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Jul 7, 2016 · 22m · top-founders

EP 348: 11,500 Paying Him To Manage One-Piece Wardrobe with Blake Smith

Nathan Latka · 11m spoken Blake Smith · 8m spoken
0:00 / 0:00

gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions

Host Nathan Latka interviews Cladwell CEO and co-founder Blake Smith about transforming a failed dropshipping experiment into a thriving B2C wardrobe styling SaaS with 11,500 paying subscribers. The discussion covers Cladwell's unit economics, fundraising trajectory, churn reduction efforts, and organic-to-paid customer acquisition strategies.

How this conversation actually went

Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Nathan holds 56.2% of the talking time here. How this is scored →

Nathan as informed peer 4.4 Guest teaching 2.0 Guest disagreement 0.4 Nathan pushing back 1.6
05100:0010:0020:000:28–3:30 · Nathan as informed peer 3/10 Weekly Listener Giveaway and Winner Announcement Nathan introduces Blake and inquires into Cladwell's onboarding flow. Blake explains how adding more questions to the quiz counterintuitively increased completion rates by making users feel understood.3:30–5:47 · Nathan as informed peer 6/10 Subscription Economics, Pricing Tiers, and Monthly Recurring Revenue Nathan drills into the core SaaS unit economics, calculating MRR on the fly based on customer count and blended ARPU across male and female user tiers.5:48–8:50 · Nathan as informed peer 5/10 Founding Journey, Co-Founder Departures, and Equity Vesting Blake details raising $1.8M in Midwest tranches and managing co-founder exits. Nathan probes their unusual convertible note terms, specifically the lack of a discount on capped notes.8:50–11:54 · Nathan as informed peer 4/10 Pivoting Away from Affiliate Sales and Dropshipping Blake candidly shares the story of a failed $100k dropshipping experiment and running 22 business model experiments to transition Cladwell into a B2C SaaS platform.11:54–14:04 · Nathan as informed peer 5/10 Evaluating Churn Metrics and Potential Upsell Models Blake discloses a 5% monthly churn rate, leading Nathan to explain SaaS benchmarks for gross versus net churn and press Blake on why they have not aggressively scaled paid acquisition.14:05–16:51 · Nathan as informed peer 5/10 Series A Valuation Targets and Paid Ad Scalability Nathan and Blake explore Series A valuation expectations and ad channel saturation. Nathan shares his own startup experience regarding unscalable marketing channels.16:54–20:29 · Nathan as informed peer 3/10 Sponsor Break: Automated Bookkeeping with FreshBooks Nathan guides Blake through the Famous Five questionnaire before closing the episode with a quick recap of Cladwell's core operational metrics.0:28–3:30 · Guest teaching 2/10 Weekly Listener Giveaway and Winner Announcement Nathan introduces Blake and inquires into Cladwell's onboarding flow. Blake explains how adding more questions to the quiz counterintuitively increased completion rates by making users feel understood.3:30–5:47 · Guest teaching 2/10 Subscription Economics, Pricing Tiers, and Monthly Recurring Revenue Nathan drills into the core SaaS unit economics, calculating MRR on the fly based on customer count and blended ARPU across male and female user tiers.5:48–8:50 · Guest teaching 2/10 Founding Journey, Co-Founder Departures, and Equity Vesting Blake details raising $1.8M in Midwest tranches and managing co-founder exits. Nathan probes their unusual convertible note terms, specifically the lack of a discount on capped notes.8:50–11:54 · Guest teaching 3/10 Pivoting Away from Affiliate Sales and Dropshipping Blake candidly shares the story of a failed $100k dropshipping experiment and running 22 business model experiments to transition Cladwell into a B2C SaaS platform.11:54–14:04 · Guest teaching 2/10 Evaluating Churn Metrics and Potential Upsell Models Blake discloses a 5% monthly churn rate, leading Nathan to explain SaaS benchmarks for gross versus net churn and press Blake on why they have not aggressively scaled paid acquisition.14:05–16:51 · Guest teaching 2/10 Series A Valuation Targets and Paid Ad Scalability Nathan and Blake explore Series A valuation expectations and ad channel saturation. Nathan shares his own startup experience regarding unscalable marketing channels.16:54–20:29 · Guest teaching 1/10 Sponsor Break: Automated Bookkeeping with FreshBooks Nathan guides Blake through the Famous Five questionnaire before closing the episode with a quick recap of Cladwell's core operational metrics.0:28–3:30 · Guest disagreement 0/10 Weekly Listener Giveaway and Winner Announcement Nathan introduces Blake and inquires into Cladwell's onboarding flow. Blake explains how adding more questions to the quiz counterintuitively increased completion rates by making users feel understood.3:30–5:47 · Guest disagreement 0/10 Subscription Economics, Pricing Tiers, and Monthly Recurring Revenue Nathan drills into the core SaaS unit economics, calculating MRR on the fly based on customer count and blended ARPU across male and female user tiers.5:48–8:50 · Guest disagreement 1/10 Founding Journey, Co-Founder Departures, and Equity Vesting Blake details raising $1.8M in Midwest tranches and managing co-founder exits. Nathan probes their unusual convertible note terms, specifically the lack of a discount on capped notes.8:50–11:54 · Guest disagreement 1/10 Pivoting Away from Affiliate Sales and Dropshipping Blake candidly shares the story of a failed $100k dropshipping experiment and running 22 business model experiments to transition Cladwell into a B2C SaaS platform.11:54–14:04 · Guest disagreement 0/10 Evaluating Churn Metrics and Potential Upsell Models Blake discloses a 5% monthly churn rate, leading Nathan to explain SaaS benchmarks for gross versus net churn and press Blake on why they have not aggressively scaled paid acquisition.14:05–16:51 · Guest disagreement 1/10 Series A Valuation Targets and Paid Ad Scalability Nathan and Blake explore Series A valuation expectations and ad channel saturation. Nathan shares his own startup experience regarding unscalable marketing channels.16:54–20:29 · Guest disagreement 0/10 Sponsor Break: Automated Bookkeeping with FreshBooks Nathan guides Blake through the Famous Five questionnaire before closing the episode with a quick recap of Cladwell's core operational metrics.0:28–3:30 · Nathan pushing back 1/10 Weekly Listener Giveaway and Winner Announcement Nathan introduces Blake and inquires into Cladwell's onboarding flow. Blake explains how adding more questions to the quiz counterintuitively increased completion rates by making users feel understood.3:30–5:47 · Nathan pushing back 2/10 Subscription Economics, Pricing Tiers, and Monthly Recurring Revenue Nathan drills into the core SaaS unit economics, calculating MRR on the fly based on customer count and blended ARPU across male and female user tiers.5:48–8:50 · Nathan pushing back 3/10 Founding Journey, Co-Founder Departures, and Equity Vesting Blake details raising $1.8M in Midwest tranches and managing co-founder exits. Nathan probes their unusual convertible note terms, specifically the lack of a discount on capped notes.8:50–11:54 · Nathan pushing back 1/10 Pivoting Away from Affiliate Sales and Dropshipping Blake candidly shares the story of a failed $100k dropshipping experiment and running 22 business model experiments to transition Cladwell into a B2C SaaS platform.11:54–14:04 · Nathan pushing back 2/10 Evaluating Churn Metrics and Potential Upsell Models Blake discloses a 5% monthly churn rate, leading Nathan to explain SaaS benchmarks for gross versus net churn and press Blake on why they have not aggressively scaled paid acquisition.14:05–16:51 · Nathan pushing back 2/10 Series A Valuation Targets and Paid Ad Scalability Nathan and Blake explore Series A valuation expectations and ad channel saturation. Nathan shares his own startup experience regarding unscalable marketing channels.16:54–20:29 · Nathan pushing back 0/10 Sponsor Break: Automated Bookkeeping with FreshBooks Nathan guides Blake through the Famous Five questionnaire before closing the episode with a quick recap of Cladwell's core operational metrics.

speaking balance: gold is Nathan, purple is the guest (3 minute bins)

0:00 · Nathan 73.2% · guest 26.8%0:00 · Nathan 73.2% · guest 26.8%3:00 · Nathan 44.1% · guest 55.9%3:00 · Nathan 44.1% · guest 55.9%6:00 · Nathan 37.6% · guest 62.4%6:00 · Nathan 37.6% · guest 62.4%9:00 · Nathan 19.5% · guest 80.5%9:00 · Nathan 19.5% · guest 80.5%12:00 · Nathan 56% · guest 44%12:00 · Nathan 56% · guest 44%15:00 · Nathan 62.5% · guest 37.5%15:00 · Nathan 62.5% · guest 37.5%18:00 · Nathan 82.2% · guest 17.8%18:00 · Nathan 82.2% · guest 17.8%21:00 · Nathan 100% · guest 0%21:00 · Nathan 100% · guest 0%
Sharpest disagreement ▶ 15:15 Rejecting naive ad spend scaling

Blake dismisses the simplistic idea that digital ad spend can simply be 100x'd overnight, explaining that channels saturate and require complex portfolios.

 Hardest push from Nathan ▶ 8:28 Challenging non-discounted capped notes

Nathan challenges the terms of Blake's convertible notes, pointing out that capped notes without discounts are unusually rare and asking why Blake structured them that way.

 Biggest teaching moment ▶ 2:49 The onboarding questionnaire conversion paradox

Blake educates Nathan on onboarding optimization, revealing that lengthening the questionnaire actually increased conversions because users felt they were receiving personalized value.

 Nathan holds their own ▶ 12:09 Differentiating gross vs net churn benchmarks

Nathan demonstrates SaaS expertise by clarifying the difference between gross churn and net negative churn targets for venture-backed companies.
the scores for every segment, with the reasoning behind each
ChapterTopicNathan as informed peerGuest teachingGuest disagreementNathan pushing backWhy
Weekly Listener Giveaway and Winner Announcement 3201 Nathan introduces Blake and inquires into Cladwell's onboarding flow. Blake explains how adding more questions to the quiz counterintuitively increased completion rates by making users feel understood.
Subscription Economics, Pricing Tiers, and Monthly Recurring Revenue 6202 Nathan drills into the core SaaS unit economics, calculating MRR on the fly based on customer count and blended ARPU across male and female user tiers.
Founding Journey, Co-Founder Departures, and Equity Vesting 5213 Blake details raising $1.8M in Midwest tranches and managing co-founder exits. Nathan probes their unusual convertible note terms, specifically the lack of a discount on capped notes.
Pivoting Away from Affiliate Sales and Dropshipping 4311 Blake candidly shares the story of a failed $100k dropshipping experiment and running 22 business model experiments to transition Cladwell into a B2C SaaS platform.
Evaluating Churn Metrics and Potential Upsell Models 5202 Blake discloses a 5% monthly churn rate, leading Nathan to explain SaaS benchmarks for gross versus net churn and press Blake on why they have not aggressively scaled paid acquisition.
Series A Valuation Targets and Paid Ad Scalability 5212 Nathan and Blake explore Series A valuation expectations and ad channel saturation. Nathan shares his own startup experience regarding unscalable marketing channels.
Sponsor Break: Automated Bookkeeping with FreshBooks 3100 Nathan guides Blake through the Famous Five questionnaire before closing the episode with a quick recap of Cladwell's core operational metrics.

Statements from this episode (19)

Disclosure
Cladwell sells an app to help consumers buy fewer clothes
“What we sell is we actually sell a tool that helps you, one, get dressed every single day from the items that you already have in your wardrobe, and two, is make sure that that wardrobe is comprised of the smallest number possible of high quality items. So we'…”
Blake Smith Jul 7, 2016 ▶ 2:02
Insight
Adding more onboarding quiz questions surprisingly increased Cladwell's completion rate
“Actually, the more questions we added up to that point, the more people actually filled it out, which I thought was really interesting.”
Blake Smith Jul 7, 2016 ▶ 2:50
Assertion Not checkable as stated
Over 200,000 users have completed Cladwell's onboarding quiz
“Over 200,000.”
Blake Smith Jul 7, 2016 ▶ 3:24
Assertion Not checkable as stated
Cladwell launched for men, but women now make up 60% of users
“The reason for that is we actually launched as a men's business, and so we launched our women's business on a whim last fall, just to see what would happen, and women right now are 60% of our business, so that, it's grown really fast based on women, so we're k…”
Blake Smith Jul 7, 2016 ▶ 3:47
Assertion Not checkable as stated
Cladwell has reached 11,500 monthly paying subscribers
“So we have over 10,000 people. That's like 11,500 people paying us now monthly.”
Blake Smith Jul 7, 2016 ▶ 4:25
Assertion Not checkable as stated
Cladwell's average customer acquisition cost is $17
“Yeah, so our CAC is on average about 17 bucks.”
Blake Smith Jul 7, 2016 ▶ 4:49
Disclosure
Cladwell spends $30,000 per month on marketing
“We're spending 30 K a month right now in marketing.”
Blake Smith Jul 7, 2016 ▶ 5:09
Disclosure
Cladwell raised $1.8M over two and a half years
“We've raised 1.8 million over the course of two and a half years.”
Blake Smith Jul 7, 2016 ▶ 5:51
Insight
Smith: A startup cannot effectively have two co-head leaders
“You can't really have two, two head leaders in a company.”
Blake Smith Jul 7, 2016 ▶ 6:50
What-if
Smith: I would have bootstrapped Cladwell if I could do it over
“If I could do it over again, I would have started bootstrapping.”
Blake Smith Jul 7, 2016 ▶ 7:57
Disclosure
Cladwell issued capped convertible notes with 10% interest and zero discount
“10% interest rate, and no discount. They're capped notes.”
Blake Smith Jul 7, 2016 ▶ 8:26
Insight
Smith: Dropshipping and affiliates are 'shoveling nickels' with operational headaches
“Like, affiliates is shoveling nickels. I'd say drop shipping is shoveling nickels, and you have to deal with shipping problems.”
Blake Smith Jul 7, 2016 ▶ 9:18
Opinion
Smith: Every personal stylist is actually just a salesperson
“Every personal stylist out there is actually just a salesperson.”
Blake Smith Jul 7, 2016 ▶ 10:22
Assertion Not checkable as stated
Cladwell generated over $100,000 in revenue in 2015
“In 2015, we made over a hundred grand.”
Blake Smith Jul 7, 2016 ▶ 10:54
Prediction Not checkable as stated
Cladwell projects reaching $1 million in revenue for 2016
“We're planning to hit a million this year.”
Blake Smith Jul 7, 2016 ▶ 11:00
Disclosure
Cladwell experiences a 5% monthly user churn rate
“Monthly churn is five percent of our users are leaving monthly.”
Blake Smith Jul 7, 2016 ▶ 11:59
Disclosure
Cladwell targets a $10M valuation for its first priced round
“Yeah, as we've modeled it, it's probably, it's around ten million.”
Blake Smith Jul 7, 2016 ▶ 14:41
Disclosure
Cladwell found early growth saturating men's fashion YouTube influencers
“We killed it on YouTube last summer, where we just, we found all the men's thought leaders on YouTube around fashion, and we just did rev shares with those guys, or paid them, and it was incredible, but we saturated the market”
Blake Smith Jul 7, 2016 ▶ 16:09
Insight
Smith: Digital marketing is like drilling for oil until the well empties
“In general, I think digital marketing is really just the process, it's like, it's looking for oil, When you find it, you dump all your resources into it until it's empty, and then you go find some more.”
Blake Smith Jul 7, 2016 ▶ 16:28
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