The Exchanges

Q in the US do, honestly, it's almost a waste of time optimizing for the cost of tape. Actually, as a VC, I'd say, fuck it, it doesn't matter, Mike. Whether you spend 62 cents or 70 cents, it doesn't matter. And it's kind of true. In that case, how do you think about the importance of constraints as an entrepreneur today and looking back at the early days of ButcherBox?

A Well, okay, so this entire business, like a subscription model, really arguably any D to C, but let's just talk about a subscription model. It's customer acquisition cost, and then there's what's called lifetime value, but really is gross profit dollars over time. Right. How much money do you make off the person that you acquired? And so, yeah, a lot of VCs are like, don't worry about negotiating the tape. You need to worry about getting more people in the door. Right. But the reality is what you need is actually a good ratio. You need to make a return on that customer. You need to make it as fast as possible and you need to watch those cohorts go up over time. And so, uh, you know, tape is a bad example cause it's really not that big of a mover, but like the price of a box, the price of a box can be 10 bucks. Right. If a customer is getting eight boxes a year and you can shave, you know, two dollars out of that thing, well, that's 16 dollars that you can actually redeploy into your CPA and keep the same ratio, right? So all of these savings, actually, you can dump back into marketing and get more confident spending more marketing dollars. Cause that's, what's going to happen. Cause what happens is you get through your first like cohort of people and then your CPAs rise, especially with all the iOS changes and an election happening and like CPAs are through the roof. And the on…

AI assessment note: “the reality is what you need is actually a good ratio”

Q How do you think about brand marketing? You mentioned the cycling there. Honestly, I, I don't, yeah, I don't like it, honestly. I freaking hate it.

A I am sure that there are plenty of really good reasons to do brand marketing and to really dive deep into brand marketing. Last year, we spent eight and a half million dollars on brand marketing, and anytime I ask the question of like, well, how do we measure this? Like, how do we know if we're doing well? It's like, well, it's like, You know, there's like a lift and it's like, well, how does that equal dollars back to us? And what happened was that eight and a half million dollars, eight and a half million dollars, a lot of money for us, at least you basically just destroy your customer acquisition to lifetime value. Like, oh, there's no payback. And for a highly measured, like, let's go negotiate the price of tape kind of person, very hard for me to be okay with that. And so we, we now look at.

AI assessment note: “very hard for me to be okay with that”

Q We're going to make this the best fucking show ever because it's going so deep, which is going to help a lot of people, I think. I think one of the things that I find interesting is channel spread and difficult for founders. They try to be everywhere. How do you think about channel concentration and where to deploy dollars and lessons from that as you scale ButcherBox?

A So I have an analogy of wildcatting for oil. When you, when this is probably not how wildcatting for Oil works. But when you go out wildcatting for oil, you have a small, cheap shovel, and you just dig some holes, right? You think this is going to be a fertile ground, and you dig some holes. You want to make the holes small. You want to make the holes cheap. You want to make the holes rapid. When you start seeing oil bubble up through that hole, time to build a rig. But don't build a huge rig. Don't, like, get the, you know, the massive rig. Get a small rig. Like, maybe you hire one person, and that person is going to be responsible for extracting the oil out of there. And then it's like, wow, we think there's a lot of oil here. It's like, cool, build a bigger rig. And so you, you basically build and build a build. At a certain point, you bring in the fracking technology and you're trying to extract all the oil possible from the thing. But you, as the founder, don't really want to go wildcatting until you make sure that that rig is, is being manned, right? That somebody is on that rig, that they're actually working harder on it than, than you can. Uh, before you move. So for us, our first, our first thing was influencers. We started with a Kickstarter campaign where we raised 215,000 dollars in pre-orders, and there was a, we, we reached out to all these, like, anyone who had e…

AI assessment note: “When you start seeing oil bubble up through that hole, time to build a rig.”

Q Did that not lead to a ton of operational debt because you wanted to outsource and you wanted an ops light model that then transformed into actually you wanted a much more different model and probably a much more involved model because of the way that you were operating?

A No. So we're in the box subscription company, ButcherBox, we ship a box of meat to your doorstep. We started in 2015. In 2015, box subscription companies were humming. It was like Blue Apron, Plated, you know, uh, Green Chef, Hello Fred, like all of them, right? And they all had similar models. They had raised tons of money, hundreds of millions of dollars in some cases, and built out their own, like, stuff. Like, we need to, we need to make, Do distribution and we need to like in blue aprons case, like we need to figure out the machine that cuts the vegetables and like everything has to be ours. And because I wanted a hobby business, I didn't want to do that. And I started by partnering with people and the difference with partnering with people like a distribution center, we work with a company that's been in business for a 110 years. Like I think it takes a special kind of entrepreneur to think that you can get into distribution and do it better than somebody who's been in business for a 110 years, like right out of the gate. That's not gonna happen, right? So we partner with everybody. It's like, the more the merrier. We're actually moving this year, we're moving to Shopify, and I'm thrilled because like, I think even that it needs to be like, you find the best partners, you work with them, you find the best apps to attach to it in the ecosystem, you work with them. Um, but …

AI assessment note: “No. So we're in the box subscription company... we partner with everybody.”

Q Does that not smash your margin? Cause you have the idea that when you internalize those functions, you internalize the margins and your margins go up. Does that not really harm your ability to actually generate premium margins?

A I mean, certainly if you look at other food companies, um, that is the way that they do margin expansion. And we have definitely asked the question over the past year of like, okay, well, especially before this year with, um, you know, Trump's tax code where you just get a ton of depreciation if you, if you take on assets. Um, we actually two years ago started, uh, a dry ice factory. We now have two. That was one, a margin play, but two, it was like this critical component that if we don't have drives, we don't ship. And we wanted to like control that. So yeah, there is, there is definitely the ability to improve or increase margins by owning bigger pieces of the stack. And that does improve EBITDA, right? Because your amortization is below that.

AI assessment note: “there is definitely the ability to improve or increase margins by owning bigger pieces”

Q What has really worked for you in terms of that AOV expansion? AOV for people listening, average order value, or like basket expansion. I'm sure you do the same. What's really worked for you in driving per order up?

A Yeah. What's great is what's worked is also very much in alignment with what our customer is looking for, and that is super well-priced deals above and beyond your box. So you get your custom box from us, you get your six cuts of meat in it, and then we have like a whole member deals and a whole catalog, and those things are priced to beat retail essentially, right? So we want you to go in there and be like, oh, I'll pick up one of those and one of those and one of those. That has worked really well for AOV. Um, and oftentimes the retailer is doubling the price that they buy for wholesale. Like that's the general rule. If they buy like, you know, chicken breast for three, three 99, they're going to sell it in the store for eight 99. We find that we can provide a better value to the customer than they can get at the grocery store.

AI assessment note: “super well-priced deals above and beyond your box”

Q Well, I look forward to it too, but I want to start with a little bit of context. So we're all a function of our histories. Clearly, I'm a failed psychologist, um, and it means we're all running from something. Mike, on reflection, what do you think you're running from?

A What am I running from? I mean, I, I think that our past is what kind of creates the people that we are today, and, uh, what I spend a lot of my time, I'm 41, what I spend a lot of my time trying to do is actually notice it and not run from it. Like a lot of my past, like life and shadows and triggers and stuff like come up constantly. I mean, I share with you that I grew up without a father. So the fear of abandonment is like really, really runs really deep to me. And whereas in the past I've like run from those emotions and run from my past, uh, my work now is kind of to sit there and take it and to notice and allow and, you know, feel the feelings in my body and then let them, let them be.

AI assessment note: “fear of abandonment is like really, really runs really deep to me.”

Q So what I mean by that is I was bullied a lot as a child for being more like Augustus Gloop than, you know, I am today. Um, but it means that I just wanted everyone to like me and it's led to a bad trait in leadership, which is I'm a people pleaser. When you think about like the abandonment, what's the impact of that on how you act?

A Yeah, so on the positive side, it certainly drove me. Like, yeah, I, I was very driven to accomplish, and I think deep down that was to, like, make my father, uh, come back, which was never gonna happen. On the negative side, I mean, in my personal relationship, I have a really hard time advocating for myself, like, with my wife or with my friends, because I'm worried that they'll leave me. I've oftentimes been made fun of by my friends, where I'm like, guys, don't leave, and they're like, we're not gonna leave you, like, we're, Don't worry, you're fine. And in my professional life, yes, I, I think, uh, I can tend to be overly generous and overly accommodating, uh, with this, because of this fear that, like, people are just gonna go. And that's something that I've had to work hard on through the past 16 years of CEO-ing.

AI assessment note: “in my professional life, yes, I, I think, uh, I can tend to be overly generous”

Q Did that not lead to a ton of operational debt because you wanted to outsource and you wanted an ops light model that then transformed into actually you wanted a much more different model and probably a much more involved model because of the way that you were operating?

A No. So we're in the box subscription company, ButcherBox, we ship a box of meat to your doorstep. We started in 2015. In 2015, box subscription companies were humming. It was like Blue Apron, Plated, you know, uh, Green Chef, Hello Fred, like all of them, right? And they all had similar models. They had raised tons of money, hundreds of millions of dollars in some cases, and built out their own, like, stuff. Like, we need to, we need to make, Do distribution and we need to like in blue aprons case, like we need to figure out the machine that cuts the vegetables and like everything has to be ours. And because I wanted a hobby business, I didn't want to do that. And I started by partnering with people and the difference with partnering with people like a distribution center, we work with a company that's been in business for a 110 years. Like I think it takes a special kind of entrepreneur to think that you can get into distribution and do it better than somebody who's been in business for a 110 years, like right out of the gate. That's not gonna happen, right? So we partner with everybody. It's like, the more the merrier. We're actually moving this year, we're moving to Shopify, and I'm thrilled because like, I think even that it needs to be like, you find the best partners, you work with them, you find the best apps to attach to it in the ecosystem, you work with them. Um, but …

AI assessment note: “No. So we're in the box subscription company, ButcherBox”

Q How do you advise founders on calculating CPAs? Cause your tax vary by channel. Is blended the best way to show CPAs? Yeah.

A Yeah. So, um, I think that the easiest way, which is like very low, you know, low lift is to take all of your marketing expenses for the month. So when you see your P and L and it's like, we spent this on Facebook and this on Google and this on whatever, take all of those costs and divide by the number of people you signed up. Um, some places, some PE shops want you to then load in your marketing spend as well. Now that doesn't help you decide to deploy more dollars towards Facebook versus like Google, right? But it does help you understand in the aggregate what happens. Cause what happens is like somebody's on Instagram and they see a thing and then they like decide to search for it and then they forget about it and then they go directly to it. And like, it's really like an attribute, a truly functioning attribution model is Really, really hard to build.

AI assessment note: “take all of those costs and divide by the number of people you signed up”

Q Help founders understand. CPAs is, you know, cost per acquisition. Um, why do, why do they increase over time? Cause a lot of seed companies pitch me and they go, it's eight dollars. And I go, that means nothing. And they don't kind of understand. So why do CPAs go up over time?

A Yeah. Like I think oftentimes entrepreneurs, they're like, oh, like I went into three places today and sold them on this thing and they all love it. Like they're going to do it. And it's like, well, yeah, that's because you're the founder and you're going in there and like, that doesn't Scale. Like that's not gonna, you know, so your early cohort of people, the early adopters, those are gonna be your, typically are gonna be your most loyal people and the cheapest to get. And then you're moving into other spheres of people and other buckets of people. And so like for us, we started ButcherBox with claims, claims based meat, grass fed beef was our thing. And there was a huge market of people in the US who already were predisposed to buying grass fed beef, but didn't know where to buy it. And so, you know, we, we use an influencer strategy and an interesting strategy to like, go get all of those people. But once you've gotten those people, and by the way, it's like two percent of the United States are predisposed to eat grass-fed beef. If you want to keep growing, what do you do? You have to actually like create a market, right? And so then that becomes like, it's not just like, oh, they're searching for grass-fed beef and you put up a Google ad and you get them to your site and you sign them up and it costs 30 bucks. It's like, Oh, we need to run like a, you know, whatever, a bra…

AI assessment note: “over time you see these businesses, CPA goes up and up and up and up”

Q What has really worked for you in terms of that AOV expansion? AOV for people listening, average order value, or like basket expansion. I'm sure you do the same. What's really worked for you in driving per order up?

A Yeah. What's great is what's worked is also very much in alignment with what our customer is looking for, and that is super well-priced deals above and beyond your box. So you get your custom box from us, you get your six cuts of meat in it, and then we have like a whole member deals and a whole catalog, and those things are priced to beat retail essentially, right? So we want you to go in there and be like, oh, I'll pick up one of those and one of those and one of those. That has worked really well for AOV. Um, and oftentimes the retailer is doubling the price that they buy for wholesale. Like that's the general rule. If they buy like, you know, chicken breast for three, three 99, they're going to sell it in the store for eight 99. We find that we can provide a better value to the customer than they can get at the grocery store.

AI assessment note: “That has worked really well for AOV.”

Q One, is it a mental challenge for you? And is it a mental challenge that founders will have to overcome going from box one profitable to accepting actually a four month payback or a five month payback? Yep. How did you get over that?

A Well, you get over that because by that point you've seen enough game tape to know like how your cohorts are doing. So What do they look like after a year? Or maybe you're starting to see after two years and you start to see the return profile, right? And so then it makes all the sense in the world to invest in our business. So we were profitable, right? So we're an, we're an LLC. We're profitable. So if I don't Deploy a dollar and it drops to the bottom line, which obviously we want a healthy amount of profit, uh, for a whole host of reasons. But if I don't deploy that dollar and it ends up as profit, you know, Joe Biden's going to take 50, 50% of it, 50 cents on the dollar, right? So like, okay, well that, that gives you even more motivation to like redeploy it into marketing where at least I can see a return, a two X return, a three X return. Like you see this return. And if you think about it, this is what I love about subscription businesses, it's like such an interesting securitized investment, right? Because it's, it's over hundreds of thousands of people or tens of thousands of people that you're signing up, you know, the return profile, you know, the things that you're going to do to improve the return profile by negotiating the price of tape or whatever else you're going to do. And so it just becomes like a, a really interesting investment. That's how we look at it.

AI assessment note: “you get over that because by that point you've seen enough game tape”

Q Can I ask, what's worked in terms of actually getting through that and getting over that? Because it is a big thing to get over.

A The biggest thing that's worked for me, so, I mean, I'm happy to talk about my, my entire career, but I, I've spent a lot of time leading people and I've seen a lot of people come and go, whether we had to fire them or whether they left on their own volition. And one of the things that I've really focused on in this business is to make sure or to try to make sure that any person who comes into the company, when they leave, they're like, wow, that was the best career decision I made. And if I can say that, if I, if I look at them and I'm like, Oh yeah, we hate to see her go, but now she's going to run data and analytics somewhere else. Like that is, people aren't designed to work at a company forever. And so again, it's kind of like noticing the fear of abandonment, but then also just like not letting it hijack my day to day.

AI assessment note: “noticing the fear of abandonment, but then also just like not letting it hijack”

Q Help founders understand. CPAs is, you know, cost per acquisition. Um, why do, why do they increase over time? Cause a lot of seed companies pitch me and they go, it's eight dollars. And I go, that means nothing. And they don't kind of understand. So why do CPAs go up over time?

A Yeah. Like I think oftentimes entrepreneurs, they're like, oh, like I went into three places today and sold them on this thing and they all love it. Like they're going to do it. And it's like, well, yeah, that's because you're the founder and you're going in there and like, that doesn't Scale. Like that's not gonna, you know, so your early cohort of people, the early adopters, those are gonna be your, typically are gonna be your most loyal people and the cheapest to get. And then you're moving into other spheres of people and other buckets of people. And so like for us, we started ButcherBox with claims, claims based meat, grass fed beef was our thing. And there was a huge market of people in the US who already were predisposed to buying grass fed beef, but didn't know where to buy it. And so, you know, we, we use an influencer strategy and an interesting strategy to like, go get all of those people. But once you've gotten those people, and by the way, it's like two percent of the United States are predisposed to eat grass-fed beef. If you want to keep growing, what do you do? You have to actually like create a market, right? And so then that becomes like, it's not just like, oh, they're searching for grass-fed beef and you put up a Google ad and you get them to your site and you sign them up and it costs 30 bucks. It's like, Oh, we need to run like a, you know, whatever, a bra…

AI assessment note: “your early cohort of people... cheapest to get. And then you're moving into other spheres”

Q Mike, what are the biggest fuck-ups you made in hiring?

A Yeah. Oh man. Well, the biggest one that comes to mind is this was really early. This was like really early custom made. We hired this guy. He was a sales guy. He didn't do any work. We were told by a restaurant like nearby that he stole a sandwich. Like they, they made a sandwich and he like took it and didn't pay for it. And so anyway, we're like, uh, you know, basically like, Hey man, um, you're not really doing any work. Like I think it might be time to replace you. And he's like, yeah, that's fine, but just in, when you do, I'm gonna let everyone know that you hired a level three sex offender. And we're, I had the same reaction, like, I'm like typing in level threes. I said better, like, what does that even mean? I don't even know what that means. Uh, and you know, it turns out.

AI assessment note: “the biggest one that comes to mind is this was really early”

Q How do you advise founders on calculating CPAs? Cause your tax vary by channel. Is blended the best way to show CPAs? Yeah.

A Yeah. So, um, I think that the easiest way, which is like very low, you know, low lift is to take all of your marketing expenses for the month. So when you see your P and L and it's like, we spent this on Facebook and this on Google and this on whatever, take all of those costs and divide by the number of people you signed up. Um, some places, some PE shops want you to then load in your marketing spend as well. Now that doesn't help you decide to deploy more dollars towards Facebook versus like Google, right? But it does help you understand in the aggregate what happens. Cause what happens is like somebody's on Instagram and they see a thing and then they like decide to search for it and then they forget about it and then they go directly to it. And like, it's really like an attribute, a truly functioning attribution model is Really, really hard to build.

AI assessment note: “take all of your marketing expenses for the month... divide by the number of people you signed up”

Q We're going to make this the best fucking show ever because it's going so deep, which is going to help a lot of people, I think. I think one of the things that I find interesting is channel spread and difficult for founders. They try to be everywhere. How do you think about channel concentration and where to deploy dollars and lessons from that as you scale ButcherBox?

A So I have an analogy of wildcatting for oil. When you, when this is probably not how wildcatting for Oil works. But when you go out wildcatting for oil, you have a small, cheap shovel, and you just dig some holes, right? You think this is going to be a fertile ground, and you dig some holes. You want to make the holes small. You want to make the holes cheap. You want to make the holes rapid. When you start seeing oil bubble up through that hole, time to build a rig. But don't build a huge rig. Don't, like, get the, you know, the massive rig. Get a small rig. Like, maybe you hire one person, and that person is going to be responsible for extracting the oil out of there. And then it's like, wow, we think there's a lot of oil here. It's like, cool, build a bigger rig. And so you, you basically build and build a build. At a certain point, you bring in the fracking technology and you're trying to extract all the oil possible from the thing. But you, as the founder, don't really want to go wildcatting until you make sure that that rig is, is being manned, right? That somebody is on that rig, that they're actually working harder on it than, than you can. Uh, before you move. So for us, our first, our first thing was influencers. We started with a Kickstarter campaign where we raised 215,000 dollars in pre-orders, and there was a, we, we reached out to all these, like, anyone who had e…

AI assessment note: “When you start seeing oil bubble up through that hole, time to build a rig.”

Q Five months? Something like that. Okay, I get you. Can I ask, what are the single biggest moments of churn in a customer's life you've seen? Is it after the first box? Is it a year in?

A No, it's, um, the first three months are the most important. It's where you can build a habit. For us, we ship meat in the mail, frozen, and generally that meat goes into your freezer. And w one of the challenges we have is people, at least in the U S they think about their freezer as like a savings account and their refrigerator as a checking account. And so when they say like, what's for dinner, very few people are opening up their freezer, right? You open up your refrigerator. You're like, Oh, okay. I got some broccoli. It's about to go bad. And I thawed this chicken. So I'll just cook that chicken and broccoli. Great. Like people aren't like generally our members have to, in order to be successful, they're not necessarily meal planning. Like, Let me pull out these four cuts of meat and like, this is what we'll eat this week, right? So because of the defrosting issue, we actually have a customer who like needs to get into a pattern. So for us, the first 30 days is, you know, big churn 30 days, gets a little smaller, gets a little smaller. If you get them through that first 90 day hump, you have a customer who will stay with you for a very long time. And so we do a lot of work trying to, what are we trying to do? We're trying to empower our customers and our members To cook awesome meals at home, because the quality of our meat's amazing, and it oftentimes are things you can'…

AI assessment note: “the first three months are the most important. It's where you can build a habit.”

Q How transferable are the skills you've gained with ButcherBox to alternative DTC consumer subscription companies? If I gave you vitamins, if I gave you... Very. So you could, you think you could switch segments and sell vitamins, uh, healthcare, um, anything else?

A Yes. I mean, I, I do a lot of investing and advising in companies that are... Not perishable, but are, you know, some sort of subscription and turns out I can be pretty helpful. So I do think it's somewhat transferable for sure. And the types of companies we're looking for are like perishable shipping. Obviously we know how to do that super well subscription. We know how to do that super well. And then meet or meet adjacent. We know how to do that pretty well. So like that, those are the realms that we want to, we want to plan. And I do believe that the DTC economy is kind of falling apart right now. And Or already has, or is about to, and what we're seeing is more and more distressed companies that raised right after COVID, you know, had their 24 months of runway, are trying to tighten their belts, but really there's not a lot of excitement, and they're generally smaller than they were at the tail end of COVID. We're seeing a lot of banks pick up stuff, and it just, it seems like a good time for us to put our hands up and say, like, hey, if you've got something and you're interested in coming to work with us, like, we, we could maybe make something work.

AI assessment note: “I do think it's somewhat transferable for sure.”

Q Do you agree? And what do you find is the red flag specifically in the negotiation on comp packages?

A Okay. Well, first of all, um, nobody, nobody understands their equity and negotiates for it. Like in, in my career, I've had so few people actually read the document. I, I've probably had like a dozen questions and usually it's on page two of a 75 page document, right? So like nobody reads it. And I think if you are getting a big comp package or if you're negotiating for comp and part of the compensation is equity, You should understand what you're actually getting because people don't. So I'll just leave that at that in terms of red flags. Well, I guess the other one for people who are hiring is I find that sometimes people anchor around like money. So if somebody really wants a hundred grand, don't come in at 95, just cause like you want to make like, oh, we only had 95 budgeted, like pay them a hundred grand because they have that, that level in their head. And oftentimes, like, I don't want to lose someone over like Salary. I think that's a big mistake to make where I've seen the biggest red flag. I mean, aside from the interview process and what they might show you in the interview process or how they might treat people and all that stuff, the biggest red flag for me would be on title where, you know, you're pretty clear on what you want. And they're like, well, I need to, I need to report to the CEO. And it's like, well, that's not available. Like you're not reporting to …

AI assessment note: “title and reporting, I would say are the two The two red flags that we watch out for”

Q Mike, what are the biggest fuck-ups you made in hiring?

A Yeah. Oh man. Well, the biggest one that comes to mind is this was really early. This was like really early custom made. We hired this guy. He was a sales guy. He didn't do any work. We were told by a restaurant like nearby that he stole a sandwich. Like they, they made a sandwich and he like took it and didn't pay for it. And so anyway, we're like, uh, you know, basically like, Hey man, um, you're not really doing any work. Like I think it might be time to replace you. And he's like, yeah, that's fine, but just in, when you do, I'm gonna let everyone know that you hired a level three sex offender. And we're, I had the same reaction, like, I'm like typing in level threes. I said better, like, what does that even mean? I don't even know what that means. Uh, and you know, it turns out.

AI assessment note: “We hired this guy. He was a sales guy. He didn't do any work.”

Q kind of direct reports, and if you have too many direct reports, it obviously impacts the, the lifestyle and the life of the, uh, direct report themselves, who receives them. And you said before, throw out your business plan. Uh, every entrepreneur who went to business school is shuddering, and think about lifestyle design. If we can break it up first, why should you throw out your business plan, Mike?

A Here's the deal. There's a lot of different ways to be an entrepreneur. There are lots of different companies. I mean, I live in the United States. There's tons of opportunity and tons of ways to make money and build a business. Tons of different stuff. What I find most people do is they spend a whole bunch of time on like the idea, like the business plan, like, oh, here's how we're going to make money. This is what it is. Like, I can't leave my job until I've like actually, like I've, I've figured out all these things. And usually you can't really foresee what the future looks like. So oftentimes people get into a business And then they realize like, oh, this is, there's no business here. Like we're going to pivot it and we're going to do something else. Or, uh, you know, the business that you start looks nothing like the business that you end up with. Like, you know, perfect example is like, uh, Instagram, right? Like it started as something completely different than where it ended up. So, okay. Why spend so much time like figuring out the market and doing all this stuff when like you haven't even decided what you want this business to look like? I think one of the lies of entrepreneurship is that you need to raise money. People think I need to raise money and therefore I need a business plan and therefore I do all this stuff. And what I try to encourage people to do is to tr…

AI assessment note: “usually you can't really foresee what the future looks like”

Q Five months? Something like that. Okay, I get you. Can I ask, what are the single biggest moments of churn in a customer's life you've seen? Is it after the first box? Is it a year in?

A No, it's, um, the first three months are the most important. It's where you can build a habit. For us, we ship meat in the mail, frozen, and generally that meat goes into your freezer. And w one of the challenges we have is people, at least in the U S they think about their freezer as like a savings account and their refrigerator as a checking account. And so when they say like, what's for dinner, very few people are opening up their freezer, right? You open up your refrigerator. You're like, Oh, okay. I got some broccoli. It's about to go bad. And I thawed this chicken. So I'll just cook that chicken and broccoli. Great. Like people aren't like generally our members have to, in order to be successful, they're not necessarily meal planning. Like, Let me pull out these four cuts of meat and like, this is what we'll eat this week, right? So because of the defrosting issue, we actually have a customer who like needs to get into a pattern. So for us, the first 30 days is, you know, big churn 30 days, gets a little smaller, gets a little smaller. If you get them through that first 90 day hump, you have a customer who will stay with you for a very long time. And so we do a lot of work trying to, what are we trying to do? We're trying to empower our customers and our members To cook awesome meals at home, because the quality of our meat's amazing, and it oftentimes are things you can'…

AI assessment note: “for us, the first 30 days is, you know, big churn 30 days”

Q How do you think about brand marketing? You mentioned the cycling there. Honestly, I, I don't, yeah, I don't like it, honestly. I freaking hate it.

A I am sure that there are plenty of really good reasons to do brand marketing and to really dive deep into brand marketing. Last year, we spent eight and a half million dollars on brand marketing, and anytime I ask the question of like, well, how do we measure this? Like, how do we know if we're doing well? It's like, well, it's like, You know, there's like a lift and it's like, well, how does that equal dollars back to us? And what happened was that eight and a half million dollars, eight and a half million dollars, a lot of money for us, at least you basically just destroy your customer acquisition to lifetime value. Like, oh, there's no payback. And for a highly measured, like, let's go negotiate the price of tape kind of person, very hard for me to be okay with that. And so we, we now look at.

AI assessment note: “you basically just destroy your customer acquisition to lifetime value. Like, oh, there's no payback.”

Q Uh, listen, I love that. Um, tell me, what would you most like to change about the world of VC? Like, do you like VCs, Mike, or do you just look at anything? You fucking slime wasters on Twitter who just pontificate, tell me to cook steaks on Mount Everest and sit and do podcasts. Like, you can be honest.

A No, like, I look, I, so I LP and, and funds, like, I, I, I, I think VC as an asset class is interesting, a great way to expose people who are interested in, like, Getting, you know, small company exposure. Like, I, I think VC, and honestly, for the VCs, I mean, between the fees and the carry, it's like a great business to be in. Super low overhead, super high margin. It's a great business. Um, I, if, if I could change one thing about VC, I think it would be that I, I don't think most founders think before they start raising money. They think that they have to raise money in order to build a successful business. And I, I just wish they didn't. I wish we could like, and I know some VCs are like, don't raise from us if you're not into, you know, getting on the VC train. But I think that, you know.

AI assessment note: “if I could change one thing about VC, I think it would be”

Q Do you agree? And what do you find is the red flag specifically in the negotiation on comp packages?

A Okay. Well, first of all, um, nobody, nobody understands their equity and negotiates for it. Like in, in my career, I've had so few people actually read the document. I, I've probably had like a dozen questions and usually it's on page two of a 75 page document, right? So like nobody reads it. And I think if you are getting a big comp package or if you're negotiating for comp and part of the compensation is equity, You should understand what you're actually getting because people don't. So I'll just leave that at that in terms of red flags. Well, I guess the other one for people who are hiring is I find that sometimes people anchor around like money. So if somebody really wants a hundred grand, don't come in at 95, just cause like you want to make like, oh, we only had 95 budgeted, like pay them a hundred grand because they have that, that level in their head. And oftentimes, like, I don't want to lose someone over like Salary. I think that's a big mistake to make where I've seen the biggest red flag. I mean, aside from the interview process and what they might show you in the interview process or how they might treat people and all that stuff, the biggest red flag for me would be on title where, you know, you're pretty clear on what you want. And they're like, well, I need to, I need to report to the CEO. And it's like, well, that's not available. Like you're not reporting to …

AI assessment note: “title and reporting, I would say are the two The two red flags”

Q I just, I mean, the amount of companies that hit their numbers, I have one or two, and I'm just like, Mike, I love you. Um, but it's rare, very rare. Um, can I, we're going, we're jumping around here. So with the generation that did get funded, do they just bluntly fizzle out and die? Do you acquire them? Do they turn into lifestyle businesses? Where, where's, what happens?

A Yes, we are a buyer. We would love to find distressed subscription, ideally perishable shipment businesses. We are looking for them. We're talking to people like we're, we're, we're at, as in, in terms of a way to grow or a way to take our know-how and apply it somewhere else. Like we're pretty interested in that realm. The big thing that happened was, so we started again, we started in 2015 at that time, blue apron had raised like a two billion dollar valuation round. Like, you know, it was, it was the toast of the town. And then in mid 2017, I think it was, like, they went public in, like, July of 17, and by December of 17, they had gone from, like, a 140 dollars to, like, 40 dollars. And all the money, and everyone was still in lockup, all the money for box subscription companies dried up overnight. And so some people are like, oh, don't, don't you wish you raised money? And like, actually, I think we'd be out of business if we raised money because we would have raised money in 2015 when it was hot with big valuations, we probably would have raised again. And then when all the money like would not had had to build a profitable business and then all the money dried up and everyone sold and the market like was empty for a few years. And you know, for us, that was amazing because Blue Apron stopped advertising, the 150 Blue Apron localites stopped advertising, and we really wer…

AI assessment note: “Yes, we are a buyer. We would love to find distressed subscription”

Q I just, I mean, the amount of companies that hit their numbers, I have one or two, and I'm just like, Mike, I love you. Um, but it's rare, very rare. Um, can I, we're going, we're jumping around here. So with the generation that did get funded, do they just bluntly fizzle out and die? Do you acquire them? Do they turn into lifestyle businesses? Where, where's, what happens?

A Yes, we are a buyer. We would love to find distressed subscription, ideally perishable shipment businesses. We are looking for them. We're talking to people like we're, we're, we're at, as in, in terms of a way to grow or a way to take our know-how and apply it somewhere else. Like we're pretty interested in that realm. The big thing that happened was, so we started again, we started in 2015 at that time, blue apron had raised like a two billion dollar valuation round. Like, you know, it was, it was the toast of the town. And then in mid 2017, I think it was, like, they went public in, like, July of 17, and by December of 17, they had gone from, like, a 140 dollars to, like, 40 dollars. And all the money, and everyone was still in lockup, all the money for box subscription companies dried up overnight. And so some people are like, oh, don't, don't you wish you raised money? And like, actually, I think we'd be out of business if we raised money because we would have raised money in 2015 when it was hot with big valuations, we probably would have raised again. And then when all the money like would not had had to build a profitable business and then all the money dried up and everyone sold and the market like was empty for a few years. And you know, for us, that was amazing because Blue Apron stopped advertising, the 150 Blue Apron localites stopped advertising, and we really wer…

AI assessment note: “Yes, we are a buyer. We would love to find distressed subscription”

Q Got you. You can't do anything with that. You ain't getting no cows, man. So if we were to put that to one side, what is heavy margin that could be internalized?

A I wouldn't just dismiss that you can improve margin in meat. One of the places where if you are a bootstrap company, you have to focus on is driving margin in everything. And so like for meat, there's like yields, right? So you cut a larger hunk of meat into ribeye steaks, and there's a yield percentage. There's a yield of ribeye steaks that you get. So you might lose seven percent of it, and, and like that gets thrown into a different bucket. Well, it is like, do you actually like, is the difference between seven percent and six percent or seven percent and four percent massive numbers? I mean, right now I'm looking at like, we ship chicken, three pound pack of chicken. One of our problems is that unlike a retailer who has a price per pound multiplied by the package size and just charges you the customer that that's not the case for us, right? We sell you a custom box and then you add three pounds of chicken to it. So if the three pounds of chicken is actually 3.3 pounds, well now my chicken cost just went up 10%. And if you're able to reduce that, it's literally, like, 50 bips of, of margin to the bottom line. And it's just, like, literally being like, hey, we've now decided we're gonna weigh this stuff, and you're off by 10%. Like, please fix it. Um, or, like, let's sell it as 3.3 pounds, but at least, like, let's not just say it's three pounds and have it be 3.3 pounds, rig…

AI assessment note: “I wouldn't just dismiss that you can improve margin in meat.”