208. Bootstrapped, Profitable (€2.2M) & Paying Dividends: How HackMotion Turned a Niche Golf Gadget Into a Global Hardware Business w/ Atis Hermanis

Speaker A: When you're bootstrapping, you have very limited resources and you have to make sure things work almost right away, at least in some small scale. We are not forced to think about exits or anything like that. So obviously we have still all our options open. Obviously not all of the things are amazing. You know, obviously several problems arise from this kind of model. First, very obvious one was that we had to be like super frugal, super scrappy, especially early on. And again, it's another thing that sometimes even, uh, kind of funny to look back. Uh, but yeah, I guess for us one of the biggest problems and it's not so far been really practical problem, more of kind of, I don't know, mental and kind of planning challenge is just big uncertainty. Uh, because I think like it was in March or April when like the first time it was, okay, there will be these tariffs, crazy rates, every single country. Then it turns out after a couple of days, no, it's not going to be the case. So back then we understood, okay, we kind of, ah, uh, can predict something. So again, we have business to run, we have product to build and do all the marketing and distribution. So we can therefore focus on something that can change kind of every day.

Speaker B: Hello friends. We're back with another episode of Pursuit of Scrappiness podcast. We're building a business, running a team, or just starting out in your career. We are here to bring you scrappy and actionable insights to help you become more productive. As always, my name is Jan Zeps. I'm here with Mr. All the starter accounts, as always. Hey, hey Mr. And today before we start, very original reminder. Follow us on Spotify and Apple podcasts. I know we have never said that, but, uh, it helps more than you know. Please do that in exchange for that. You'll find over 200 episodes there. We cover all sorts of topics that you need to become scrappier and better version of yourself in life and business and marriage maybe, um, but primarily business. Plenty to explore if this is your first episode and if you subscribe, of course you will be the first one to know when the new episodes drop every Tuesday. So go to Apple and Spotify. Please do that for us. All right now. One thing we love ourselves about Pursuit of Scrappiness podcast. It brings us together with guests who have, um, done very many interesting things in different fields. They figured out clever and profitable ways to build businesses in so many areas and industries. And then no story is quite like the other. And today we're exploring another niche that we find. I don't Think we have covered too often now we know that after people have met their daily needs financially, they spend their money on their hobbies and uh, quite a lot of money I would assume, worldwide. And of course for a lot of people. It also includes sports activities. I mean we want to keep active, we want to keep moving. And sports is this crazy thing that kind of drives people to be more competitive. And in few of the sports you can see it more than in golf, uh, actually where like performance is and you know, technique is so important. It's very unforgiving hobby to be honest. It pushes you to be at your best to even uh, enjoy the game, not even to mention to be really good at it. The technique has to be very proper if you want to enjoy a game of golf even casually. And of course of course this creates a huge market for all sorts of various types of sensors, coaches, apps, assistants and devices globally. And the one company that has very successfully and profitably tapped into that lucrative market is Hackmotion. And very happy to have actually for the second time already founder of HackMotion, uh, with us at Herman.

Speaker A: Hey, uh, happy to be here, honored to be invited and chat, uh, a bit about tech and golf.

Speaker B: Nice. And yeah, uh, Hackmotion is a lifetime startup. It's bootstrapped, profitable and growing. So all three things that make any startup founder envious these days. So we were going to talk about bootstrapping and profitability. We're going to talk about also rewarding your employees not only with stock options but also dividends which hackmotion is one of the few startups that they are doing it. We're going to detail, in detail, talk about also building hardware and software product because for, for Hackmotion there is two components. There's a hardware element and of course the actual app and software that people use. And also of course has AI impacted that business and how the tariffs, I mean everybody wants to sell to us how the tariffs affect that. So maybe some interesting conversation about that. But yeah, let's, let's just ah, kick off finally. Uh, actually we spoke in 2022, a lifetime ago in startup years I think. And uh, what do you think have been the main changes in Hackmotion since?

Speaker A: Um, yeah, uh, obviously many changes. So yeah, three years, definitely a while. Uh, I guess to summarize the biggest change obviously the scale. So back then uh, I think we maybe got some early signs that we understand what we are doing that we can maybe uh, scale beyond some early adopters and uh, being super niche. So since then we have grown I uh think at least tenfold uh in terms of revenue and obviously all the operations and everything that has happened, uh to sustain that. Yeah, it's been a big, big learning curve for me personally, for the whole team and uh, yeah, so a lot of hardships, a lot of uh, kind of fun times and exciting times. So uh, yeah, it's been a journey.

Speaker C: How many people are you now?

Speaker A: So currently we are uh 25 ish and we have uh, for us quite a lot of vacancies open. So we're looking to be around 30 in a couple of months time.

Speaker C: So yeah, also still relatively lean.

Speaker A: I would say I'm uh, bootstrapped company, you know, that's the way we do.

Speaker C: Okay.

Speaker B: Yeah. I mean I think now the story of bootstrapping people are in last few years are more and more paying attention to it and like the previous playbook, growing only with venture money. I mean of course it's still a playbook, but especially in A.I. uh, I guess. But um, overall you know, it's a path that bootstrapping is a path that more and more companies take and yeah, only of course a few can pull it off. So from your perspective, what have been the biggest, I would say pros and cons of choosing this path that you as a founder now feel. Uh, there must be some good sides, maybe also some downsides. Yeah. Can you talk about those?

Speaker A: Yeah, sure. Uh, I guess from the good sides or advantages. So uh, I guess the main one is that when you're bootstrapping you have very limited resources and you have to make sure things work almost right away, at least in some small scale. So we've been kind of, it's sort of like uh, ingrained in our DNA that we have laser focus on what actually matters for our customers, for our business. Uh, so things like I don't know, unit economics. So we are hardware business so it's a bit, maybe more complicated. We have manufacturing costs, we have order fulfillment costs. We are uh, in consumer market and doing our own E commerce. So going directly uh to consumers. So quite a lot of marketing costs as well. And uh, it's a big part. So for us day one kind of unit economics meant getting this whole, whole equation under control. And so uh, sometimes you see what from our uh, kind of point of view uh, seems relatively kind of stupid mistakes that some companies do, uh, when they try to scale rapidly and seems that uh, oh my God, probably these guys haven't have even a simple spreadsheet with like uh, revenue forecast going forward and how that could translate after you have stopped burning uh money. So for us it has never been an option. So I think it has helped to be kind uh of really focused on the things that matters and we just couldn't afford to do those things that uh, don't bring us forward. Uh obviously freedom definitely comes with uh, especially once you are at least somewhat profitable so uh, you feel that you are somewhat stable. And uh, yeah then uh, basically we have still all our options open so we control the whole company. And uh, in our case we have been lucky enough to show to ourselves, our team that we are uh, able to increase the pace of growth. So last couple of years we've been growing twofold or more, more year over year. So that's already comparable to maybe uh, relatively successful even VC backed startups. Uh so basically we are not forced to think about exits or anything like that. So basically we have still all our options open and uh, obviously not all of the things are amazing. Obviously several problems arise from this kind of model. So uh, the first very obvious one was that we had to be super frugal, super scrappy, happy especially early on. And again it's another thing that sometimes even uh, kind of funny to look back and even at ah some things that we are currently doing. Uh so again this is sort of become like a culture of the company that uh, we try to get by with the least m amount of resources. And uh, yeah this has definitely been a theme both for the company and also for founders personally. So obviously to get by the early years. So one thing is to kind uh of scrap forward the company. The other is to get together your personal life and financials and so on. And yeah, uh, obviously especially the beginning, uh it took time so to get maybe from zero to first million of yearly revenue. It was something like five years. Uh so definitely not your overnight success. Uh so yeah those things definitely are the ones that uh, are maybe not so great shiny when you choose this path.

Speaker C: But how much of this was your choice and how much of this was like uh, you know, circumstantial. Meaning that uh, probably in the beginning there were no VCs really willing to fund you. Right. And uh, it's hardware, it's some kind of niche market, uh like hugely competitive with all kinds of tools, everything as Jan mentioned, uh, at which point did it even become a choice? Uh let's put it like that definitely

Speaker A: it was not like intentional to be bootstrapped from the start. So we actually launched with super typical startup mindset. We're gonna Go out, we can try to raise some funding, uh enter some acceleration programs, uh uh then maybe do some, I don't know, Kickstarter then maybe raise some more funding to scale everything up. So that was kind of the thing how we started. And so we definitely tried to fundraise at very begin uh at the same time we were super early so we didn't have kind of pre product pre revenue. And yeah just as you say obviously all the conversations with uh VC funds, even angel investors and so on they were not too kind of encouraging to say the least. And uh. So uh, we had later down the road it's kind of internal joke that we couldn't figure out how to raise money so we figured out another way. Uh but yeah so quite early on our strong side was that we were able to build something that at least some people thought was cool at first in some maybe demos and so on so we could get some attention. And so we were kind of encouraged that we can build something that is valuable at least for some very small amount of uh people or some small market. And uh, yeah so at one point we just understood that we can kind of the easiest way forward is try to bring something to the market. And we were I uh guess lucky enough to find uh kind uh of way and niche where it was kind of physically possible to actually launch like super small and then slowly start to kind of climb up.

Speaker B: Are we see knocking on the door now?

Speaker A: Uh yeah definitely things have turned around a bit. So obviously I think everybody who has been in kind of fundraising world so knocking on the door is not the typical thing that happens uh not actually that far far from that. So obviously with uh, especially after this kind of uh post uh Covid kind uh of tech crush and where uh kind of companies start to focus way more on kind of profitability and being sustainable long term no matter what are the circumstances. Then obviously our model started to look a bit uh more reluctant and interesting. And uh. Yeah so we definitely have been having interesting convers. And actually we are still considering maybe every half year we have internal discussion maybe we need to raise if we would how would it help. And so far uh we have decided not to do that. And I guess at least up to now every quarter or every year when we discuss this uh then we are kind of quicker and quicker decide that kind of for us uh additional resources and money is not limiting factor for our growth. And uh yeah so uh, currently not really looking around uh but always definitely interesting to check the market Talk with uh VCs and investors understand what are their experience with maybe similar type of businesses to learn something and understand what are our options in case we figure out that uh, we want to raise and go forward that way.

Speaker C: I have a dad joke to plug here inspired by this conversation. You know what they call a bootstrapped startup? A business?

Speaker B: Yeah. Um, on the, on this one, just one last. When, when recruiting employees, when hiring are uh, people do you have to select for someone who, who can be frugal, who can be like that? Or, or maybe our market is just full of those people. Maybe they're not so spoiled with like very big, well funded startups with you know, candies and, and PlayStations or uh, have you found this more challenging to find people that match your thinking and approach?

Speaker A: Yeah, for me this is kind of the only company building experience. So I don't have a good way to compare. Uh, but uh, there are definitely people out there who want to enjoy this kind of maybe high salary right out of the bat, uh, very nice office, a lot of perks and so on. And uh, obviously early on we couldn't provide any of those. So uh, yeah it definitely was a challenge. But then uh, kind of from our experience the way we build things, we understood that we are really looking for builders. And in our experience it turns out that those people who are kind of real builders who are more interested in what's the outcome of what they do rather than maybe the process or the kind of environment where they do that, uh, then yeah, those are the, the most suitable for actually trying to achieve what we are set out to do. And so uh, at some point we even started to discuss uh, like how to continue this. So if we would, I don't know, move into fancy office or have a lot of perks, like whether it would attract, it obviously would attract at least some talent more but whether that's the right talent. So yes for us, those people who been kind of bringing the most value to the company, uh, those uh, I don't think have ever really kind of uh, worried too much about uh, how our office looks like or what kind of perks we can give and so on. And obviously lastly our target always has been that uh, we are kind of bootstrapping is a way to kind of move forward. It's not like some sort of overall theme or religion. And uh, in long term uh, we, we are building product for worldwide markets. It's a tech product, high added value product. And we definitely don't feel that we are kind of competing with, I don't Know, cheap labor from Eastern Europe or something like that. So our vision definitely is that when we enter these markets and can scale up, then our salary level should kind of correspond uh, to that sort of business and we should be able to operate business even if we would be based in, I don't know, London or New, uh, York or San Francisco and so on. And so this is what we've been actually doing. So uh, when, when in last years when the business scaling up, we are kind of increasing our salaries quite rapidly. And I would say at this uh, state definitely we are not in position where we are kind of uh, cutting low on salaries just to bootstrap. So we are, I think, very competitive. And yeah, it has worked uh, out uh, very well. But obviously those early years it uh, took the right amount of uh, the right mindset to join the team and uh, go forward.

Speaker C: Have you managed to do all of this from Latvia like completely or you have had some people outside, uh, along the way or now?

Speaker A: Yeah. So all of the main operations are happening in Latvia. Even manufacturing, most of it is happening locally. Uh, so obviously we have a ton of partners around, uh, for supply chain and so on. And then basically, uh, very early on our first customers were kind of some of the most advanced and top, uh, golf coaches around the world. And so we developed really good relationships with them. And so we had tried to continue that uh, all the time and still doing that. And those are the people who are definitely helping with this kind of, let's say foreign perspective, especially in our specific niche, uh, can help us with a lot of contacts and things, uh, moving forward. But yeah, I would say we are definitely kind of surfing one of this, maybe first wave where building uh, company where you kind of remotely from the market you're selling, uh, selling hardware product, uh, is really possible. So I don't think we've been able to do that maybe some, uh, even, I don't know, 10, 15 years ago. But yeah, right now all the things like uh, I know, accepting payments, uh, shipping the product, uh, it's very reasonable price, especially if you have kind of higher margin product. And if you're selling T shirts, it might be a bit uh, more difficult. Uh, but uh, yeah, currently we are shipping basically every single unit from Latvia. And no matter whether it uh, is going to US or Australia or whatnot, we're serving I think around maybe 60, 70 countries every year. So uh, yeah, it's been working us quite well for us, us and uh, working out quite well for us. And yeah. So uh, this is how we got to this point?

Speaker B: Well if you start talking about shipping actually one of the questions we wanted to ask is uh as a hardware product all the tariff situation I assume us is a market you want to target and how do you look at it? Optimistic, pessimistic or just waiting it out and see what happens.

Speaker A: I guess we are looking kind of realistic which is somewhere in between. Uh so yeah around half of our market is in US and so obviously this uh, is concern for us as well. And uh, yeah so we are definitely following what's happening. So so far we've been relatively lucky uh as uh, again we don't have any kind of big distribution partners, anything like that. So we are shipping directly to states. And so there was this or still is this kind of de minimis of packages under I think 800 uh, uh dollars that uh, don't qualify for still these uh, kind of uh import taxes and so on. Uh this uh seems that will change rather soon by the end of August. Uh but yeah I guess for us one of the biggest problems and it's not so far been really practical problem, more of kind of, I don't know, mental and kind of planning challenge is just big uncertainty. Uh because I think it was in March or April when the first time it was ok there will be these tariffs, crazy rates, every single country then turns out after a couple of days no it's not going to be the case. So back then we understood okay we kind of can uh predict something. So again we have business to run, we have product to build and do all the kind of marketing and distribution. So we can there focus on something that can change kind of every day. So we decided okay we are in relatively good position with quite strong cash flow, relatively good margins. So in short term we can definitely basically swallow any problems that come our way at least with some reason and just see what happens and then adjust. And so right now we are starting to prepare that we will need to pay tax uh starting basically from September. And uh, we are sort of ready to do that. But again there are many practical problems. Uh so one thing is to say that okay there's going to be tax and we will collect them. The other thing is actually to introduce all the laws and systems in place from not even our side but from kind of US government side and courier companies and so on. And currently there's a huge uncertainty. So uh, I think just today I read that Omniva is just stopping shipments to us because I guess they can't figure out how it's going to go. And uh, yeah, we are definitely prepared for some short term um, turbulence. But again, uh, this is one of the, maybe another advantage of our model how we're building uh, the business that we uh, are relatively resilient towards kind of short term, uh, fluctuations in the, maybe revenue or margins or so on.

Speaker C: But in the medium term I'm guessing, at least from the side you're selling to the US which is a relatively wealthy market, plus you're selling to golf coaches or golfers which are also usually quite with high purchasing power. So I uh, to me it seems that you know, if they would have to pay like 20% more for your product, that probably wouldn't make a huge difference uh, for your sales or have you done any.

Speaker A: Yeah, yeah, absolutely.

Speaker C: Analysis on that?

Speaker A: Yeah, I think we are in a relatively good position compared at least to some other companies. So I think if you are like absolute commodity where the main thing that you are kind of competing with is price, then you probably are not sleeping so well currently and already facing a lot of challenges. So for us definitely it's not the worst situation to be in. Uh, from the other side obviously, again with our model, when we try to grow with our own funds and everything, every single percent of our margin matters because it gives some sort of uh, uh, leeway and some margin of error when we move forward. And so obviously this just puts more pressure on what we can. Uh, so if we would be convinced that we can raise prices, we uh, would do it without the tax anyway. And now we might be forced to maybe experiment. Experiment uh, with something that we otherwise would not, which uh, might as well and then be healthy thing. Uh. But yeah, so we see how it goes. But definitely not uh, in the worst position compared uh, to maybe some other businesses.

Speaker B: I think you can sell. Golfers will buy the craziest shit sometimes. My impression, like from when I was actively playing, I was also like thinking of uh, this, this could make sense. This could make sense. I think it's a. Men especially I think love to, love to spend um, on um, interesting things. Yeah. So yeah, let's hope it's not going to be a major turbulence. But in overall, um, uh, you got a PR recently around uh, some startup news which we wanted to discuss. It was very interesting actually. You're one of the few companies we've heard of that are actually uh, paying dividends to employees based on their stock options. Um, and as you said over time you've also kind of been thinking more and more how to increase salaries and Motivate employees. Maybe you can talk through that decision. It must have been like a discussion in the company to decide to do that. And what results you see so far, what were the goals and um, do you see other companies also considering that or are you guys pretty much the only ones?

Speaker A: Yeah, this is definitely interesting question. So maybe to break it down uh, so why we decided to do that goes first of all regarding stock options. So this was from day one when we, we launched company and and with the plan that it's going to be hopefully become a relatively uh, major company and then with high growth and obviously a lot of talent that needs to be acquired and then uh, all the idea around stock options very well resonated with us. We thought it's kind of fair deal and definitely we need to do that. Even though in kind uh of Baltics and Europe as a whole it's definitely not as, as popular instrument at least wasn't some 10 years ago then it's absolute must have in the states. And so yeah we definitely already planned that we are doing that and uh, thankfully Latvian legislation uh somewhere along the way turned out to be very well. So uh, uh several new laws were established that uh, I think we are still regarded as one of the best uh legislations regarding stock options in the whole world. And so. So uh, one of the things that we understood quite early with this bootstrapping model. So again one of the cons at least from this perspective is that uh, at least for more maybe savvy kind uh of educated employees m. Uh it kind of makes sense if you join VC backed startup if you understand roughly how it works. You know that the typical kind of scenario is you raise some funding, you go to next round, next round, next round and then roughly in maybe seven to ten years time you will be basically forced to sell. So the early investors will just need to uh, can exit. And so all the company will be structured in a way that basically your main mission and only mission is in then sell the company. And in vast majority of the cases and obviously if you come with kind of the same setup in bootstrapped company where you understand founders completely control the the uh kind of cap table and they don't have any external pressures then uh, obviously for ah more educated people uh sooner or later the question will come okay so when will the exit come? What's going to be the shape of it? And so we understood that this might be a problem uh especially if we look down the road and we understood that obviously we need somehow to start solve it and the most logical thing to do was just what is absolutely I think normal. If you look, maybe not in the startup world but again as a joke if you have real business then all of the shareholders there are mostly because of profits that the company can generate. And so obviously if you are growing fast then any kind of dividend that you can uh, pay out is very small compared to maybe the share value and, and uh, especially potential share value in the future. But we understood that so at least we can give some sort of real understanding that this is real value, not a toy early on. And uh, with uh, any kind of pace where we understand that okay, we just don't want to sell, we just keep moving forward then uh, there is at least some value that people can get out before we uh, for one reason or another decide to do some sort of exit. You can see that uh, there's um, I think a lot of talk especially in last years regarding secondaries and so on. I think in at least some of the cases companies uh, are trying to solve kind of the same problem. You know, you're in this big fancy VC backed company, the valuation is kind of through the roof but like you don't have any liquidity and what happens when you are okay, first couple of years in the company you still have your vesting, you're just grinding, looking forward. But again it's not marathon, not sprint. So sooner or later you'll get uh, people that are maybe there for four, five, six years and again if like uh, I don't know, IPO or full exit is not uh, anywhere near inside, then uh, to take some chips off the table is absolutely reasonable. Especially you've been kind of grinding very hard uh your early years and so at some point you have some opportunity costs and so on. So just to get the stress out, uh, I think it's both for employees and also founders so I think it makes sense. And so yeah, regarding other companies, uh, it's difficult to tell uh, but obviously what one needs to understand that most of the companies just can't do that. So if you're a VC backed company and starts to, so it's a very slim chance that you have any actual profit and if you have and start to talk about uh, kind of taking it out. So obviously it's a very, very bad sign for a typical VC case. You know, where it's uh, go big or go home and nothing in between. And so this actually is somewhat a problem for us as well. Uh but so we've been now operating for like eight years and going fast forward for maybe like last three years. Years. And so for three years in a row we have seen that we are actually accelerating our growth and um, we are increasing our margins. So for example last year, so we had relatively healthy margin and it was the highest margin we have ever had and it was higher growth rate that we have ever had. And I guess it comes a bit from our kind of frugal kind of roots and the way we operate the business. And we really understand that the bottleneck of our growth is not the cash in our bank account account. So again, is it just gonna keep growing so we can start to take maybe some limited amounts off and then uh, distribute throughout the team as a motivation, as a showcase that you know you have options. We have talked about this for like maybe with some people for even like four or five years. And then so just to give some, some reality check that you know, this is a valuable thing. It's not only a story and some uh, kind of company vision or whatever. But uh, yeah, it's something that can uh, become a tangible kind of value and has potential to be uh, uh, really beneficial for you financially going down the road.

Speaker B: Yeah, we touched profitability many times and last year you posted 2.2 million in profit. So on top on 7.3 million of revenue, it looks like from outside a very healthy margin. A lot of companies would be probably jealous about that for hardware and business like you are in. And if there's uh, a new founder trying to enter a similar space. Yeah. Are you happy with the margin? What margin should businesses overall target like to be healthy in this space because it's profitable?

Speaker A: I mean it really depends obviously on the business. So uh, I'm definitely not in the position to kind of analyze every single kind of niche and kind of even in the same market, different approaches to business and different kind of situations, uh, you are in. Uh, but what I personally have always, uh, thought that uh, at least 30 to 35% margin is what I would consider kind of healthy and stable. Uh, so why is that? So let's say you have, I don't know, 10, 15% margin still very good if you have significant uh, revenue, you can kind of chunk out a lot of cash that way. Uh, but uh, so the slimmer your margin is, especially if you're kind of building your own product and you're very dependent on the revenue stream, the supply chain, everything, uh, basically the more risk you take on and then the more unstable you are. Uh, just look at what happened last year So I don't know, uh, currency exchange rate from dollar to euro I think changed somewhere close to 10, 15% in couple of months. So imagine you have your whole business, you're operating in uh, Europe, you have your whole business for example in US and then you have I don't know, 15% margin which might not seem that small. Uh then over time of like two months uh, your margin just kind of vanished just because of kind of external factors. And so obviously this is maybe relatively extreme case. Uh but it just happened and so we had Covid time and other things and uh, yeah, so taking uh, altogether I would say like yeah those 30, 35% is what I would consider healthy. Is that kind of good? The ceiling? Uh, definitely not. Uh, especially for these kind of products which are high added value products, mostly software based. And so yeah definitely if we look at our uh, kind of uh, cost of goods sold and so on, there are definitely no kind of laws of physics or economics that wouldn't uh, allow us to get much more better margins. So there are definitely also hardware companies operating uh at maybe 40, 50% percent. Uh, that I would say is really nice. But then you have to really kind of control have very efficient ways you acquire customers. So for us absolutely the biggest uh cost is marketing. And so yeah, you have to be kind of super efficient regarding it. And so I have big respect for those companies who are able to pull that off. So we are definitely uh, kind of uh, aspiring to get into the direction. But uh, yeah so far we feel confident that at least we are stable, we can move forward and still uh, our primary focus is not kind of being just cash positive and taking our dividends is to grow as fast uh as possible. And so uh, yeah, we'll see where we go down the road.

Speaker B: No, no good points you made because exactly like Steven, the currency thing, like even 15% of margin many businesses looks like very good and healthy. But like you said, I mean you know something changes and it's gone in terms of um, just um, margins I was into like Apple for example. What's their, what's their like uh, how much they make on iPhone versus cost to produce. Do you know they probably are like industry leading uh example I guess.

Speaker A: But I mean I'm definitely not an expert in analyzing these kind of companies. I think it's very difficult to analyze them because they have so kind of wide uh, suit of products and a lot of software part. So yeah, what's the kind of ah, they definitely have some more profitable product lines and less profitable Product lines and the strategy might be kind of intertwined. But yeah, obviously if again you look at like purely how much it costs to manufacture one iPhone compared to the price uh you're selling it, uh then uh, yeah it's uh, definitely uh a very significant margin and in some cases you could say similar as us that we sometimes reflect prefer that okay we are hardware company but basically our margins are like kind of costs and how much we can charge for what it costs to manufacture. We are definitely much closer to kind of software company operation style. So not really there. But yeah it's uh, a bit different than maybe if you are manufacturing washing machines or cars or something like that where obviously the cost structure is completely different.

Speaker B: M. How did you grow uh in the last few years you mentioned you have had a pretty good growth. What um, were the channels that worked for you you briefly touched like golfers, um, influencers, coaches, uh, any kind of, you know, secrets you cracked you can share with other founders, listeners.

Speaker A: So yeah, I guess the biggest thing for us currently is just the whole setting how we set up the company already several years ago. So I think a lot of things on a lot of kind of choices we made are uh, at least in, in their structure and essence relatively easily uh scalable. So one of the first things is that we are uh, so already mentioned but yeah we, we are selling online through our own channels. So we, we sold through Amazon for a small while stopped even doing that. Uh but yeah so maybe 95% of our revenue comes from our own uh E commerce store. And so we are not really kind of tied with, with any geography. So so we can even though it's a niche product we can just sell everywhere. So yeah, really serving maybe 60, 70 countries every year. And uh, yeah so this is one of the first kind of just kind of physical things that we don't have to deal with some small shops or distributors at some specific places. And we were kind of forced to do that because again being a niche product it's just super inefficient to try to find some local distributor or shop or some like that. And uh, yeah the, the other things are, are just kind of building the team especially in in sell the marketing around E commerce and kind of digital marketing, uh really learning how we can can reach those customers online. So uh, yeah different kind of channels starting from, from content in. In YouTube. We have a lot of uh, really successful partnerships in in or I would say in scale with, with different kind of YouTube content creators. Again our, our the hobby. So people can consume a lot of content. They are very passionate about uh, those things. So we have a uh, ton of partners that are producing really high quality, very interesting content regarding how to use our product, what are the features and so on. Uh, obviously also social uh, media marketing, uh so paid ads and that part we been uh all the time learning how to scale up. It's kind of very difficult to find uh, a lot of costs involved. And when you scale things up, up then the operation becomes uh, very difficult to manage. So you need to create a lot of assets, test things all the time. And uh. Yeah. So uh, I don't think we have any one key thing that let us grow. It was just maybe the right setup for the type of company we are and the market we uh, operate in and then just kind of pushing forward and grinding and again having sort of healthy uh unit economics and always checking our, our kind of customer uh acquisition cost. So one, one thing why we do that, obviously just to understand whether we are profitable and what's our Runway and so on. But the other thing is that we've been always very kind of performance based. So all of the marketing activities are like, we always try to kind of measure at least in some approximation like uh, what's our return on ad spend and uh, so on. So I personally come from technical background so I don't know anything much about like typical marketing and so on. And at some point I was kind of scratching my head and so you had this term uh kind of performance marketing and I was like in my experience like it's the only type of marketing. Why would you ever do anything like that? And uh, so obviously it depends a bit. But yeah, at least in our experience being kind of really laser focused on what kind of return you'll get on the activities you do has been something, it's kind of true serum. And you just can't keep doing things that don't matter because know you, you just can measure that this is not how you move forward.

Speaker C: Are you targeting several geographies or. It's mostly the US and the rest is kind of uh, like ad hoc or collateral damage.

Speaker A: Uh so around 50 to 60% of our business uh, is in US so actually quite a large part of it's outside US and actually I think Europe is only maybe 20% and so obviously we do uh, some specific activities in other markets as well. Uh but so far we haven't localized too much meaning all of uh, all the product is in English language. Most basically almost all of the marketing activities are in English and uh, yeah this is one of the directions where definitely we have kind of untapped potentially markets in Asia like uh Japan and Korea are big Gulf markets. And uh, yeah we definitely don't have very strong sales compared to some other countries uh or over there. And uh, yeah so far uh, we've been focusing on the English speaking countries mostly uh and uh, those very well kind of overlap with the biggest Gulf market. So US Canada, UK in Australia, New Zealand. So uh, those all are big Gulf markets. And so that has kind of propelled our growth. But yeah then there's kind of overspill uh to many uh, countries, countries. And again the type of marketing you do, let's say you have like Your I know YouTube influencers, some famous coach who are reviewing products, uh giving golf tips and so on. So if he's like golf celebrity then he will be followed by a lot of people not only in English speaking countries but also uh, in other countries. So that has definitely helped us to kind of uh, uh spill over more and more to those uh, kind of long tail of countries. But yeah vast majority is still in English speaking months and in Latvia. So we definitely have some clients in Latvia. I'm very happy regarding that. Uh, but yeah I think from maybe upwards of 40,000 units or whatever we have delivered to date, maybe some five are here. So yeah we are definitely uh not focusing on uh this market.

Speaker B: It's not on the dashboard even.

Speaker A: Yeah uh, the lime is too small to be even pixel wide.

Speaker B: Um but yeah it definitely sounds like a product that if you have a reputable person kind of advising and I think it's kind of type of product that you will do some research before buying and if there's a guy who says like yeah it's legit, I like it. I mean it's, I don't know yeah how to attribute value to that. But you probably can see some effect from these coaches, influencers, people who are respected in the industry to kind of. Yeah uh, totally makes sense. Uh, about product, uh, just wanted to ask one question. Now of course have to ask it in every, to every company we speak to AI and how is, how has this changed your game? Are you, are you forced to put AI in M ads and the product and uh, and say that it's some kind of AI powered device now or, or um, like, like Golf now have

Speaker C: AI written on them as well.

Speaker A: Yeah. So I guess this is one of uh another advantage of not being VC backed so we don't have to put this on our pitch deck at Least not for now. But yeah. So for us uh, definitely it's been something that we've been monitoring. Uh it to be honest hasn't changed too much uh things that we've been doing. So obviously there are practical things, I don't know, subtitles, voiceovers for the content, so on. So those, yeah we used to maybe hire people from Fiverr or somewhere else. Uh, now we can kind of auto generate that. So it's some small efficiency. It's nice to have but definitely not kind of game changing in the business. And uh, for me AI as a whole, so I come from technical background. I used to work in science research for some six years and uh, related to electronics and also had some colleagues that were directly working with AI before it was cool, you know. And so I had some kind of exposure to it. And what I would say is that AI is very good. Uh when you need to deal with kind of unstructured data or with data with like extremely large number of dimensions, uh, it's not that good if the underlying problem you need to solve, you can just calculate it. So I don't think it's a good substitute for like calculus. And it turns out that many, many problems or most of the problems are not really type of kind of unstructured data and many dimension type of problems. So just trying to stick AI on top of it I don't think is really a solution uh in those types of situations. So there are definitely significant uh, number of specific use cases where you just can't do anything else than AI. So all the things with kind of speech recognition, image recognition and now also kind of structuring text, generating text, so on. So those things, yeah you can like a formula how to do that and there you need this kind technologies uh but yeah trying to find the right use case where it's like really valuable turns out to be super hard. And for us again as we've been always like really focused on what actually matters for our clients, what could increase our margins, what could increase our maybe uh, uh, kind of efficiency of marketing and so on. So as soon as we feel that some of these tools can help then obviously we try out. And so far most of the kind of tries have not been like very, very successful. And so it's more in the demo mode than kind of uh, just uh, looking around the area. But yeah, not something that has significantly changed the business at least uh up to now.

Speaker B: Right. Well now super insightful. I think the journey you guys have had and also how you're producing those results and profitability can be. Be, I think, inspiration to so many, so many companies. And, uh, thanks. Thanks really for coming on board once again and sharing the story. Um, this was awesome, awesome m. Conversation.

Speaker A: Thank you very much for inviting it. It was amazing to. To chat and. And yeah, uh, happy to be here.

Speaker B: Yeah. Check out HackMotion if you. If you guys are into golf. Uh, I know a lot of people are. Has exploded, at least in the Baltics, I think, in last 10 years. So. So maybe you can double the Latvian sales relatively easily, I hope, in the next few months or weeks. But, um, thanks. Thanks a lot. It was a great conversation and to listeners. We'll see you next week. Thank you.

Speaker C: And stay out of golf. Thank you. Bye.

Speaker A: It was a pleasure.

Speaker B: Bye.

Speaker A: Um, if you like this show, remember to leave us a rating or review. It helps other people to discover the pursuit of scrappiness.