How I Built This with Guy Raz - ButcherBox: Mike Salguero

Episode Date: October 3, 2022

Back in 2015, when Mike Salguero set out to buy some grass-fed beef for himself and his wife, he had to meet a farmer in a parking lot, who handed him the beef in a trash bag. Naturally, Mike figured there had to be a better way. At the time, he was running a company that was slowly cratering, and he didn’t know the first thing about sourcing or packaging meat. But he had a hunch that if he could figure it out, he could build a successful home subscription business, shipping humanely-raised meat across the country. Mike connected with farmers and packers, launched a Kickstarter campaign, and began working with food and fitness influencers to promote ButcherBox. Today, without taking on a shred of VC investment or even a bank loan, the company does roughly half a billion dollars in revenue.  See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

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tall windows, beautiful old details, and plenty of space for all of us. And being in that home on Airbnb, right in the middle of Vienna, walking distance from so much of the city made it feel less like a visit and more like we were actually living there. Plus, taking a trip is the perfect time to host your space on Airbnb. Your place with a place with a all of its personal touches and its amazing location could make someone else's vacation even better. Your home might be worth more than you think. Find out how much at Airbnb.ca slash host. I gave that thing everything. And it's hard when you're in failure to not take it personally, to not be like, this is my fault. Like, I'm doing something wrong here.

Yeah. But so often it's really the business itself. is like, does the business want to be a business or not be a business? And like so often it's not up to us. And if I could talk to my scared self back then, you know, just be like a failed venture is not a failed entrepreneur. Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built. I'm Guy Raz, and on the show today, how Mike Salgaro, walked away from a failed business, figured out how to source and ship grass-fed beef across the country,

and built Butcher Box into a $500 million brand. When I sat down to write this introduction, I needed to check on how many subscriptions I have. And I was kind of shocked. There's Apple TV, New York Times cooking, Amazon Prime, Pandora, Audible, Wondery, Plus, Spotify, Netflix, Disney, the Hulu, YouTube, SiriusXM, the New York Times, several wine clubs. And that doesn't even include my phone bill or the fact that I still pay an annual fee to use Microsoft products.

And I'm just scratching the surface. According to one survey from 2021, the average American household spends almost $240 a month on subscriptions. And businesses love this model because it essentially allows them to predict. recurring revenue. And it means that if they do it right, if they offer a great product and great service, their subscribers stay and there's less volatility for the business. And sure, from time to time, you hear talk about subscription fatigue. But the business model, according to an analysis by McKinsey, is still in its early stage of growth. Between 2012 and 2020, subscription businesses grew more than 500% or about five times faster than the revenue of S&P 500 companies.

But like anything out there, podcasts, YouTube channels, coffee shops, burger joints, to really stand out? Well, you have to stand out. And the obvious way to do that is by finding something people want and making it easy for them to get it. One of those things is grass-fed beef. And in 2015, when Mike Salgaro came up with the idea for what would become Butcherbox, he was really thinking about serving people like his wife, Carleen. Her thyroid condition led both of them to seek out an anti-inflammatory diet with foods that included grass-fed meat.

Now, at that point, Mike had walked away from a failed startup, a marketplace for custom woodwork. He had spent six years of his life on it and was left with very little money. When he launched his new venture, he had no experience in food. He also didn't know how to source meat or where to slaughter it or how to pack it, let alone ship it across the country. But he knew one thing, something he learned from his previous experience. Mike didn't want to deal with investors ever again. So he went to Kickstarter.

And with the money he raised, he launched Butcherbox. And it turns out there were lots of people looking for an easy way to get grass-fed meat, including cross-fitters and people on keto diets. And this year, Butcherbox is expected to reach nearly $600 million in revenue. Mike Salgaro was born in Paraguay. Both of his parents were South American. They divorced when he was a baby, and Mike's mom moved him and his siblings to Massachusetts to be closer to the grandparents. And by the time Mike finished high school, he had a pretty clear sense of what he wanted to do. I knew I wanted to be in business. I didn't know what that meant, but I knew I wanted to be in business.

And so I started Boston University in the business school. And when I got to Boston University, one of the things that I realized pretty quickly was that the academics were not going to be very challenging for me. And I didn't really care that much about excelling in academics. and I decided to make the city my education. What is it meaning? How so? So essentially I worked almost full time starting by my freshman winter. I was working as much as possible, had a lot of really interesting odd jobs.

What would you do? Well, I would say the two most interesting jobs my freshman year. One was I worked behind the counter at a magic shop. So I would show people different magic tricks. And the second was I started working at the stadiums in Boston. So I worked at the Boston Garden, which was then called the Fleet Center. I worked at Fenway Park. And I was one of these people that walk up and down, you know, screaming peanuts and throwing peanut bags of people.

And you get a commission on every sale, right? Yes, you get a commission on every sale and then you also get tips on top of it. And people pay more for you to be a little more lively. It's a great way to learn how to sell because if you stare, at someone long enough they usually buy and uh really helped me realize that i loved sales and i did that i mean there's 80 games a year for for baseball so i did that a lot that's a lot i mean that's a lot of games so you were i mean you were kind of it's i would imagine not really focused on school that much at all because if you're going to the boston garden or fenway you know a couple times a week like

that's a that's a commitment that's right yeah yeah no i mean i mean i I graduated with a stellar GPA of a 2.9. Acceptable, reasonable. Barely. So you graduate from Boston University, I think in 2003. That's right. I read a story, an interview you gave, where you talked about at one point, like, you were kind of an activist. Like, you were protesting, like, globalization.

Like, this was a big thing in, like, the late 90s and early 2000s still is in some places. But in the U.S. it was. It was a lot of like anti-globalization. And you kind of took part in some of this stuff. I did. Like anti-capitalism, anti-corporate stuff. Corporations are going to rule the world. Yep.

Tell me about that. Yeah. So the protest that I went to was in 2002 in New York City. And it was the World Economic Forum protest. Well, the World Economic Forum was in New York City. And there was a big protest against it. And what was interesting to you about joining? What attracted to you to that?

I just felt like the world was not going to be in a better place if we just let corporations do whatever they want. And I remember reading a book when corporations rule the world. And I remember being very scared about corporations being allowed to do whatever they want to do. And so I go to this protest and I'm holding a sign. I believe I was outside the Waldorf Astoria Hotel. I was outside some hotel in New York City.

And I'm sitting there with my sign being like, hey, hey, ho, ho. You know, corporations have to go. And I just got this voice almost in my head that said, you won't change the world from this side of the fence. And that was a turning point in my life where I decided to dedicate my life to being on the other side of the fence, to running companies and to try to prove that you can do well by doing good. Yeah, I mean, if I was staying next to you at the protest in 2002 and you're like, you know what guy?

I think I'm inspired to join the other side. I've been like, Mike, you're a sellout. What do you mean? Stay on this side of the fence. Don't join those corporate pigs. That's right. That's right. Yeah, I think, unfortunately, capitalism is are the rules of the game.

And in my opinion, if you want to make a change to the system, you need to know. how to play in the system. You know, I spent school, yes, saying, oh, there needs to be a different way. And when I got out of school, I really got focused on how can I build myself up to be one of these suits and actually have a seat at the table and be able to make a difference. All right. So now let's find out how you sold out for the next hour and a half. I mean, I know you mentioned you kind of were interested in maybe getting into business somehow, but, but you didn't. You went into work for like a real estate company at first.

That's right. And what was the company? It was just a standard real estate agents or realtor? Yeah. So it was a rental office in Alston, which was the place where BU students went to get housing. Okay. And so I graduated early. I graduated in January, so three and a half years. And I was looking around for a job. And what I really wanted was something that would help me hone my sales skills. Like I wanted to get a little bit more professional in my sales skills. And I saw an ad in the paper and it said, East Coast Realty. And it was like two blocks from my apartment. And so I went into East Coast Realty. And the owner, John was there. And they were playing Grateful Dead. And you were like, oh my God. I found my people. They're, they're, they're, capitalists, but they're playing Grateful Dead. All right, I'm in. Yep. Exactly. And so, you know, he's like, well, if you want to work here, you have to go get a license. You have to get a real estate with license. And I was like, okay, took the 15 hours of class and took the test on

Monday. And by Tuesday, I was working there. If you could, you were certified, uh, realtor. Like, you could sell homes. I could sell homes, but I didn't sell homes. I rented apartments. It was rented. Okay. And it's interesting that you say you wanted to get experience in sales, because a lot of people graduate in college who want to get into business don't think about, you know, about sales. But sales is like the fundamental building block of how to start a business. And you thought to yourself, I don't know what I'm going to do, but I need to learn how to sell stuff. Yeah, I believe dealing with the rejection of not being able to sell is really important. And those lessons that I learned either at Fenway Park or as a realtor have stayed with me.

Because when you're running a company, everything is sales, whether you're trying to sell another client or you're trying to sell your company on what you're doing. And the other thing that I love about sales is it's one of the best ways to tie how hard you work to how much you can make. And that doesn't really exist in a lot of places. Like there's a lot of jobs where you can just work harder and harder and harder and you just make your salary. In sales, if you're working harder and you're lucky and you work smarter, you can actually make a lot more. money. Yeah. And so when I started in this real estate office, I was really good at renting apartments. You would basically rent apartments as students and you were good at convincing them

that this was the right apartment for them. I mean, how, is that basically what you were doing? Yeah. My perspective was that I was never going to try to sell somebody on a house or an apartment. I was just going to find them the best place. And I would just keep looking until I found them the best place. And apparently that was a refreshing perspective. Most people didn't take that approach. And from what I understand, that job turned out to be really important because of some of the people he met there. Yeah. The manager, the kind of office manager, is this guy, Seth. Seth becomes my co-founder, my first company custom-made. So Seth Rosen. Seth Rosen. He's also working there. Okay. So we become best friends. Also, my second or third client,

I ever had was my wife Carleen, who was a freshman looking to move off campus and, you know, sparks flew. And we didn't start dating for years later. But it's just amazing how this like, saw an ad in the newspaper was like, okay, this feels like the right spot for me. How much that one decision set up. I found my wife and I found my co-founder. Wow. All right. How and so you're there. And how long did you end up staying there at that company? So the real estate season in Boston is essentially from January until September. Okay. So I worked that season.

And then I actually went to live with my father in South America. Wow. Yeah. So I had reached out to him and had said, like, you're half of me and I don't even know you. And I want to get to know you. So between the middle of September and Christmas of 2003, I lived. in South America and spent a ton of time learning who this man was who I didn't know. And what was it like, that experience of living with this person who is half of you that

you didn't know? It was fascinating. The most interesting thing was just how nice and caring he was and how genuine he was. And then I would see these faces he would make or these gestures he would do that reminded me like, oh, that's my brother Andy or that reminds me of my sister. And it was just a real mindbender. I didn't have the conversation with him. Like, hey, dad, why did you leave me?

Yeah. I just wanted it to be good. Like, I just wanted to, like, get to know him better. And it's a really, it was a really fascinating time. All right. So you spend that time with him. You come back to Boston in 2004. Yep, back to real estate.

Okay. And I run another season in real estate. Although in June, I went with my friend to Israel. And I had made this t-shirt kind of as a joke. This is when Fahrenheit 9-11 came out. And the t-shirt said buck fush on it. Instead of F. Bush. Correct.

As in George W. Bush. As in George W. Bush. Okay. said buck bush in the logo of george bush it was a it was a blue t-shirt with white writing buckfush and you made this on a trip to israel i was no i made it before i um got on the plane to israel got it and my friends wore these t-shirts to the movie fahrenheit nine eleven so i get this call or an email while i'm in israel and they're like uh we sold all the t-shirts because i'd bought like i'd bought like 50. We need more. And so here I am in Israel and I'm deciding to make a lot more Buckfush T-shirts. You were going to get into the t-shirt business. That's right. That's right. And I, you know, I was not a George W. Bush fan and I thought other people in Boston weren't George W. Bush fans either. So I thought it could be an interesting, an interesting shirt. And so we set up booths at the Democratic National

convention and I found salespeople. And so I had people coming to my house who would buy the shirts for like $7 and then sell them for $10. And I also got into a few stores. So I had a few stores that would, you know, buy 30 shirts and then they would sell them for whatever they sold them for. And so, you know, things were starting to move. How many, how many of these T-shirts did you sell? By the end of it, I sold 17,000 T-shirts. 17,000 T-shirts that said, buck, Fush. And did you, it's, I mean, I have to assume you made it quite a decent amount of cash on that. I actually ended up with no cash whatsoever. You made no money off of that? How is it possible you made no money off of that?

I was asking myself the exact same thing. How is this possible? And, you know, really what was clear to me was I didn't know what I was doing. I didn't know how to account for it. I didn't, I just didn't know what I was doing. All right. So I think this is around like 2004 or 2005-ish. And I guess you decided to go back to the Boston area and sort of get like a stable job. And you eventually do get hired by a commercial real estate company outside Boston. I mean, it must have been okay, right? Because I think you wind up staying there for like three years or so. Is that right? Yeah, well, I ended up getting my MBA at night. They paid for me to get an MBA. So one of the reasons why I stayed for as long as I did was because they were paying for me to go to school. But I also, me and my buddy Seth, who were best friends at that time, we were looking for something to do. Like a business idea. That's right. We were looking for something to buy. We were looking for a business to start, like anything. I mean, we tried. We looked at a number of of different things and nothing panned out until we stumbled across custom made.com. Tell me this story about what was custom made. Sure. So, yeah, this is 2007. Seth has moved into an apartment and decides that he wants to get a fancy coffee table and he wants to custom make his coffee table. And so he's doing his research

and he's on this website customade.com. And that ends up getting this beautiful. beautiful coffee table from a woodworker in Maryland. And he's talking to the woodworker, and the woodworker's like, I get all my business from this website, Custom Made. It's amazing. And I pay $35 a year for my membership. And a light bulb goes off in Seth's head. And Seth calls me and he says, hey, we should buy this website, customade.com. You know, this guy gets all of his business and he's paying $35 a year. It was a guy who was a woodwork, like a carpenter?

Yes. So customade.com. When we purchased it, started in 1996 by a woodworker, Ted Wheaton-Krauss, and it was a listing service for other woodworkers. But this is built in 1996, and so the website actually, if you as a woodworker wanted to update your content, you had to email Ted, who was the webmaster, to put up photos for you or to help you manage your profile. So it was like an old-school directory. That's right. with an amazing SEO footprint, just tons and tons of customers going to the website, because when you would type in custom bookshelf into Google, customa.com came up first. Wow. And so the investment thesis was actually like a real estate investment thesis.

We called it a shack in Manhattan. It's like this place gets tons of foot traffic. And all we need to do is rehab the shack and jack up the rents and we'll have a nice little cash flowing business on our hands. In other words, you take this like GeoCities Quality website, you update it into something that looks a little nicer. You charge people more to advertise their services and you got a nice cash flow business. That was the idea. The number one thing was people need to be able to manage their own profiles. I mean, it's 2008 for God's sakes.

People should be able to log in and manage their own content without having to like email a webmaster. Yeah. How many people were listed on this site? There was about 350. 350. That was it. Yep. Okay. So the business had a top line revenue of $34,000. And so you thought, wow, there's just opportunity here.

All we need to do is just get more people listing their services, and we can actually make a lot more money. That's right. So, all right. So you presumably approach the guy who owns a site. And what? What did you say? I reached out to this guy, Ted, and I said, hey, if you're ever interested in selling, we'd be interested in buying. I didn't hear anything from him. Meanwhile, this is 2008, and the real estate market had crashed. Yes, really beginning to 2009.

Everything's unrued. Even worse. But yeah. Yeah. And so I ended up getting laid off at the real estate office. And it must have been a week later. this guy, Ted, actually wrote me back and said, I'd be interested. Let's talk. And so Seth and I put our heads together, and we send him an offer for $140,000. It was four times revenues.

It's pretty good. Yeah. And we put down a $5,000 deposit, and we wanted 90 days of due diligence. Right. And the 90 days of due diligence was really to go find the money because we didn't have enough money to actually buy that website. And he agreed to that price, basically. He did. Okay. Meanwhile, the economy is collapsing, and Seth and I are running around Boston with a logo on a Blackberry,

trying to raise money for this idea of a woodworker listing service, you know, $5,000, $10,000, $25,000 slugs at a time. This was not an easy time to raise money, 2008, 2009, right? because lots of people lost a lot of money and we're losing money. Yeah, literally our investment thesis was like, well, you could give it to us and maybe we'll make you money or you can leave it in the market and lose 30%. Yeah. But you did manage to raise the money. We did. We raised $500,000.

Okay. So the two of you are like, all right, you get the money, you buy this site, 2009. Let's do this. You've got custom made.com. And the plan was still to be just a better listing service. Right. Allow people to list their own products and then slowly increase the prices. Okay. So first of all, 350 listings is not enough to create a business that's going to make you some significant cash. So how did you get more woodworkers to join? Yeah. So we our list or our forecast was we could get about 45,000, there were 45,000 custom woodworkers in the United States.

And then we knew with a domain name like custom made, we could move in. into other verticals, whether that's jewelry or glass or ceramics or other things. And so the first thing we did is we built a website. And while I've been a tech entrepreneur now for 15 or 16 years, I knew nothing about building a website. And presumably you had some money to hire a few people with that $500,000. Yeah, we, exactly. The original team we brought on was mostly paid inequity.

And then we had a couple people who kind of helped us built. Okay. But what we launched was a total disaster. Total disaster. Why? What was it? I mean, the plan seems pretty straightforward. You're going to make the site better.

You're going to raise rents, and you're going to go after more woodworkers to advertise. Yeah. So the first thing that happened is we just completely destroyed the search engine optimization, the SEO. By doing what? we didn't tie all the pages to each other like they were in the original site and so over the course of a few months these makers are calling in they're being like first of all I can't use the site I can't upload photos in the back end I can't log in blah blah blah and all the business has dried up I'm not making any more money and so we we are frantically trying to fix the website while at the same time working to sign up more and more people onto the website that was in dire need of fixing. But, I mean, you eventually do wind up fixing the SEO and revamping the website. And, I mean, because you also managed to raise another round of funding, I think, in 2010.

So, I mean, at that point, how was the business actually doing? Were you actually, I mean, was there cash flow coming in based around this model? There wasn't cash flow, but we got it up to about $20,000 a month. in subscription revenue. And yeah, we needed more money. So we went out to a couple of venture places, but nobody was interested in talking with us. And so we did another round and raised an additional $600,000.

But really still at this point, the model was purely, like the idea was we're just going to make money off people paying to list on this site. That's right. Shack in Manhattan. We're not going to take a cut of a sale or anything. Correct. Okay. Yep.

So I can understand why it might have been challenging. I mean, that's a disparage the model, but I mean, it's kind of limited, right? Especially when you're going to venture capitalists who are like, you know, they just want bigger bets than like a woodworker listing service. Yeah. So we were just on the road trying to sell and everybody said no. I mean, it was like, no, no, no. Like listing service, no way. I mean, I know that at some point you broke through because, I mean, you were finally able to raise some money for custom made.

So how did you do that? How did things turn around? Yeah. So there was a moment. We were in Polaris, Polaris Ventures. And we had launched this feature called the Job Board. And the way the job board worked was we actually launched it so that we could sell. members because one of the questions we would get when we're calling these potential

woodworkers is like, well, how do I know that there are any jobs on there? And we created this thing called the job board where somebody could say like, oh, I'm looking for this in this area. I'm looking for like a chest of drawers in the Albany, New York area. Correct. And so we would say, hey, let's go to the job board and like, look at Albany, look at these jobs. If you, if you had a membership, you could bid on these jobs. I see. Okay. And so I'm in this meeting and I'm like, pull up the job board. We pull up the job board. I'm like, all we need to do is stand in between these transactions

and we can be the largest marketplace for custom stuff. As soon as I said the word marketplace, everything changed. This is 2011. Airbnb had just kind of started, and people got excited about the concept of being a marketplace for custom stuff. And the venture capital came fast. Right, because once you are the middleman, and you are controlling the relationship between the artisan and the end user.

There's all kinds of things that could happen. You could take a cut. You could, right? You could. You're basically the platform to get. And of course, that model would be huge, Airbnb, Uber, et cetera, et cetera. Right. And so we attracted first round capital into the round.

And then first round capital and Google Ventures led our first institutional VC backed $1.9 million. My co-founder stuff announced that we closed it at my rehearsal dinner for my wedding. Wow. And it was very exciting. It was amazing. You were now a venture-backed business, having raised a few million dollars. But presumably, your business model had to change because you couldn't just charge an annual

subscription fee, even if it was 50 bucks or 80 bucks. Like now, you had to figure out other ways of making money. So what did you start to think about doing? That's right. So the charter of that money was to build out a marketplace where we were going to no longer worry about subscription fees, free to join. And then we were going to take a 10% cut of the transaction. Okay. That makes sense.

From the maker. Yep. But the reality is that the model didn't work. And, you know, I used to call this like the trade show phenomenon. Like if you go to a furniture show or a trade show and there's like all these booths, most of the makers are like sitting in the back, like doing something or they're not out there selling. And, you know, you think about the psyche of a woodworker. Oftentimes these are people who were maybe a bit of a loner, not necessarily super sociable, didn't necessarily like writing. like obviously this is generalizations, but the written word is not necessarily like their strong suit.

Yeah. And now we're asking them to put themselves out there to like sell their expertise. And to bid on projects. And to bid on projects and to get rejected a lot and to put a lot of work into like, here's a sketch and I can do this for $2,000. And then the customer just doesn't go anywhere. Yeah. Getting something custom is an incredibly intimate back and forth conversation that can be, you know, dozens of back and forth communication. before anything actually happens. And we tried to, like, put ourselves into the middle of that, and it didn't, it just didn't work. And, you know, despite that, we're out, like, well, let's just raise more money. Maybe we can make it work. Yeah.

And we tried a number of different things. Like, we built a whole concierge team, so, like, kind of take the pressure off the maker, and we would do the back and forth. Try a number of different things to make it work. I mean, we pushed that boulder up the hill for years. trying to make it work. But the reality is that the whole premise was wrong. We just went on that premise because that's the only way we could get funded. But what was the, I mean, if you had 12,000 makers on this site, this is a lot of makers, and you had, you know, tens of thousands,

maybe hundreds of thousands of people coming to the site every month. And by the way, did you? Yes. And let's say, 5% of those site visits resulted in a trend. transaction, why didn't you make money? What was the problem? The big issue with the model was very few of the people who posted a project to something they wanted would actually transact on that project. And what you're doing is you're essentially taxing all of these makers who have to like say, hey, I'm Joe and I was about to work on this and put themselves out there. And they only have the capacity to do that a little bit. So there were a number of people who were quite successful. We have lots of maker stories of people.

who did incredibly well. But they had to hustle. They had to hustle. Yeah. Actually, most of the people who did incredibly well were not necessarily the best artisan, just amazing at sales. So you were the CEO and you were running this company, you were getting more and more cash coming into the business,

but you were burning through the cash? Yeah. We were burning at about $600,000 a month at our height. And that was mainly on hiring software engineers. Yes, it was mainly on staff. So designers, product people, engineers, marketing people. And how much was coming into the business every month? Oh, like 30 grand.

Wow. Yeah. Wow. Yeah. And as you're, I mean, having Google Ventures and Schooner Capital and some of these big, you know, first round involved, were they getting in your business? Were they like, okay, you just got to do this. You got to do that. Or were they kind of leaving you to just run it? No, they were definitely getting into our business. I mean, so Google was like, hey, if you want,

we can bring our technologist over and he can talk with your technology team. And hey, if you want, we can have a user experience person come over. Of course. And you're like, are you kidding me? We're like, great. That's amazing. Come on in. See everything. And, you know, know, right after we raised this money, Google's position was that our team was not good. Who on your team? Your technical team? Essentially everybody. Because, you know, like, from the VC's perspective, there wasn't a question about whether the marketplace was the right concept. Like, that's what they invested in. It was really a question of, like, well, we must have the wrong team to go activate that. So, like, let's go figure out who that person is.

And so we believe that, right? We were like, well, if Google says that's true, that's got to be true. Yeah. And, you know, I have this analogy of, I heard it somewhere, it's not mine, but when you start a company, it's like you're hacking through the jungle with machetes. And you're just like, you just need people who are willing to stay up and hack and try to find a path. Yep. And eventually you find a path. and that path leads you to a dirt road

and there's a bus on the road. Yeah. At Custom Aid, that bus was funded by Google and funded by First Round Capital. And what we did is we hopped on that bus and we looked at a great deal of the hackers

who helped us get on that bus and we said, you guys don't know how to drive. And we left them in the jungle. They were saying your team isn't good enough. You've got to replace them, which, I mean, setting aside the kind of the interpersonal challenges

of doing that with people you know, let's say they were right. Were you able to get good engineers? So we started hiring not for culture, but for experience, for resume. And over the course of the next two or three years, We went from overhauling our technology team, our design team, our product team, our marketing team. And when there was no one left, it was like, it must be a leadership problem.

We got to do something about Mike and Seth. When we come back in just a moment, how Mike emerges from a failed business and pivots to something that seems even harder. A subscription service for grass-fed beef. Stay with us, I'm Guy Raz, and you're listening to How I Built This. Hey, welcome back to How I Built This. I'm Guy Raz. So it's 2014, and Mike is still the CEO of Custom Made, a woodworking marketplace that's slowly running out of steam. And Mike and his co-founder, Seth, they're under a lot of scrutiny from the company's board. The board said, we think we need to get like a real CEO in here.

I was like, okay. And Seth called me one night, and he said, I feel like it's the fourth quarter, and I haven't been the starting quarterback. And I want to be the starting quarterback. And I had just, my daughter Marley was just born. Obviously, things weren't working out with the board. And I didn't, I wasn't like I had any great ideas. So I was like, yeah, go for it. Yeah. And so Seth took over as the CEO. How did you, how were you managing your own anxiety and stress at the time? Poorly. Because you were sitting on top of $29 million that you'd raised. And essentially this message that you're getting back from your investor saying you're not doing a good enough job. Yeah. But you knew that no matter what you did, the people you were serving, the artisans, it just wasn't the right fit. I'm by my nature a very hopeful person.

And so I was definitely able to remain hopeful that the next change we were going to make was going to work. Right. The hardest part for me was actually losing the culture. I remember around that time basically sitting in my car not being able to walk into the office. Because you were so... The people were so foreign to me. It was like it just felt so hostile and it felt so... because I had left all the people who helped me get there in the jungle, there was no one left.

It just became a place that I felt very unwelcome. And that feeling is just a horrendous feeling. I gave that thing everything. I mean, I sacrificed my health. I sacrificed my time. I would work there almost every Saturday. And it just didn't work. and it's hard when you're in failure to not take it personally,

to not be like, this is my fault, like, I'm doing something wrong here. Yeah. But so often it's really the business itself is like, does the business want to be a business or not be a business? And like so often it's not up to us. And if I could talk to my scared self back then, you know, it would just be like a failed venture. is not a failed entrepreneur.

Just keep trying to do the best thing possible. And if this doesn't work, you're okay. Yeah. While your, while custom made was sort of, let's say, imploding, what was your relationship like with Seth, your co-founder, who's your friend? It was good. I'm really proud of the fact that we were able to remain best friends

through all the ups and downs. We had a good, I mean, we would get on the phone and scream at each other. And it was obviously very tense. But we both just maintained a huge amount of respect for each other and a huge amount of love for each other. So eventually you leave the business and it sort of starts to wind down. And I read that you were able to find new jobs for most of your employees, which is pretty great. But what about custom made with the website and stuff?

What happened to it once you left? So the website remained. So what ended up happening is Seth and four other people remained at Custom Made and essentially bought it out of bankruptcy. And he has done the miraculous job of pivoting it to a jewelry site. So it's custom made.com. It's custom jewelry. And they do everything themselves. So there's no back and forth with a maker.

You're going back and forth with a designer who is an. employee of custom made. And the model actually works amazingly well. You can get a custom engagement ring for cheaper than you can get it in a store and you get to actually say exactly what you want, what you want done. So the dream that we always had is actually starting to come to fruition. But you were, you'd put seven years of your life into this thing. Seven hard years, yep. And did you think in your mind, I'm never going to be able to raise money again? I thought in my mind I never want to raise money again. Right.

How was your confidence as a leader? I mean, were you thinking, yeah, okay, this didn't work. I'm going to start my next thing. Or were you thinking, God, maybe I'm not cut out for this, this entrepreneurial stuff? I knew I wanted to remain an entrepreneur. I knew I didn't want to go get a job. But I also was deeply insecure about that. failure and about how was I going to pick up the pieces and start over.

But fortunately, I didn't have much time to think about it because what ended up happening was while I was at custom-made, my wife and I were trying a whole bunch of different diets. She has an autoimmune disease, Hashimoto's, which is a thyroid condition. And a lot of the stuff we were reading online was suggesting, hey, if you eat like an anti-inflming Amatory diet that can help with your autoimmune diseases. Tom Brady diet. Exactly. So a lot of these elimination diets would say don't eat conventional meat.

Go eat grass-fed beef. And I think, by the way, I think they said this because, and again, I'm not a doctor here, but the idea is that meat or beef that is raised with antibiotics and steroids and stuff, that has an impact on our bodies when we eat it. That was a lot of what people were writing. That's right. So we're following these elimination diets. We're online, you know, going to Daniel Walker's website or Whole 30 or Mark's Daily Apple or any of these other ones.

And so the first thing that happened was I realized it was remarkably hard to find grass-fed beef or it was prohibitively expensive. Yeah. And so the idea behind the company, I had a very modest plan. My plan was to start a hobby business while I went and figured out what was next. And the idea behind the company was, I wonder if there's a lot of other people who want grass-fed beef and can't find it. I should try to bring grass-fed beef to the masses, try to get people to have a good, reliable source of grass-foot beef. Right. The only challenge is that with grass-fed beef, it's less fatty.

Right. So the argument that people who love beef made and continue to make is that the fat in meat is what gives it flavor. And that's why I like Kobe beef or Wagyu beef is so delicious because they eat a lot of, they're giving a lot of corn. Yeah. So in this country, if you think about the rating system for beef, it's choice prime select. Those are like the three types of beef that you can get. And all that is is when you cut open the carcass and you look at the rib eye, it's how much marbles. is in the rib eye.

Yeah. And so, like, the entire rating system in this country is based on how much fat could you put into that animal. Yes. I don't believe that is the right way to rate the quality. And if you look at other places in the world, that's not how quality is rated. But this idea was in your head as, like, a kind of a hobby, a side project to figure out your next move.

Yeah. This was like the Tim Ferriss four-hour work week. Right. I'm going to like live in Argentina and look at my laptop, see my numbers. Take tango classes. Take tango classes. Call it a day. Yeah.

And so we were doing these elimination diets. Then I started buying meat from farmers. And I meet a farmer in a parking lot and he gives me like a trash bag full of meat. And I guess at this point, 2015, it sounds like we're talking about ancient history, but you could buy, and you can still buy this in some places, like a, a, share of the cow like a quarter or a half. That's right. Basically, you got to buy a lot of that meat. That's right.

And this was so you guys, you and your wife could consume it. Right. And it, but we ended up because, you know, these, these farmers are like, oh, I need to sell you half a half a cow. We ended up needing to like sell it to friends because or sell, I actually am bringing it to custom made and selling it to people at custom made because it was just like too much meat for our freezer. And I remember distinctly where I custom made and I sold someone some meat and he's like, this would just be so much easier if it was delivered to my house.

Yeah. I was like, yeah, that would be easier, wouldn't it? And I just got obsessed with like, okay, let's say, how would I do that? And I called the project Meet with a Name, which would have been a really bad name to lead with. And the idea was, hey, why don't we try to ship you your monthly allotment of grass food beef? And I couldn't figure out how to make the business work. I couldn't figure out how to ship a box frozen in the mail, how to buy grass food beef, where to buy grass food beef. Yeah.

I mean, you're a real estate and then a woodworking guy. I mean, you're not a food. This is not your area of expertise. Not my area of expertise at all. And I ended up hunting down the former head of operations of Omaha Stakes. Omaha Steaks, which for anything a lot of people know, they advertise in the magazine and stuff. You can get steaks from cows in, I guess, Omaha, Nebraska. And they've shipped them to you frozen.

Right. And they've been doing this for a long time, like 50 years or maybe longer. Yeah, Omaha Stakes have been around for 100 years, 100 plus years. And they were really the only big direct-to-consumer. steak shipper. Yeah. And it was kind of like Harry and David Pears. Like getting an Omaha steak was a special thing that somebody would send you for a gift or something.

That's right. It's a largely gift-giving business, largely large in the holiday time frame. So I, you know, I read an article. He was quoted in it. I hunted him down on LinkedIn. I reached out to him. And he was like, well, actually, I've been out of Omaha for over two years and I don't have an encompet anymore.

And I'd be glad to help you. Huh. Wow. This is the guy you got to talk to. He's the guy. You're like, where do you get the meat from? Where do you get the, how do you ship it? How do you package it?

How do you like what? And slaughterhouses are so complex in the U.S. There's USDA and then there's like, it's just really complex. And a lot of these farmers don't slaughter their own meat because they don't own the slaughterhouse. Right. There's a lot. There's a lot of complexity there. Multiple steps.

There's a slaughterhouse. And then generally that goes to like a cutting. facility where then they cut it into stakes and then it has to be packaged and frozen and then then the fulfillment center and then the fulfillment center ships it and it has to have like a certain amount of dry ice in it has to be in the right box and like yeah all of those details I had no idea how to do and by the way like at this point 2015 how much grass fed meat is being raised in the U.S. at all probably not that much not much to date there's not a lot of beef raising the United States that's grass fed it's about 2% of the overall beef and also

beef at that point grass fed was like nobody was really worried about the quality and the taste and so a lot of the grass fed that came out early was actually dairy cows or was older and it wasn't like high quality stuff and so the perception that a lot of people had about grass fed was like oh i tried it is like really chewy and gross it's gamey yeah and and dairy cows i should mention because i they are grass-fed by by and large, I think. Yeah, some are. Not all of them, but some are. And that was what people had brought to market as like the first grass-fed.

Right. Rather than a product where they were really thinking about what the animal is eating and like how that's going to taste. And grass-fed has changed dramatically over the past five years. All right. So you seek this guy out who worked for Omaha steaks and you contact him and say, hey, can I ask you some questions? What does he say? He was like, sure, fly me to Boston. I'm happy to meet with you and I'm telling you everything I know.

So he flew to Boston. We met and I ended up giving him equity in the company rather than paying him. And he, I would not have been able to start this business without this guy. What's his name again? His name is Ron Aikey. Ron Aiky. Okay. And so, but you didn't yet have a business, but you said, here, I'm going to give you equity in this business.

but you knew that you were going to start something. Right. Well, I knew at that point, I knew I was going to start an LLC and, you know, was going to give him stock in the LLC. Yeah. And once I met with him and he's like, oh, this is totally possible. Like, I can do this, this and this and set this up. Then it was like, okay, let's go. There's a business here.

All right. I'm curious. At this time, how much money did you have in the bank? Did you have, like, over a million dollars to put to maybe? you start this? No, maybe like 500. So basically that was all the money you made over a period of seven years. Yeah. So you did not have a whole lot of money to start this thing, but you had this and he comes out and this guy presumably Ron is he's a wellspring of information, right? Because he has done this before. Absolutely. So you sort of what do you lay out to him? You lay out,

What's the vision you kind of lay out to them? I laid out a vision for an Omaha steaks, but focused on grass-fed beef and a monthly subscription. All right. Now the question is, how do you do that? Right. And the reason for the monthly subscription was when we were at Custom Made and we had these makers who were at the very beginning who were this listing service, monthly subscription is amazing if you keep the person. Yeah. And so I just thought, well, people buy meat all the time.

I imagine they would just prefer to have a monthly subscription. And so, and I was looking for a hobby business, and I felt like it would be much easier to just sell someone once and then, you know, kind of dial in their meat subscription. And so Ron comes in and he says, first of all, he's like, it's too much beef. You need to move into other things as well. He's like, you know, people are going to want chicken and they're going to want pork. And by the way, those two species have the same issues in terms of being able to get a high quality product. And so it became rather than just like grass food beef, it became a beef chicken pork. That was kind of what we were looking at.

And Ron had all these connections. He had a connection with a company in Wisconsin called Nesvigs. And Nesvigs had meat cutting next to a frozen fulfillment distribution center. So it really solved all of our problems all the same time. Wow. So Ron has these connections. And he has the know-how. of like how to do this.

But where do you like where do you start to forget about getting customers? That's going to come later because you have this intuition that people want this food. But where are you going to source this stuff from? I mean, does Ron have the answers? Where do you find the meat? Ron did have the answers. Yes. He was like unlocking this just world of knowledge.

Yeah, literally unlock the business for me. I would not have been able to do this. But he had some contacts of people in Iowa, and he believed that they could provide what we were looking for. All right. So just curious, like, how do you, in terms of shipping beef, right? How do you make that, like, how did you make that economical? Because ice and dry ice, which you have to use is heavy, right? Until, I guess, until it evaporates.

It is. It's about five pounds. of dry ice per day in transit. Five pounds per day, meaning that every day five pounds evaporates. That's right. So if you were going to ship a box from Wisconsin to California, which was a five-day ship, you were putting 25 pounds of dry ice in that thing.

Wow. Okay. So 25 pounds of the has to by the time it gets to my front door five days later, that's got to still be pretty much frozen meat. That's right. But there's going to be no dry ice left. Ideally, there is like a little sliver or no dry ice left, yes. Yeah. All right. So you have this idea to do a meat box and you come up with a

butcher box, which is a very good name. And you knew that from your previous experience that you did not want to seek out outside investors. Right. At the beginning, it was that I didn't think the opportunity was big enough to have outside investors. I thought this was going to be a very small company. Right.

So I had this goal that I was going to start the company for less than $10,000. That was because I didn't think that if it's a hobby, like I wasn't really willing to spend more than $10,000 to get this thing off the ground. And then as I got going, I didn't want outside influence on how to build this company because I thought that my first company, some of the outside influence, didn't help. And I didn't want to have to deal with that again. But even to get it off the ground, right, how are you going to do that? because I have to assume this packaging company in Wisconsin has a minimum order size. And, you know, you've got to buy meat.

Right. And these processors, producers are, they don't want to just sell you $500 of the meat. So, you know, $10,000 you had of your own money. How are you going to get the cash to launch this thing? Right. And it's amazing how these like constraints can actually shape the business that you're in. So we launched with a Kickstarter campaign. And the idea behind the Kickstarter campaign was that we were going to be able to get a whole bunch of pre-orders.

And then we were going to be able to order the meat from Nesvigs and ship it to customers. And the other thing that we did, which was like very unique and had really never been done before. And again, it was because we wanted to like save money was we said, you're just going to choose, do you want beef? Do you want beef and chicken or do you want beef, chicken and pork? And then we're just going to send you whatever we want. Like, we're going to surprise you. Yep. And the reason why we did that is because I didn't want to carry a lot of inventory.

Yeah. And so the idea was, hey, we're going to know we get 500 orders. We're going to know what that box looks like, box one, and we're going to ship it out to everybody and, like, we're not going to have to worry about inventory. Because where you get into trouble is if you have a bunch of different skews and you're trying to, like, you know, carry them all in case the customer wants that versus that. Yeah, everybody wants breast, chicken breasts. Right.

So we just went for kind of center of the plate stuff that we knew people would like. We added recipes to help people learn how to cook, and everyone got this box curated by the butcher, by us. Got it. Delivered to their door. All right. So you decide to do a Kickstarter campaign. And did you, I mean, did you make like a cool video? And tell me how you, yeah, tell me what you did.

What did the video say? So the video was all about the nostalgia of how people used to go to a butcher shop and talk to a butcher and really be connected to the meat that they're eating and that we're trying to bring things, what we said, back to nature. Are you, is it like you in a field, like the grass field? Prancing around with cows, yeah. Yeah, you can still find it, Kickstarter, butcher box Kickstarter video. And so we did a 30-day campaign. We went out to race. raised $25,000, and we ended up raising $210,000. When we come back in just a moment, how Mike begins to grow the business by using a Trojan horse strategy, reaching out to food influencers and putting their recipes in his boxes.

Stay with us. I'm Guy Raz, and you're listening to How I Built This. Hey, welcome back to How I Built This. I'm Guy Raz. So it's 2015, and Mike has just on a Kickstarter campaign for Butcher Box, where he's raised a lot more than he expected, over $200,000. And now he has to fulfill all of those orders. I was in a rush because I wanted to not only get the boxes for people, but then to get them to sign up as subscribers. And so we were shipping our Kickstarter boxes within two weeks of the campaign being over. And then what we did is we, so we launched our website. But with the Kickstarter people, we shipped them all a box and we started calling them and saying like, hey, do you like your box?

Do you want to sign up as a subscriber? Can we take your credit card? I believe we sent about 1,100 boxes to different customers. And we got like 60% of them to sign up. So right away, we had 600, 700 subscribers. So, all right, you launch, you get the boxes out to people. And I have to assume even though you raise all this money, that's not enough for a big marketing campaign, right? Like you need to get the word out.

That's right. And so from what I gather, your strategy was like, let's just go to any paleo influencer and see if we can get them to promote our product. That's right. The first thing we did is we, because we had this curated box of like mystery meat, people didn't know what was going to show up. We wanted to like include recipes in the box to help people like cook it, but not ship any of the ingredients, just like, you know, just the meat. But then here's a recipe for terriaki chicken or short ribs or whatever. So what we did is we reached out to these influencers and we're like, hey, we started this company and we started it because like we followed this diet and, you know, we used her website. And we really love this recipe for squash and ground beef.

and we were wondering if we could include it in our box. And we'll put something on there that says, like, your name and your website and stuff like that. Like, would that be okay with you? We call it like a Trojan horse. These influencers are like, yeah, that sounds awesome. Like, of course you can use my recipe. Like make sure you have my website on there and what on. Oh, by the way, what do you guys do?

We're like, oh, this is what we do. And by the way, we're launching a referral program. So if you want to become an influencer for us, we'd love to have you. And how did the referral program? work. I mean, you would give them like a special link. And when people clicked on that link, they would get a, uh, they would get some money. Yeah. So, um, they would each get a unique link. And then when people click on it, it drops a cookie onto their browser. And so if they were to order over the next 30 days, that influencer would get money. But because we didn't have a lot of

money, what we told these people is like, we can't pay you a lot of money because we needed to make sure that we were what we called box one profitable, like we made money on the first box. Right. And so what we offered them was a residual. It was like, yeah, we can't pay you like $50 up front. What we can do is we can pay you $10 every month for the life of that subscriber. So if your link gets somebody to subscribe every month that they pay the subscription fee, and it's anywhere from like $99 to now, almost $300, right, depending on the box, that influence. would get $10 a month? Yeah.

At the time, we had one box. It was $129. And so they would get anywhere from $10 to $15 per month. And they loved it. You know, I often joke that I think the American dream is to sit on your ass and collect checks. And that was essentially what was happening. I mean, people were able to send an email a quarter to their email list and say, hey, butcher box is great.

You should sign up. And then just on a monthly basis, just get pretty sizable checks. And so we reached out to anybody in paleo, in CrossFit, in keto. Keto was just kind of starting. But in that world, we reached out to all of them to try to get them to promote butcherbox. Right. Grass-fed meat was a big part of that and is a big part of that culture. And it's kind of an important subculture.

And we've talked about this because it's fueled brands like RXBarr, for example. Like that really kind of fueled that company. And I know the grass-fed beef is really important, but obviously pigs don't eat grass and either do chickens. They eat corn and feed. And that's okay, I guess, right? Yeah, their bodies are better adapted to that type of diet. But with them, one of the big issues, first of all, you've got antibiotic use in both, right? And humane treatment is a really important part as well.

So, you know, essentially we're looking at. looking for the grass-fed equivalent, but that doesn't mean that they just eat grass. It's like, what are those claims that then transfer over to other species? I wonder also if at the time, like, the hot boxes at the time were like those ready-made things or like ingredients that were already pre-proportioned, like Blue Apron, which these days isn't doing as well as it as once did. It's a public trade company. But like that was a thing, too. People were like, oh, man, what am I going to do with these steaks? How am I going to make this food?

I actually, I think we stumbled into this, but right from the beginning, we were attracting a customer who, like, didn't want to be told what to do with their meat. Yeah. We were attracting a customer who might be a little more adventurous in the kitchen or might have some knowledge already, who wanted to be able to do what they wanted to do. Yeah. And so that's, like, categorically different than the blue aprons or hell of freshes of the world where it's like, here's your spice packet and here's your potatoes you're going to saute this with.

And we kind of took like the most important element of one of those boxes, the meat, and just made it all about the meat. And people really loved that approach. Your goal was to get, I think, a thousand subscribers by the end of 2016. But you got 10,000 subscribers by the end of that first full year in business. Yeah, pretty remarkable. And that was purely because of this influencer marketing strategy? That was the largest part of it. We also tried to do, you know, email sends and just anything we could do.

No paid advertising. No, we didn't really start paying for advertising until 2017, I believe. But were you profitable from day one? Yeah, we had to be. You know, people oftentimes ask, like, well, how did you build a company with, like, no outside capital and no bank debt and, you know, And one of the things that would really work to our advantage is that company in Wisconsin that cut all of our meat for us and shipped all of our boxes, they were pretty bad at billing us. So, you know, it turned out that they would like, they'd be like five weeks of float in between like them shipping our boxes and them and then charging us. And then it was 30 day terms.

So like they kind of helped us finance it at the very beginning. But yeah, no, we always had to be profitable. And so we were always looking at the cost of the box and what can we do and how can we increase the gross margin and all the, you know, the things that I didn't have to worry about my last company because we were incredibly funded. Really, it was a super efficient model that didn't require a lot of manpower, a lot of humans, right? because it was, you were doing, you were handling sort of the technical logistics, sort of the, the, the, the relationship with the customer. But then everything else was handled by these other companies. Yeah. And because I started this business as a hobby, our backbone, like the farms, the processing facilities, pick pack and ship, customer service, all of that was third party. And we do that to this day as one of the ways that we've been able to be very capital efficient.

By the end of 2016, you had done $5 million in revenue, and you were profitable, and were you significantly profitable? No. I mean, at that point, we didn't really even know because our accounting systems or books, it was just really hard to actually know how much money we were making. But, no, we were not dramatically profitable by any means, but we were profitable. All right. Let's talk about beef for a moment, because we have to talk about some of the downsides here. Okay, and I say this as a meat eater, I eat everything. I eat unfortunately too much meat.

But, and we've had Pat Brown on the show, you know, the founder of Impossible Foods. We've had Lauren Poncha, who has Stemple Creek, an amazing grass-fed farm and ranch in California that produces some of the most awesome grass-fed meat. But we also know that livestock production, not just beef, but, you know, all animals, it creates devastating carbon emissions. cows especially because of methane. And we know that it's a fact that livestock, whether it's grass-fed or feedlot produced, is not great for the world. Yeah. So there's a lot to unpack there. I don't want to build a product that is just causing, going back to my roots of wanting to do well by doing good, I don't want to build a product that's causing, I don't want to build a product that's causing a bigger problem in the world.

I believe that meat is here to stay. It's a question of how do you make it work and how do we make it sustainable? When people look at the beef industry, I think it's important for people to recognize that what we are talking about is a very small percentage of the beef industry. So grass food beef in this country is about 2% of the overall beef consumed. So generally the large confined feeding operations are the places where some of the research has been done on environmental and And we agree that there needs to be a better way. What we're trying to do as a company is to find a third way to raise animals. I don't think that the solution is let's move to impossible burgers.

And on the other side, you've got kind of the beef enthusiasts who are like, yeah, well, this is American-made beef and, like, we're just going to do it. We want to honor that, like, what's happening in the industry right now is not necessarily. good for the environment. But we believe, I believe, that there's a way to raise animals that regenerates the soil. There's a lot of really interesting research on. Alan Savory and has done this work as he's given a TED Talk if he wants to see it. Yeah, that you sort of move the animals around naturally as they would on the savannas and they trample the dirt and then they fertilize it and then it grows flowers and yeah.

And that dirt sucks out the carbon. It decarbonizes. If you don't turn it up. If you don't turn it up, right? If you don't tell it. So let me ask you this question. And I know this is a crazy question. Ask somebody whose business is built on animal products.

But could you make the argument that we should eat less of it? We should eat meat as a side dish rather than a main dish or as much of it as we consume? Yes. I don't have the courage to, but would love to do a marketing campaign that is eat less meat, but make sure it's raised the proper way. What we'd love to do is to build out a program that is actually carbon negative and that we can prove it from like the ground up. That is, if you talk to me in 10 years,

my hope is that I have helped to transform meat by creating a carbon negative beef in the United States that honors the farmer, because the farmer is not honored in the system today, honors the animal, treats the animal with humane respect, honors the environment. And the belief is that all of that is better at the end of the day for the customer. Yeah. So is there a world where you could create a system in the U.S.

where a small farmer with 100 head of cattle certifiably raises those cattle on grass and then sells them to you and then you guys continue to raise them on grass and then you actually take over the process of slaughtering. And I mean, is that efficient? Could you imagine getting into that business? Yes, absolutely. I'm going to take a detour and answer your question. But I read somewhere that CEOs have a seven-year shelf life.

And at the end of seven years, you need to either replace yourself or reinvent yourself. And my seven-year mark was Memorial Day weekend of, 2022. And I thought long and hard about whether I wanted to replace myself or reinvent myself. And I don't want to replace myself, but I do want to reinvent myself. And if I look at the last seven years, what did I do? I'd spend a lot of time with my hands in the business and my head down. And now I want to have my head up and to be really to be working on what I call the transformation. You know, we've said as a company that our mission is to transform meat. That's a big mission. And what I want to work on, what I want to spend every waking day and moment working on is how do I transform meat and starting with grass food beef?

And so we're looking at all options. We're looking at like, do we need our own processing facilities? Do we need to own the last stage? Do we need to be the financing vehicle? Do we need to do the technology layer? You know, there's interesting stuff with carbon credits and there's like all sorts of ways in which we can approach like cracking grass food beef in this country. It's a big, big, big challenge, though, because it's like an entrenched, massive industry. So it's, you know, in some ways, I look at us now as a business.

And here we are seven years in. We've grown to be a decently large company. We haven't taken any outside funding. I've decided that this is my life's work. And I kind of feel like it's almost our obligation to take a crack at transforming this industry. because it's so rife for disruption. It needs it so badly. I mean, what's remarkable, we didn't mention this, and it's a good place to mention it, is that in 2021, your revenue surpassed half a billion dollars. That's a lot of subscribers.

And I have to imagine that a lot of that came from people stuck at home during the pandemic and really kind of maybe discovering it, but also just not wanting to go to the grocery store. Yeah, that's right. I mean, we had grown quickly for the many years before that. Going into the pandemic, I think we did $225 million. And coming out of the pandemic, we did $450 and then $5.50. So, yeah, we've grown very quickly, clearly struck a nerve in terms of delivering a product that people are really looking for. And we've done it our way.

And I think that's, like, validating for, I don't know, like, my first. first company I failed miserably, and this is why at least it felt like a miserable failure. And so, yeah, I think we are now seeing that we have a much bigger role to play than just being a hobby business. Yeah. Did you, as you, as you could sort of like, as the company grew and, you know, 20, 30, 40, 100% growth year, year over year, whatever, you must have attracted institutional investors who are like, can we get in? Yeah. Can we invest? Can we scale? Can we help you grow this? And you clearly were like, nope, we don't need it. Yeah, I was tempted twice. One time we almost got documents, but have said no, have continued to say no. But one of the things that happened while we grew this company is Blue Apron went public and immediately started trading well below their last private.

Well below. I mean, their last, they raised a who? knows what and their last investors lost their shirt. Yeah, they were like a $2 billion valuation and now they're trading today at like $100 million. And so what happened was all of the venture capital for box subscription companies, it just dried up in an instant. And what you saw was a lot of them sold. So like plated sold to Albertsons and Green Chef sold to Hello Fresh and like, they all sold. And, you know, like I look back at the decision not to raise money. If we had gone and raised money, we would not have a business right now. Because if we had built a model that was like, oh, we're just going to like buy a bunch of customers and hope for the best, we would have

like me, you know, it's a game of musical chairs. And when the music runs out, yeah, there's no more money. All right. You have this company now that is, you know, could be a billion dollar company is if the trends continue and a billion revenue, I should say. And you want to transform. You clearly have this idea of like how do we how do we have a bigger role in changing how cattle is raised in the U.S. But at some point, right, I mean, there is usually an end point, right? There is usually a sale or, I mean, could you, you can't rule that possibility out that one day, you know, you sell your company to a, I don't know, Costco or a meat producer or somebody. Yeah, I always caveat my feelings on selling the company with the statement that there's no letter sitting on my desk, right? Like, it's easy to say, I'll never sell. It's a lot harder when there's a letter on your desk saying we want to buy and here's the price. But when I look at, when you look at iconic food brands in this country, you look at brands that have been around like that are well known, they all have a similar DNA.

They've been around for 100 plus years. A lot of them are family controlled and they're a multi-generational place. And so if we are trying to build an iconic brand in meat, it just might take, you know, 25, 50, 100 years. And so, yes, is there a possibility that someone swoops in and says, hey, let's buy butcher box and here's a price? And I'm like, okay, you know, like, great, let's do it. that's possible, but the future I'm planning for is one in which I have to plan on like my succession and the company continuing. I mean, it's really, it is kind of remarkable. I mean, that this was supposed to be a side project, but you really kind of caught a wave, right? You know, this kind of move towards thinking about, you know, where food comes from.

And I mean, it's almost kind of like a dumb question, but it is, I don't know, do you ever sit back and think, God, seven years ago, it was a Kickstarter? Yeah. Yeah. And how freaking lucky I was, you know, as a very novice surfer, I feel like my time at custom made was just paddling against waves that were just knocking me over and over and over and over. And never waiting for a break in the waves, just like, keep paddling, keep paddling, keep paddling. And this business, I mean, really has started snowballing from the first day we launched Kickstarter. But I mean, I can say unequivocally that like we got really lucky. Like our timing was really good. I'm not sure if we had started a year before or a year after if things would have been the same. But the timing was right.

And it's just been a remarkable shift in like seeing the difference between a boulder being pushed up the hill and a boulder. rolling down the hill. And, you know, I worked way harder of my first company. And it didn't work. Like, I always thought that I would run a big company, but I did not think that this was going to be the big company. That's Mike Salgaro, founder and CEO of Butcher Box. By the way, if you've ever wondered how much ice it takes to ship thousands of boxes of beef, pork, chicken, and seafood of across the country. Butcherbox uses about 26 million pounds of dry ice each year. The company will soon have two dedicated dry ice making facilities, and it even has a management position that you do not see in most workplaces, senior director of dry ice.

Hey, thanks so much for listening to the show this week. If you enjoyed it, please help us spread the word. Tell someone about how I built this or post about it on social media. and thanks. If you want to contact the team, our email address is H-I-B-T at ID.Wondery.com. If you want to follow us on Twitter, our account is at How I Built This and mine is at Guy Raz. On Instagram, we're at How I Built This and I'm at guy.org. This episode was produced by J.C. Howard with music composed by Rumtina Arablui. It was edited by Neva Grant with research help from Catherine Seifer. Our production staff also includes Elaine Coates, John.

Isabella, Liz Metzger, Carrie Thompson, Alex Chung, Sam Paulson, Chris Messini, Carla Estevez, and Josh Lash. I'm Guy Raz, and you've been listening to How I Built This.