branding. That's table stakes. If you're not branded. Well, uh, if you don't have the right design and the color palette and tonality, it's going to be harder for you to get that meta ad delivered to me, harder for you to stand out on retail. So I think branding is a must. It's almost table stakes. And with AI and where the agencies are and designers, probably never been easier to get good branding unless you're using cloud design, which means everyone's brand is going to look exactly the same. Um, I think for us, what we're looking for is first and foremost, a great founder should always be investing in brand, because brand is as internal as it is external. If you don't have your purpose, if you don't know why you exist, if you don't know how you speak and think and act in this world, it's really hard to make decisions. One day you might be talking about sustainability, uh, the next day you might be talking about convenience. The next day you might be talking about price. But your brand sort of dictates what you should be talking about. It gives you the authority to talk about certain things. So I think the external branding you can do very quickly, but you have to spend the time internally to know why you exist, what you stand for, how you look and feel, because otherwise you're going to make a bunch of mistakes. I also think, as he's learned, this brand cannot be built overnight. The sum of, like, you're not making enough experiences with your end Customer to build a brand. And what we found is most D2C digitally native brands, they sell long before they have the opportunity to actually become a brand. Brands take 5, 10, 15, 20 years to happen. So we hope that we can find businesses that are in the right, you know, in the right zone of brand and that this end buyer believes that it can become a brand. But it's rare that you can build a brand, uh, that's, you know, sells in our time period. Uh, most of them just are benefiting from excellent branding and great customer experiences.

Speaker A: Are you looking for that to show through in NPS and retention, that kind of accumulation of brand experiences? Or is it more everyone on the team is buying the product, emailing customer service, finding it on shelves, seeing how retailers are talking about it. Is it kind of more anecdotal and analog or are you kind of more viewing it through the data?

Speaker C: I think it's gotta be both. I think that, um, first and foremost, I think we need to make sure that founders and teams believe in brand, that they view it to be an investment, not a cost, that they're willing to do the things that make, make no financial sense. Meaning, hey, we're going to show up at doing events here and we're going to, we're going to activate this group of customers and we're going to do this great TikTok campaign. Even though we can measure this, we're going to do it because we think it's going to build more experiences, build more awareness with our customers. So if they believe they're looking at everything from a performative standpoint, it's just not going to work. They're going to say no to a lot more things. Um, second is, yeah, I think the customer matters most if the customer, and I think in this case what Moises said is product trumps the experience. Like, there's a lot of business products that allow a lot of companies that allow you to get the product in hand. If the product sucks, it doesn't matter how good the brand is, doesn't matter at all. So we want to see brands that people love on Reddit. We want to see brands that are active, that customers are talking about socially, that, uh, high NPS word of mouth that merchants can't get enough of. Um, we think that's a little bit of both what we're reading through social listen, what we're hearing through social listening and what we're seeing through the data. But you also can tell from the team upfront, you can tell, I love performance marketing. I Love meta. I love TikTok. Um, when you pair that with great brand building and noise making you have really an unstoppable one two punch.

Speaker B: Just because you've mentioned customer experience a

Speaker A: few times, I'm curious your view on customer service and you also said view it as an investment not a cost center. Because I think customer service is such an interesting approach arena for this. You know I think E commerce brands maybe 10 to 12 years ago started outsourcing customer service most notably to the Philippines. We're now way past the Zappos. Like everyone needs to be in person like phone service 247 arguably like customer service experiences have probably degraded over that period. The last three years it's all been about AI customer service.

Speaker B: So I'm curious if you have a

Speaker A: view of like no early like it needs to be even founder led or it needs to be in person us based and you're and it's an investment not a cost center. Thus hey, keep OPEX tight. Yeah. What do you think?

Speaker C: Yeah, I mean it's both. Um, yeah, I don't think you can have limitless, you know a customer experience thinks the math won't work. Um, you know I'll, I'll, I'll break down your P and L. What is this call center. Um, but, but I think one, I think there's table six and there's an expectation by the consumer that you're going to get really good experience. Um and I think it also depends on the category. So you know if you're buying a widget, you know something for $10, you know the unit economics probably don't allow you to have wonderful customer service. Doesn't mean you can't brand the moment. Doesn't mean you can't teach the team in the Philippines to speak, speak on brand and speak in a great tonality way. It doesn't mean that you can say you know, you can't write email like we're not going to get back to you because we don't have money to do it right. You can lean into it. When you put it on autopilot without any personality, you're telling the consumer that you just don't care. So I think there's a lot of novel and creative ways. The most where uh, I think consumer uh, service is the most important is when it's a high involved purchase. Two of our biggest outcomes or business has been factor which is a prepared meals business. Um, you know you're buying fresh food in a brown box and sometimes in the last mile product gets Messed up. And people have trusted you to be their lunch and dinner for that week. And if something gets messed up and you're talking to a robot or talking to someone overseas, you're probably pretty disappointed. Like, you know, we were telling people where you're personalized chef and then you're not getting to talk to a human. That's a problem. And so we over invested in that. Our CEO would make customer phone calls and they were blown away that we would do that for them. And they also learned that if you talk to us, we're probably gonna give you a discount. Cause we took the time to talk to you. So it became really important to us to do that. And you could see it higher LTV, you know, you got offer em that 5% discount, they're gonna stay longer. A CEO calls you, they're gonna stay forever. You know, a uh, CEO calls a churned customer, they're going to come back. We're in a telehealth business called Rougette. Same thing. This is a personalized decision. You're getting medicine online in a world where you only got medicine from a doctor. And so while telehealth makes it discreet and convenient and fast, you still want to feel like you're engaged by your provider. And so I think the customer experience matters materially. So you have to understand your unit economics. If you can't afford it, you should brand it to make it wonderful. Lean into the fact that it's outsourced or AI'd. And if you can m. If it's a highly involved purchase, make sure that you are investing in it because the consumer care sends a differentiator from someone else.

Speaker A: Rick, let's get into Listen. So you previously had or maybe still have a startup studio, mostly focused on tech. How did that evolve into Listen and part two? Like, tell us a little bit about the listening part of Listen.

Speaker C: Yeah, yeah, I have to back up a little bit. But, uh, I'm the recovering banker at Listen. So I grew up in, uh, investment banking at a firm called Leben Brothers, which I'm not sure if all of your viewers will know or heard of. I know you have. Um, and then I went into private equity, um, and I launched Dash Fire, um, because at the time it was 2009 10. Anyone, uh, in my cohort grew up with Facebook in college. And we're all just blown away. The fact that someone wrote software and this business, it just seems so simple. But none of us could code. Uh, like now we're in the world, everyone's coding with Vive coding no one could code. There's just a very small group of people who could actually set up a server, understand the basic languages to get online.

Speaker B: Landing Sephora, Whole Foods or Target feels like a major win until they send you an EDI spec sheet that reads like it was written in 1987. Because it basically was. Suddenly your growth depends on technology older than your founders. Most brands wing it by signing on with legacy providers like SPSCommerce, which means long onboarding, outdated interface, a fee for every document, and an overpriced annual contract.

Speaker A: Sound familiar?

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Speaker A: money Every business person had a business idea. All they needed was the technical co founder.

Speaker C: That's all they did. Business school, like the one engineer in business school was like the most coveted person. Everyone wanted them. And so we, you know, my peers from business school looking for that. So I was like, huh, that's a huge gap. Everyone is looking for the technical co founder. And so we play that role. We set up a team of developers in India and in Croatia. We traded their time for equity in my friends businesses frankly. I would go to business schools, sit in their lounges, hear them talk on the business, sort of knock on the door and be like, I, uh, can do that for you. And so when they would enter at the time you wouldn't have an MPP competition or uh, a uh, pitch conversation. You would have a business plan competition. We were still in the writing documents phase and my founders would show up with a product and it wasn't a good product, but it was a product that showed, hey, you know, we're live, we've got some customers coming. And that would do two things. One, it would attract obviously customers to show that they knew how to sell and market. And then second, it would actually attract a better technologist because they could go to, hey fan, you're the one business schooler that can code actually um, up and running. You should work with me versus the business plan. So we did that for a number of years and then in around 2014, 2015, I recognized that software is becoming completely commoditized. You could go anywhere abroad. WordPress, Shopify, it all existed. So if you're coming to me you probably weren't hustling enough. You weren't probably the most scrappy entrepreneur mitigating risks. But one of my investors was a guy named Jeff Cansalupa who grew up in brand. He's the ad guy, grew up in Brand. He, at the same time I was running dashfire, was, uh, angel investing in consumer brands. And his whole view was he's working with Kellogg's and P and G and Philip Morris. And they were all talking about innovation. They're like, we need to build a, you know, a Facebook page for Special K. He's like, nothing that you do is going to make Special K fun and interesting. Just like lean into what you are. You're, you're not this up and coming brand. And so he wanted to invest in innovative companies that didn't know brand yet and he would support them on brand in the same way we were supporting our company's technology. We sort of joined forces with the two, two premises. One is we were kind of disappointed with early stage Capital. Um, we think that early stage capital, um, promises the world. And this is back then they say, we're going to provide you all this value add. That was the buzzword. But you're writing 40 million, 40 checks out of a $20 million fund and you have two people working there. You have no time to provide value out. It doesn't work. But an early stage founder needs the most value. It they haven't seen around any corner. They've never hired the great talent, they haven't raised the next round. They haven't scaled meta or scaled their tech. They haven't done it and they were in most need. So we sort of had a contrarian view that we were going to be concentrated, we were going to do fewer deals. We got laughed at by a lot of LPs. We're going to do fewer deals, which you can do in consumer, in our view. And we're going to do an exclusive in consumer. And I sort of drank the consumer Kool Aid, um, and haven't looked back. No more invisible wear or writing, you know, putting this pixel in your tech stack to get, you know, better, better page speeds. It was all about consumer.

Speaker A: And then the listen put part M again in pre recording. You were talking about how you've learned to listen better. Maybe tell us about that.

Speaker C: Jeff called it listen. He's like, in a world that can't stop talking, the best investors listen. As an ad guy, great, great, great, great tension in that statement. Um, and so we would ensure that we would be talking to customers. We'd encourage our companies to listen. We would, um, and I think we had a pretty good track record. We were, when we'd find a founder who would bring us really good tension. You know, the founders of Calm said that, hey, you know, this device, what if this, what if the device that actually creates the most mental health issues could actually be the solve? Why don't you meditate on your device? The guys at Factor said everyone wants a personalized chef. What happens if we put fresh food in a brown box? Because the logistics allow us to do that. We're like, huh, that makes sense. People care a lot more about their wellness, uh, you know, post recession and post digital, uh, media. That makes sense. We were able to, you know, find great founders and figured out that they weren't interested in the fresh food in the brown box. They were interested in eating healthy, they weren't interested in meditation. They were interested in like, uh, uh, a cleanse, you know, a phone cleanse. Um, you know, we were early in nicotine with Black Buffalo. Similarly, we people wanted, they wanted their ritual, but they didn't want tobacco anymore. So we were getting it right. And of course we got a lot of them wrong. Um, and then in 2022, we brought on, uh, a woman named Ellen Wilcox, who was a student of mine at Kellogg. She interned with us. She went to Ido and we told her, you're going to come work for us one day. Because she told us as an intern, she's like, it seems like you guys really listen to confirm your biases versus listening for a new insight. And I was like, oh man, is that true?

Speaker A: What a punchline from the punchline.

Speaker C: What a punchline. She said it to us. She's like, you just like you're finding the data that proves your point. And she wasn't wrong. And her point was, let's go in there and actually listen to consumers. And so since her arrival, we've gone deep into women's health. We were talking about perimenopause three years, four years ago, right when MIDI and Alloy were starting. Um, we were getting into Food is Medicine. And she has this incredible chart where she talks about GLPs. And like right now people who are obsessed with living forever are taking GLPs and people who, uh, have significant diabetes or chronic, um, obesity, they're talking about GLBs. But what happens if the mask gets into it? She was right. We're now looking at social beverage. What's happening with hemp derived THC peptides, you know, and so, but she's done that by interviewing hundreds of people. AI and protocols allow us to get there fastest. We can, meet hundreds of people, get their viewpoint, synthesize it, and come back like, this is what they're actually saying. Reddit confirms it. Reddit is the only place Peptides. If you go to Reddit and read about peptides, it's the only place where the fringe left and the fringe right agree. They both agree that you should be on peptides. So it's been a lot more listening and covering new things. And then when you meet that founder who by the way, is living the problem, they're doing it day to day. We're not. And the founder says, hey, I think longevity is going to be about peptides. I think supplements are going to be peptides. Like, we know, we agree. Um, and so they get a lot more like, oh, you've done your research. They don't have to pitch us the problem, we already know it.

Speaker A: You mentioned value add before and kind of began 2014, 15, maybe some of the fallacy of value add, I think I read that your have staff members doing a, um, creative brand for your

Speaker B: podcast, is that right?

Speaker C: Yeah, so we started that way. Um, you know, we're very much a startup. I think we all VC funds have to be. Um, we, our original pitch was we're going to invest dollars and then we're going to invest brand expertise. And in many cases, you know, factor is a business that we branded from scratch. Own up is a business we just sold to Experian. We did their whole brand. We would literally redesign the companies, sort of Red Antler esque. We would rebrand them, we would think about their web look and feel. We to now we do all the work. And one of our partners here is a gentleman named Brentos and he is a creative director. That's what he's done. He's got the tats and the long hair, so he looks the part and, uh, he gets to work on the brand. Over time, as we've said, branding has become just so much easier to do. It's been less branding oriented, more about just confirming, you know, what you stand for. So every time we do a deal, we get everyone in a room, we hear what they're talking about, how they talk about. A lot of times, you know, six people at a company, they don't all say the same things about the company. Um, and so we want to make sure everyone's on the same page so you can make the next decision easier, better, faster, cheaper. Um, and when we are investing in brands that are already great, we can then support them, we can extend their capacity. Is there an activation, is there a campaign they want to run? And we're happy to roll up our sleeves and help them do that Same thing On digital marketing, given that all we do, all we have is companies that are, you know, E Comm, retail, consumer Internet. We have a lot of best practices that we can share across our company, not dissimilar to others, but because it's focused on consumer we can not only show them what our brands are doing, we can often help them do it.

Speaker B: If you've been running a Shopify brand for a few years, you've probably already

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Speaker A: The pattern is always the same demand

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Speaker A: Since it's so Listen and then Thesis Evolution driven, maybe you could talk about one or two of uh, the trends that Listen is particularly interested in. I know you've talked about Peptides a couple of times you mentioned so drink.

Speaker B: Maybe uh pick something that yeah you're

Speaker A: in market looking for or that you're really excited about that a port co is currently in.

Speaker C: If this was a year ago I would say tasty beverages and Peptides but I feel like the cat's out of the bag. Demand is only going to get bigger and it's less for imagine you're the people who are watching this or listening to this already are aware they're taking their BPC and they've tried, they've tried THC beverages. Um, so I'd say the two, two net new categories that we're focused on is we've been very invested in telehealth through our company Rougette. We're actually now really focused on, um, deprescription. How do you actually get off, how do you actually get off medicine? And you know, I'll, uh, it's off of an insight we met through a company called Outro, which we're an investor in. And their belief is, you know, there's a role for pharmaceutical drugs. Of course there is. They're very, very important. But they're often not used in the way that they're supposed to. You know, antidepressants are not intended for, uh, lifetime use. But if you, if you stop using an antidepressant and you psych from a psychiatrist and you need it, it actually becomes ineffective when you get back on it. And if you're on Reddit and you're reading about people's, you know, relationship with their antidepressants, they're already trying to taper off of it, they're dissolving it, they're making solutions out of it. They're cutting into pieces because they know if they quit completely, they had actually had side effects, they'd have withdrawal. And so Dr. Uh, Mark, who's one of the founders there, wrote a book on hyperbolic tapering and we believe as being really big in telehealth, we don't think that's going anywhere. Um, you also need an off ramp. And so we think that's going to happen in GLPs, antidepressants, anxiety medicines. Uh, we think peptide things that happen everywhere is how do you actually get on and how do you actually get off? So I think that's a really important category to us. I'd say the second is a category that we're looking at aging. Um, everyone is, um, the boomers and uh, they have so much spend. What are they going to do for their health and wellness? And an area we really focus on and on is their basic, basic activities. So as you get older, the idea of waking up in the middle of night to go to the bathroom is stress inducing. I have to turn on the light. What happens if I fall? If I fall, I might hurt my hip. If I hurt my hip. It's all down roads from here, downhill from here. Can I not hear correctly? Am I hearing poorly? What does that mean? Am I going to withdraw from conversation? Am I not going to go to the restaurants anymore? Am I just doom scrolling on my phone because it's the only thing that gets me. And so we've identified basic living activities as an area to look at and it's pushed us in the direction of you know, we're in a, in a stealth company doing a hearing aid product that's really cool, stigma free. Uh, we're looking at businesses that are helping, you know, basic lifestyle changes into this community. It's forcing us to understand Medicare and Medicaid more which is very uncomfortable. Um, but uh, uh, we like that cause they, we believe they have unlimited capital. They are social media savvy so they are on Facebook and TikTok so you can get to them. There's not a lot of brands trying to target them in terms of improving that because these are hard problems to solve. Um, and you're seeing second, third time founders as they see their parents age, really invested in building brands here. So I would say those are the two categories I'm most excited about.

Speaker A: The stealth one is an interesting segue into kind of just stage and how

Speaker B: early do you like to get involved?

Speaker A: How late will you get involved? Do you like take kind of pre launch risk? Is there a, with the hardware device? Is there a concern of hey, we could spend $10 million two years pre launch on R and D but then not hit kind of market fit? Yeah.

Speaker B: Talk to us about stages.

Speaker C: Yes, yes and yes. Um, we historically have written two to four million dollar checks at the early stage. Um, you know, 10 to 12 deals, uh, want to, want to get as much ownership as we can on the first track and then we want to roll our sleeves up and help our companies. You take our dollar, you take a listen dollar. Listen, all of us work on every company. I think that what's changed in the last 12 months has been AI. I think that if we wait to do that deal, we'll probably miss out on a lot of deals because we didn't need to do a pre seed deal before because pre seed always, almost always turned into seed. If you raised a couple million dollars, you got just enough traction to go. Allow me to raise at a uh, 10 to 20 million dollars valuation that was always available. Now you raise that 2 to 3 million dollars pre seed, you might skip that round entirely. If it's working, you don't need to hire as many people, you don't need as much creative talent for marketing. You're probably getting better gross margins because you can have better merchandising or better procurement. Um, so we got really nervous that we were going to start missing those rounds. So we're able to, we're now choosing to write a couple more, you know, more option checks. And I wouldn't call them option checks. We're still working very hard for these companies, but it allows us to do two things. One is we can understand how well the business are performing against the underwrite and whether we can validate to them that we're great partners. And if that's the case, then we can preempt those rounds. Um, and that's how we can get sort of our core concentrated position on. So we're doing more of those deals on hardware. No, I hate hardware. I, um, think it's capital inefficient. I think they never get it right. I think if it's going to launch in a year, it's going to launch in two years. Um, and I think there has to be a rare combination of a team that has built in hardware. There's not a question mark that they can't do it. They will do it, they can do it, they've done it before. And an infinite tam, I, um, think if you're playing in small market hardware, you have a really tough problem because you're going to be diluted so much with follow on capital and you sell for a few hundred million dollars, which works for most consumer categories. I don't think it works for consumer hardware. So you need to have an infinite TAM and you need to have founders who have built hardware before. Because you make one mistake on supply chain, you're done. You have to go raise a down round. It's really challenging. So that's got us a little more comfortable. AI helps writing. Firmware and software is a very small sliver of their use of funds now. Before it required lots of engineers and a whole team to build the app. You don't need that anymore. They can do it with AI. So I think it's changed a little bit. Um, I'm still very hesitant, but we were just blown away by team and this particular deal and the infinite TAM around. Boomers.

Speaker A: Let's talk a little bit about location. Historically, so much of consumer investing, consumer brands, you'd even say kind of being on the frontier of trend is coastal. Listen's based in Chicago.

Speaker B: Yeah. How do you think about geography?

Speaker A: Sourcing edge, where you like your podcoast to be?

Speaker C: I think the party line in Chicago is, has historically been like, we can do it. Um, I think the party line in most cities has historically been we can do it too. I think the reality is no, you can't like we're not going to go out AI San Francisco. I think we seen the Austin Miami experiments. They're not going to out AI San Francisco. I don't think you're out FinTech, San Francisco or New York. The capital markets are there. You're not going to do it. Um, I think Miami's, you know, IRL Miami, I think, you know, longevity Miami. That's where all the people are. Yeah, I think they're doing a really great job. I think where Chicago, if you look at the numbers where Chicago has done exceptionally well yet we've done a really poor job marketing ourselves for it is in Food and Bev and it shouldn't be that surprising that we're good at Food and Bev. One, some of the largest CPG Food and Bev brands are headquartered in the Midwest. Two, from a logistics standpoint where can you, you can manufacture for really cheap and you can distribute cross country really cheap. Um, and three, the talents that comes out of Midwestern schools and is being trained, you know, at CPG is all there. So I think we're the best in class of food and beverage. I wonder uh, if there's a city that's better than us. We're also representative of the US So I think your early adopters are New York and LA and Miami for sure. Like you got it. You got to win there. There's a lot of companies that are winning in mass markets. Like I think we look at, we look at companies that are going to win in the coastal cities, but there's a lot of people in mass America. Um, and there's a lot of brands that are winning targeting them, not targeting coastal elites if you will. So I think we advantage. I think it also um, uh, there's a lot of considerations by investing in, by headquartered in Chicago, you might not get the best digital marketing talent, you might not get best AI consumer engineers. Um, you might not get access to the best funding. Uh, you know, El Catterton's in New York, Cabo's in New York and in Texas I believe, uh, a few others are in California. There aren't many big stage consumer funds, uh, you know, later stage consumer funds in Chicago. So I think that's an issue. I think there's pros and cons for it ultimately. You know, you can make movies outside of Hollywood, you can trade stocks out of Wall street, you can build businesses anywhere. Um, and it becomes the team, the ability to solve that problem. But we uh, like Chicago from the logistics standpoint for sure.

Speaker A: Yeah. Super interesting.

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Speaker A: founder that's listening right now that is maybe building in elder care or you know, is solving your problem in adult diapers.

Speaker B: How do you like to be approached

Speaker A: and like what do you like to see? What's going to get you to cancel your afternoon and spend the, you know, two hours with this founder?

Speaker C: I, I love when founders obsessively inundate us like what's the worst thing that can happen? Like hit us up on our website, get a warm intro, hit us UP M on LinkedIn, send us product like what's the worst thing that can happen? I ignore you. Not saying I'll ignore you, but sales. I think if you're not good at sales as a founder, you're missing an intrinsic quality. That thing is M if you can't, if you can't hire talent, if you can't raise capital, can't sell to consumers, you know that's a problem. So I think sales having that people don't like the word sales. It is such an important skill. Um, as VCs we have to be really good. We have to sell ourselves, we have to raise money. It's a sales game. So if you're not willing to be rejected, I think it's a huge issue. I want to know that. I love when you inundate me. The classic move is hey, I'm going to be in Chicago on Thursday. They're not going to be in Chicago on Thursday. I'm like, yeah, sure, swing by, they book a ticket, they show up, it's in Chicago on Thursday. So that's the attitude I love seeing because then I know they care. Uh, they really want it. They're sending me products they're always selling. So I, I would say that's the first and then do the work. We're very, we're becoming more um, external facing. We're posting tons on LinkedIn between our partners publishing our research. You know what we're looking for? Um, you write peptides in a subject line to me. I'm going to open the email. I, I have to. Um, um, so I think it's, it's paying attention. I, you know, I think you can tell especially with AI, you know, so there's cold emails and there's impersonal emails. Um, I don't mind cold emails if you make them warm, if you make them personal. I don't like a cold email that's got my name wrong or got a bracket or is completely regurgitated, uh, from A.I. slop. Um, use A.I. but show me that you're good at brand.

Speaker B: And I know I asked this question

Speaker A: earlier but maybe we just put some numbers to it. So yeah, they're building in a, uh, category they care about. They've got pep, you know, they're in peptides and put that in the subject line.

Speaker B: Yeah. Is there a size.

Speaker A: What are some bold elements in that email with the other than the peptide subject line that's got you interested?

Speaker C: Depends on the stage. Um, I'm the math guy on the team so if you're emailing me, I love knowing about your unit economics. Obsess over them. Uh, I think if you have a great command over unit economics, it doesn't mean that's all you're good at. Um, um, that means you understand as the founder of your business, as the. Which means you're the biggest investor in your business, you're objectively evaluating your business in the same way I would. Um, it doesn't mean you can't have a big pitch and where you're trying to go and what the ambition of this business is, how you're going to change the world. But if you're not telling me that you have great unit economics, you know, lifetime value, LTV to CAC retention, um, I'm going to ask you, you need to be prepared for that. So you know, that's, I talk about this online all the time, so I think you having, you're going to get me if you say rick we've got 3x margin to CAC in the first. I will open the email, I'll schedule a call immediately. So write that in the subject line. 3x margin of CAC in the first year. For Ellen, it's, hey, we talked to 500 customers. Here's what they said about us. You know, for Jeff is like, um, check out this ad we made. Check out this brand we're building. Right. I think we all have our, we all have our tendencies.

Speaker A: Uh, yeah, super interesting. As we head towards a wrap. Rick, is there a marketing tactic or piece of tech that's working especially well for the Portco right now?

Speaker C: Yeah, I, uh, will see how dated I am, whether I'm cutting edge. Um, I think obviously TikTok I, um, think is a really big component. I um, think I have no, I think there's a lot of pushback from people who have inertia. TikTok doesn't work. We're not eligible for TikTok shop. There's no attribution, we're not seeing any benefits. And my counter that is, look how much time has spent on TikTok. Like, you know, look at it like old media. Old media. You couldn't measure how many people saw your billboard. You couldn't. But you still put the billboards up. You still, you know, publish in the newspaper, you still have the tv, TV ad, uh, or the commercial. If you're not engaging there when they see your meta ad, they're not going to know you as well. Um, Jeff likes to say you either have to, you should be first and, or you need to be first and, or you need to be the loudest and TikTok allows you to be the loudest. Um, it doesn't always need to be founder content that maybe that's you're not the person that do it. But if you're not willing to be scrappy enough to do it, um, I think you have a huge disadvantage. And I think the best case I see is every net new brand we see launches on TikTok because it doesn't cost them anything. In 20M14, a net new brand launched on Facebook because meta costs were so cheap relative to Google. And so by not being on it, I'm um, realizing you're not as scrappy as the net new founder who is doing whatever they need to do to survive and win. They're clipping content, they're publishing themselves, they're doing long form ads, they're doing everything it takes. Um, and so yeah, I think I always ask what you're doing on TikTok. Um, and that for the companies that are really leaning into it, it's doing really well. Um, the companies that are not nervous about it, perhaps too precious, perhaps too much inertia.

Speaker A: And then is there a. I know we've talked a little bit about AI.

Speaker B: Is there an AI use case at

Speaker A: the brand and Portco level that you think is interesting novel to share with the audience?

Speaker C: Yeah. If you're not. I, um, would say the same thing on TikTok. If you are not AI ing everything or at least contemplating or trying it, you are, you're a step behind. I think that whether you look at, you know, inventory procurement or internal workflows, or even the customer funnel and digital marketing, if AI is not touching all of that, you're just behind everyone else. You have to believe that your competitors are doing it in full stack AI, which means they have less people, they have less opex, um, they're moving much faster than you. It doesn't mean you're replacing everything. It should make all your humans on the team far better. And so I think the classic, and I didn't invent this is are you trying to use AI to be skinny, which means you reduce your workforce by, you know, you cut it to a tenth and you get the same productivity or you're looking to be strong, keep your work for us and be 10 times better. And I think we need our companies to be strong. Um, we need to be lean into this moment and take advantage of it. And I would say what we found, we're building a lot of AI internally is we try to build net new things and like two weeks later Claude and OpenAI just catch up. They just do it themselves. So now we're building multi skills that are within Claude. So today it might be Claude, but we can then take our skill and put it elsewhere. Similarly for a startup, if you're a two person startup, you're writing a lot of skills, you don't have time. And so I think, you know, um, concluding comment on there is always go back to your scrappy self. If you are a founder, write yourself a note and say, here's the things I do today that I never want to compromise. I call my customers, I create band aid solutions. Good is sometimes better than great. I'm willing to do whatever it takes. Two years later, when you're at $10 million of revenue and you've raised venture capital and you have a board and you have a team, look back and then say like, oh my God, I'm not calling my customers. I'm not creating bandit AI solutions. I'm. You know, I think you can't ever leave that scrappiness. Um, because if you do, the next scrappy company is going to come and beat you.

Speaker A: Yeah. Fascinating. Other than peptides and 3 times margin to CAC, is there anything else that you're seeking from listeners, operators, collaborators?

Speaker C: Uh, yeah, I think it's. I teach a class at Kellogg, so I understand the idea of like looking at a market map and finding a gap, but this is a, uh, hyper, uh, irrational decision to make is to start a company. No one should do this. Vast majority of them fail. There's nothing glamorous about not getting healthcare and living on a. So not. There's. There's nothing glamorous about it all. Like, no, no one should actually do this. So if you're willing to do this, you gotta be doing it for the right reasons. You are most likely gonna fail. So if you're not motivated every day, just like I'm most likely to get investments. Wrong. If you're not motivated by the ultimate customer problem, you're not doing this for glamour and for money. You're doing this because you truly believe in what you're doing. You gotta get out of it. I would rather you join a company, join a 50% startup. Um, watch the founder psyche, watch their volatility from a day to day. Is this for you? I mean, that's the best job for a wannabe founder, an aspiring founder, is to go work at a startup. You will learn so much more there. So, yeah, show me that you have de risk this. I don't think the best founders seek risk. I think the best founders mitigate risk. And so show me that you're mitigating risk along the way.

Speaker A: Amazing. Rick, thanks so much for coming on. I look forward to m.