Invest Like the Best with Patrick O'Shaughnessy - Carlos Cashman – Lessons from the Amazon Ecosystems – [Founder’s Field Guide, EP.15]

Episode Date: January 7, 2021

My guest today is Carlos Cashman,  co-founder and co-CEO of Thrasio an acquirer of third-party Amazon sellers. In a surprising departure for a high growth company, Thrasio has been profitable since its founding in 2018 and was most recently valued at $1 billion. In our conversation we discuss the full spectrum of the Amazon third party seller ecosystem, the effects of globally commoditized manufacturing, and the terms of Thrasio's acquisitions of Amazon businesses. I hope you enjoy this great conversation with Carlos Cashman.     For the full show notes, transcript, and links to mentioned content check out https://www.joincolossus.com/episodes/28372673/cashman-lessons-from-the-amazon-ecosystem   This episode of Founder's Field Guide is sponsored by Klaviyo.  Klaviyo is the ultimate marketing platform for ecommerce. With targeted segmentation, email automation, SMS marketing, and more, Klaviyo helps you create your ideal customer experience. See why Klaviyo's trusted by more than 50,000 brands, like Living Proof, Solo Stove, and Nomad to help them grow their business.   For a free trial check out https://www.klaviyo.com/founders.      This episode is also sponsored by Vanta.  Vanta has built software that makes it easier to both get and maintain your SOC 2 report, at a fraction of the normal cost. Founders Field Guide listeners can redeem a $1k off coupon at vanta.com/patrick.    Founder's Field Guide is a property of Colossus Inc. For more episodes of Founder's Field Guide go to https://www.joincolossus.com/episodes.    Stay up to date on all our podcasts by signing up to Colossus Weekly, our quick dive every Sunday highlighting the top business and investing concepts from our podcasts and the best of what we read that week.  Sign up here - https://www.joincolossus.com/newsletter.   Follow Patrick on Twitter at @patrick_oshag Follow Colossus on Twitter at @JoinColossus   Show Notes [00:02:44] – [First question] – Origin of Thrasio [00:07:27] – The types of business they work with [00:11:19] – Challenges for smaller businesses selling on Amazon and when they need a Thrasio [00:15:31] – How the Amazon ecosystem has changed since they started [00:18:14] – The capital sourcing side of their business [00:19:49] – Future of the ecommerce space that has them excited [00:27:20] – What makes the major online powerful so powerful for DTC companies [00:32:18] – How edge erodes on spend when people crowd into a platform [00:34:46] – Building the recognition of the Thrasio brand [00:44:06] – His history as an entrepreneur and what was the common thread in these businesses [00:45:47] – Getting customers early on [00:46:47] – Knowing when something will fail [00:48:48] – Downside of MBA’s [00:50:07] – The importance of people in building a company [00:51:01] – Effectively hiring people [00:52:37] – What has to remain with the founder             [00:52:50] – The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success [00:53:53] – Other places in ecommerce that fascinate him [00:56:36] – What are the risk factors that he worries about [00:59:12] – Kindest thing anyone has done for him

This episode of Founders Field Guide is sponsored by Clavio. Want to deliver marketing moments that last a lifetime, Clavio is the ultimate marketing platform for e-commerce. With targeted segmentation, email automation, SMS marketing, and more, Clavio helps you create your ideal customer experience. See why more than 50,000 brands, like Living Proof, Solo Stove, and Nomad, trust Clavio to grow their business. Keep your customers coming back.

Get a free trial at clavio.com slash founders. That's K-L-A-V-Y-O-O-com.com. slash founders. Stay tuned at the end of the episode where I talked to Clavio customer Nomad on their origin story and how they work with Clavio. This episode is also brought to you by Vanta. Does your startup need a SOC2 report to close big deals? Or do you already have a SOC2 report and want to make it easier to maintain? Vanta has built software that makes it easier to both get and renew your sock two. With Vanta's continuous monitoring solution, you avoid hosting auditors on site and taking hundreds of screenshots to prove that you are compliant so you can focus on building your business.

Vanta partners with audit firms who file your SOC2 report directly inside of Vanta at a fraction of the normal cost. Hundreds of companies, including more than 100 Y Combinator businesses, are leveraging Vantas today to streamline compliance and focus on building their businesses. Founders Field Guide listeners can redeem a $1,000 off coupon at Vanta.com forward slash Patrick. That's vanta.com forward slash Patrick. Hello and welcome, everyone. I'm Patrick O'Shaughnessy and this is Founders Field Guide. Founders Field Guide is a series of conversations with founders, CEOs, and operators building great businesses. I believe we are all builders in our own way, and this series is dedicated to stories

and lessons from builders of all types. You can find more episodes at investorfieldguide.com. Patrick O'Shaughnessy is the CEO of O'Shaughnessy Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Shaunacy Ashani Ascent Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of O'Shaughnessy Asset Management may maintain positions and the securities discussed in this podcast. My guest today is Carlos Cashman, co-founder and co-CEO of Thrasio, an acquirer of third-party Amazon sellers. In a surprising departure for a high-growth company, Thrasio has been profitable since its founding in 2018 and was most recently valued at more than a billion dollars. In our conversation, we did

discuss the full spectrum of the Amazon third-party seller ecosystem, the effects of globally commoditized manufacturing, and the terms of Thrasio's acquisitions of Amazon businesses. I hope you enjoyed this great conversation with Carlos Cashman. Let's go into the origin point of Thrasio. Tell me how you and Josh conceived of this idea, the very first conversation that ultimately led to this business. So I had this fantastic Facebook marketing agency called Orion, CKD. My team was really good at customer acquisition marketing on Facebook, Instagram, all that.

We started in 2013, 2014, and we're growing from there. Because we were so good at customer acquisition, so we had a lot of e-commerce businesses and great ones that I was watching them all grow, and they were largely growing on what we were doing. They're like super happy going out and getting $50 million, $100 million valuations, and we were getting paid our monthly check, which in some cases was nice and sizable, but it was still just a monthly check. And I'm an entrepreneur. I'm always looking for that lever.

I started thinking about more can we do. And I think everyone loves to sell stuff. I've always loved e-commerce. And we were starting to mess around with Amazon potentially for some of our clients as another performance marketing medium, let's say in 2016 or so, 2017. And Josh had been a friend for years. He had done some deal work for us. He's one of the most amazing financial deal minds I've ever seen.

So he and I were talking about what we could do, what opportunities might be out there. And again, I had a great team in Orion so that I had no day-to-day responsibility. So I had time to focus on stuff. I was getting these leads literally every single day, a lead would come into Orion of a $2 million D to C site running on Shopify or Woo Commerce, probably 20%, 25% margins that wanted to advertise. And our clients, we would only take a client that was spending $50,000 a month and above commit. So we couldn't take them on.

They weren't going to spend that. They were like, well, we want to try Facebook, but we only have $10,000. And I'm like, well, that's not going to be enough to test it. No, if it works, first off, we can't take that as a client. But I was getting this all the time. So Josh and I were talking about it. I said, you know, look, I got 10 of these. And I look at 5 of them.

When I know we could turn them from $2 million into $10 million, maybe $20, maybe more. I knew we could do that. And the other ones I said, you know what? We might spend $100,000. Maybe we lose it. They're making $400,000. If we could spend that $100,000, they're afraid to, right? They need to pay their bills, whatever, taxes.

But we had that business. We could spend it and we could do something. We could see if it worked. And if it doesn't, it's still making money. We have that. We were talking about this. And Josh said to me one day, This e-commerce stuff sounds interesting.

I think we could raise a fund and just buy all these guys. And you go pull the marketing team together and we grow it. We actually started off thinking we were going to roll up D to C e-commerce players and started looking at that. And it's a much more complicated task. There's some interesting companies trying it. And for everyone you look at, you've got a different tech background or it might be Shopify. It might be WooCommerce. It might be BigCommerce.

It might be Magento. It might be any of a dozen other things. Then they all have their own 3PL relationships. They're all shipping differently, all this stuff. So you would have had to do a much heavier lift on the back end to do it. But we actually started putting together the teams to do that. Started looking at that whole opportunity. So we got connected to some different people in the Amazon ecosystem

through my network and connecting with people and ended up meeting Casey Gouse, the founder of Viral Launch, fantastic, one of the three top platforms for Amazon sellers to learn where to launch, how to launch, all that kind of stuff. And just learned about the whole Amazon ecosystem there with Casey. And so Josh spent some time with Casey mentoring, helping his business, putting some professional structure around and bringing in some investment and all that kind of stuff. After he'd been doing that for a couple months, he came back to me one day and said, forget all this general e-commerce stuff.

Why don't we try this on Amazon? We had a couple of other early people around that were kind of in the orbit of what we were doing, waiting for us to come up with something here, and just said, yeah, let's go look and see if we can find any of these for sale. We literally just Google it on Internet and found these business brokers who sell all sorts of fascinating businesses and found a couple of Amazon FBA businesses for sale. I mean, I bought the first one just personally before we even knew what we were doing. What is the business? What did it sell? It's funny. It's my favorite product. I just used it a minute ago to make my

bulletproof tea and I use it for bulletproof coffees. So it's a handheld mixer. We call it frothy now. It was called Cafe Casa initially. I think it's still sold under the Cafe Casa name, but it's battery powered handheld mixer. I literally have a drawer full of mixers. I'd buy out on Amazon because a blender's too big to blend a bulletproof coffee. You know, bullproof coffee is ice and butter and MCT oil and stuff. The hand mixers that plug in, you don't want to go plug something in and do all that. And they're too big generally too. I tried that and shot coffee all over my kitchen once. So this thing's a little battery powered thing and you just stick it right in, blends it up perfectly. Turns out it's also fantastic for opening

wine. If you've got wine that needs to open fast, you can scramble eggs with it. So this was the first product we bought. It was very small, doing a couple hundred grand in sales and stuff. It was fun. It got us into the game. So talk us through, you can use that or any other transaction. What one of these businesses that is living mostly on Amazon looks like are 100% of their sales on Amazon? What is this universe of companies? What are the ways that they're most distinct from, say, a Shopify or some other backend style business? Pretty much they are 100% on Amazon. I mean, that's what we look for. And that's our kind of our ideal case. Although now we're larger. We're looking at businesses that have more off Amazon business additionally, but it was important early on for us to just look at that.

They're not a business in the sense that you think of a business where you get a bunch of people and start doing things and have some raise money and all that. This is the thing that Amazon is done with the third-party seller program. The most unbelievable entrepreneur creation machine the world has ever seen. I mean, they've got three million active sellers around the world now or two million, but there's a couple hundred thousand that have produced sales of six figures and up. And there's half a million or a million. I think they release these numbers every now and then that do 50 grand in sales, let's say, which is not insignificant. And if you're living in Asia or some other countries, 50 grand a year, 20% margins making 10, 20K on that could be

fantastic. And as a side hustle, it's great for almost anyone. What they enabled was an individual to be able to sell products for one thing. And then the other big part of this is the way that manufacturing has been commoditized in the last 20 years by China. It's just, it's stunning. I think everyone says it and talks about it, but you don't really understand or appreciate the extent to which that has happened. So an individual can get an idea and just say, hey, I want to sell these things. Go on Alibaba, one of these sites, and find a manufacturer in China, a bunch of them, and arrange to have samples sent over, pick out a product, tweak it a little bit, and then ship it directly from them to Amazon's fulfillment center and start selling. And the cost to get started

is almost nothing. I mean, I remember reading a Businessweek article where the reporter had decided to try this out and it made like pink jeans or something. in order like 500 pairs of pink jeans or something. It was really, it was funny. But they ended up selling them all, but they just showed how that process was just the gears have been greased across the whole spectrum of things you need to do. Amazon sourcing the product is one thing, but Amazon took the rest of it out of the equation. I mean, the hardest thing for these businesses that I saw, like, I ran traffic agencies.

I've done Google PPC and Facebook. Like getting the traffic is the hardest thing. It turns out, as the agency, I was seeing this value created by fewer people shipping product from Asia, two guys shipping stuff. And we would come in and create all the value by building their customer based on D2C. Amazon brings the customers. They're there. So if you understand, use one of these tools like helium tan or viral launch, right, to help you understand the space and understand where there's opportunity and how to rank on keywords and what keywords need to be looking for, then how to pick a product. Okay, I need to pick spatulas because I can get on the first

page there and sell. They make everything else so much easier. So you have to procure and produce a great product, but that's easier and easier for everybody to do. So these companies are really just, they can be oftentimes just an individual doing it on their own, or maybe it's a couple of friends from college that knew each other and launched something or retired executives. We've met a number of them and just weren't done. They retired early and said, I want to try something and launch products on Amazon and or maybe bought into a small business and grew it. These aren't sophisticated company builders. When you're talking about shares and asset purchase agreements and all this, that they don't really understand all that, and it can be a little daunting.

This is an asset that represents probably 99% of their net worth. You're speaking in languages, it's like real estate. Think about it. When the first home you buy or sell could be terrifying, there's a lot of stuff to learn and whatever. It's the same thing in business, but it's something even less people know about. Everybody owns lots of people on home. We all know people own homes.

Very few people know people own businesses and or sell those businesses. We've made over 80 millionaires in the last couple years since we've done this thing. We're going to make a lot more. I love to see it to hear the stories of what they can do with that and to watch it. So there's this enormous fascinating ecosystem just on Amazon. Like I know obviously there's a big ecosystem we can talk about off of Amazon, but just countless people with little small businesses selling some product that they care about. And then you guys enter the picture at some point in the funnel.

So pretty far down the funnel, meaning obviously you need businesses that are of a certain size for it to be worth your time. So talk to me a little bit about the specific challenges. that you see these smaller entrepreneurs face, where do they start running into a scale and a size that they get interested in selling to you because it's just getting too much to manage, like you said. The interesting thing is the challenges have changed and multiplied in the last few years, last couple of years even since we've gotten into this.

Early on, it was enough to just get a good product and ship it to Amazon and be smart about selling. Almost all of the early sellers we spoke to had taken an online course on doing selling on Amazon. Some of these things that seem cheesy or whatever, but they frankly have a lot of good information. You spend 2 to 5K to learn, and most of them had done that and learn. So they were doing the basics, and that's all you needed to do. This really all started to explode.

I think the third-party marketplace, really in 2015 around that time period. So if you got into it there, had a good product, picked the right category, it starts to take off. Where it starts to get difficult is when you start growing, you're getting to a million, a couple million a year in business, and you're starting to order a lot from your supplier. Amazon's got Prime Day. there's deals, all these things starting to happen, and you have to keep up with that. But the more Amazon has released in terms of flexibility and power to the third-party seller, the more complex it gets for that loan operator.

And the more it really favors bigger operators or people like our company or medium-sized sellers who have a team because a few years ago, advertising on Amazon wasn't much. Now they've had the fastest growing advertising ecosystem ever. Google grew so fast, we were all amazed. Then Facebook came and blew that away. And Amazon has blown Facebook's growth rates away. Now you have to be a fairly expert marketer and advertiser if you want to advertise and keep up. And you're not going to be able to compete with my team.

I mean, you know, I ran a performance marketing agency. I've got those kind of people that are fantastic. I know what they're doing, focused on that. And now you also have Amazon has released multiple different advertising options and things you can do. Year, year and a half ago, they introduced the supply chain score. You get scored on the quality of your management of your supply. You didn't have to do that necessarily before. You just ship the products to Amazon.

They figure out exactly where to pay. put them and how to get them out to people. But now you get scored. And based on that score, your fees change. You might be paying more if you're not doing a great job of that. So that starts to get really hard. These weren't things that a lot of these people signed up for. So it was like entrepreneurship in a box. And now suddenly they're having to do all this stuff, have this particular expertise. And then it's getting very competitive. I mean, you hear about the competition on Amazon. And there is a lot. And there are a lot of unscrupulous competitors. Mostly, I'd say those are overseas firms, you get attacked. I mean, 10 ways to Sunday, your listings get attacked. And stuff

that's just crazy. And Amazon just can't keep up with that they're trying, but it can be very difficult. When you're an individual and you've got this asset that represents this huge portion of your total net worth, maybe your entire earnings for the year, and you're worried about it being at risk of just drop off the first page, you're not selling anymore. You're used to making 20 grand a month profit for yourself and living happy. And then suddenly you're down to warn. That's a big deal. I think where we start to see it, and it's particularly two when companies have most of these people will have one killer product that drives most of their revenue of profit and then a handful of others. We love that. We love to acquire that. But I can see why that's scary to an individual, right? So their mantra is always, launch new products, distribute your risk and all this stuff. So they're doing that. But then there's still single point of failure with Amazon on their account. And they're worried about that. And you hear all the nightmare stories about random shutdowns.

It's not quite as random as the stories that have you believe, but it does happen. And you can get shut down. because of an attack, something you had nothing to do with. Someone fakes something against your account. So that's where I think they start to, as I said, get a little bit out over their skis, people start to worry. And when you get to something that represents seven figures and value where you can walk away with a million bucks or plus, that's life-changing money. So I think that's when people really start to think about it and look at that risk-reward equation and make the decision. Talk to me about how the transactions have evolved, both in terms of their size. You said you've probably done, call it six dozen deals or something like

this. So a lot of reps now acquiring these companies. And I'm sure a lot more reps of stuff that didn't get done that got initiated or something or companies you looked at talking through the change of the size, the multiple you're paying, the competition. What are the most notable points of change from when you started a couple years ago to today? We look at a lot of stuff, but we have closed fully about 94% of the deals that we have gone into OI with. We've closed deals that have had review scrapes in the middle of the deal and got just hammered down or some other change that that caused their product to drop in revenue. When we know it's not the seller's fault, it wasn't malfeasance,

and it's possible to fix, we move ahead and we don't even let it impact the terms that much. We know what we're doing here. We know what we're getting into. We were better at that now than we were early on, I would say. Early on, you don't necessarily know what is great, what isn't, and how to look for warning signs and things like that. But again, when we go into LOI, we close, it's rare that we don't.

And it's usually, like I said, something that we discovered that they were doing bad or wrong, which can happen or change their mind here, but it's very, very rare. We have seen multiples expand, but not a whole lot. And it's mostly due to COVID, to the massive e-commerce bump that everybody got this year who was selling online, in particular on Amazon. So I'd say multiples were, you know, in the low twos range and now are in the high twos range. Of revenue. Of EBIDA. Of EBITDA. Oh, wow. But they call seller directed earnings in the space. We've paid more for many businesses at times. people get to have gotten it in their head that oh, Thrasia only pays this. They have a formula and this or it is. And that's not the case at all. We look at every deal. The larger you are,

generally the more you money or multiple you can command. We do earnouts. Almost everybody does on these deals to some extent. We've paid 90-some percent of our earnouts also. We're very good at that. We have become fantastic operators. I mean, this is all my team. I mean, they're just great. And it's just amazing. I think we're, you know, world class at Amazon operations now. So when we say, here's an earn out. And based on these numbers, here's what you're going to get paid, we hit that and pay it more than 90% of cases, which is fantastic also. So being able to do that and confidently say that, that's changed. We didn't have the track record before when we first were starting, and that was harder.

So we've seen that change a little bit. But other than that, I haven't seen a massive change. There's more people who are willing and interested in selling all the time. They're starting to learn that they can. That's interesting. There are other competitors, right? There's a lot of people now who are copying the Thrasio model saying we're going to be Thrasio for this or that or do Thrasio.

this vertical or that. But we haven't seen a large impact on pricing there yet. I imagine you will at some point. But that remains me saying. Again, there's a decent number of these businesses out there. If I wanted to just go full spock-like about this whole exercise, I would think about your cost of capital, the mix of equity and debt that you've used to acquire the businesses, the multiple you're paying. It kind of boils down to a simple formula that my guess is working quite nicely so far. How do you think about the capital sourcing side of all of this and the strategy that you've employed there. What's worked? What hasn't? What would be most interesting to those out there learning about Thrasio for the first time on the capital sourcing side. Well, so I'd say two things about

that first. You're talking to half of the Thrasio brain here. The other half is Josh. That half happens to be the capital sourcing half and the finance half. I mean, he is a savant when it comes to capital strategy and debt and equity and all that. I've never met anybody smarter. Unbelievable. So we've talked and you've learned about me like when I have someone who's great at something and better than me, I hand it off. Be lazy. I'm lazy about it. I'm sure much to Josh's chagrin at times. He really runs a lot of that for us. Now, that being said, we talk about it. I understand this stuff. And you're right, there is something of a formula. I couldn't give you everything because part of that is our secret

sauce is how we've done it and being smart about it. We've largely done this with debt. That's no secret because when you're buying assets that are fairly low multiple and you know at some point, if you're a reasonable operator, you're going to come out with a higher multiple. And where that tops out, it depends on how great you are and what you do with it, then you can follow that formula basically. But Thrasio's never been just about assembling Amazon assets. And a lot of people out there say, well, how can they be worth that? This is crazy. Because that's not what isn't our pitch decks behind the scenes. And it's not the only story here. It's a much bigger story. And this is step one, phase one. Can we talk about those subsequent chapters? So let's just say

chapter one is kind of what you described at this point. So this really neat kind of win-win situation where you bring expertise and scale and operational excellence and all these things and de-risking to entrepreneurs that have been really successful and sort of everyone comes out ahead. But it's really focused on Amazon and a single ecosystem. Now it happens to be like the biggest ecosystem, I guess, in commerce that we've ever seen. So you could probably stay there for a long time. But as you think about chapters two through X of the Thrasio story, what has you most excited? What is interesting about this e-commerce space deeper into Amazon or beyond Amazon?

A lot of people are kind of using this line and we aren't the first and we're not the last. to be talking about the consumer products company for the next century, right? And some great folks talking about this for a little while. So what does that mean? So what's most exciting to mean? It's a combination of all these things coming together. In no small part, the commoditization of manufacturing globally, and particularly in China, the simplification of moving goods around the world

and then selling them both through marketplaces, whether it's Amazon or Racketon or Zolando or whatever it is. And from other places, like these have all built up all over the place. Marquado Libre, right? The ability to go D to C, you're going to have other Instagram shops, all that stuff. So all this stuff has been going on. And if you looked at that and you were to start a company, which many of us have here to sell products directly consumers nowadays, you wouldn't go build a factory. That's the last thing on your mind. You don't do that. Nobody does that anymore. But we're talking with just 20 years here. I mean, this isn't that

long ago. It's certainly not to me. I remember distinctly what, you know, I was doing getting crushed by the dot-com boom, bus. Before that, like, you couldn't have done a lot of this stuff. Even 10 years ago, it's funny, we talk about the scale of our company. You don't get a feel for it. I tell my team all the time, we're shipping over a million goods a month to people, every month into people's hands. And that's growing dramatic. It's probably a million and a half line.

I've been using that number for a few weeks now, so it's old. 10, 15 years ago, we would have had a humongous warehouse. We might be based at Ohio or something so that we could have a million square foot warehouse to bring in that stuff and get it out and do it ourselves and have 100 warehouse workers and our company be based near that. We'd see trucks going in and out all the time. And you'd have a sense for this scale. We started this somewhat remotely in three different cities, Boston, New York, and Houston.

We don't see these million products getting shipped out and shipped around every month. We don't see the hundreds of storage containers on the ocean, leaving China, coming into the various coasts. You don't necessarily get a feel for, but that's what is going on. That's the consumer products world today. There's just so many people who have made it easier along the whole spectrum. Where I look at this, what's exciting is, well, how do you get good at this? What would you build? If your advantage is not going to be in a factory and your advantage is not going to be in building a huge sales force that goes out into every Safeway in the country and repositions products, because now Safeway's got their own data and they're doing that on their own, thank you. These are the things that the big consumer products companies of the last century did. So now what do you do? How do you get position where it matters? How do you get position on Amazon? That's what we are experts in. How do you get position on Walmart.com? How do you get position? I'm a Mercado Libre. What do you do? How do you move product? How do you do it directly? We've got D to C sites launching at an extremely rapid pace. What does that mean?

The most exciting is sitting at the nexus of all that what you learn and what you do with that. So there's an enormous amount of data flowing through all this stuff. And you start to learn a lot about products, what's popular, what isn't, where it's popular, how you can move it, where the most cost-effective place is to move it. When I think about what consumer products company can become or we can become, oftentimes I talk about Zara, the company Zara, is a fantastic. story in fast fashion, right? Unbelievable. I see a trend happening in Paris and have it on shelves in 60 days or something like that, 60 to 90 days. Well, no one's quite done that in consumer products yet, but is there an opportunity to do that. Yes, I think there certainly is. It doesn't encompass

the whole opportunity there, but it's an interesting analogy to look at and to think about. So for us, look, I think the Amazon, you mentioned we can keep doing that and growing people like, well, what does Amazon think of you? And I say, well, if we're doing a billion dollars next year, Amazon doesn't even think of us. We're going to be less than half a percent of their third-party seller revenue. By the time we're 10 billion, we'll still be half a percent because they're going to be so much bigger. They don't really. It's a huge marketplace, but you have to know how to sell them. And they're giving you more and more tools and putting more and more than a third party seller over time. So it gets more complex, but that plays under our strengths. I think Amazon,

we can grow fantastically there. It will always be kind of the foundational piece, if you will, like I say in some ways the cash machine, right? It's kind of like Google. Google has the AdSense as their cash machine, which has funded everything else. It's ludicrous profit margins and drives most of their profits, but it allows them to do a lot of other stuff. I mean, you can peel a lot of stuff away from there, and it would still be a massively powerful, probably be more profitable like company, but they keep at that. There's a baseline here we can do by delivering fantastic, high-quality products really efficiently, pricing them well, getting them into consumers' hands and making them happy, and doing that through marketplaces around the world, Amazon and others,

and directly where it makes sense. And who knows where that's going to go. But being positioned to always take advantage of this, we have to be nimble by definition, because I don't know what's going be the big selling thing in a year. Telling you, I do it. It'd be freaking crazy. We can't do projections. Doing a five-year vision for this business would be insane. You can look at China and say, what's going on there? So live commerce is huge in China. It's larger than any other means of doing the largest e-commerce economy in the world. And they shop in a discovery fashion with live commerce in many ways you think about it. So that's more like watching Instagram, Instagram stories or Snapchat and then buying something because it knows you so well. It knows you're about to travel to Ireland.

And then it shows you an umbrella. And you're like, oh, yeah, I need an umbrella. Boom. In the West, 70% of product searches start on Amazon now. And it's very search and intent-based. People go to Amazon and say, I need an umbrella. They find umbrellas. We happen to have an umbrella.

Hopefully you buy it. And you probably already own one, frankly. I actually discovered I own four of them after we bought the company. There's different modalities of purchase. Like, how is that going to evolve? I don't think that you're just going to see us pop over to live commerce in one year because the Western consumer is different. And we didn't grow up with that. They didn't start with an Amazon. They started with that kind of system. They'll be different around the world.

And so you have to be prepared to look at all these things and take advantage of them quickly. And the faster you can take advantage of them, the faster you can exploit these new channels for selling, the better return on investment we get. I think of mine and Josh's primary job is capital allocation and is producing the highest return on our capital we can. Otherwise, if I can't keep producing fantastic returns on it. I should invest it in your fund or something like that. We can and we think we can keep compounding an extraordinary rate. But to do that, we have to build an exceptional company. The foundation of that is unbelievable execution on Amazon. And frankly, I can't take any of the credit for this. I mean, it's a combination of skill

meeting opportunity, which in many definitions is luck. There's a little bit of both those things in there. We do that. But once you build an execution machine, then what you do with it and how you keep it vibrant and alive is important. And that's what we're thinking about all the time. This is what I spend almost all my time thinking about as organization is how we interact with each other, how we experiment, how we try things, keeping everybody open-minded to new ideas, dedicate a ridiculous amount of time. Many people will think to reading books and listening to podcasts. It's all generally learning about this stuff. And who knows when one of these ideas becomes the thing that makes a difference for us. But lots of times it's just got to percolate for a while. But that's where I think

the opportunity is. I love the idea that the competitive frontiers, which were factories and logistics and the physical kind of infrastructure of a consumer, the CPG business kind of last century, is now the competitive frontier of data and marketing and platform management, completely different game. Given that you spent so much time, especially on Facebook and now on Amazon, so at least two of the major five platforms or whatever, what would interest people about those platforms that they might not really respect or understand? that makes them so powerful for DTC companies, or anyone who's using them to reach customers. I don't think people probably realize how powerful Facebook could be for their business or Google could be for their business.

Can you say a little bit about that to most that probably have no idea? They don't realize the power. And I'll tell you with a little anecdote, a story. And the story plays out almost every single weekend, where we're hanging out with our friends or neighbors. We start talking about cutting boards, let's just say. And then my wife the next morning wakes up and the first ad in her feet is a cutting board. And it's always this like, they're listening to us.

They're listening to our conversations. And a year ago, I was always like, no, they're not. That might be going on now. I looked at Apple's turns of service and stuff. It's not like there's a person sitting there listening, but there is a system that can sit there and can understand what you say. Frankly, I think less often, people don't understand the power of the data these companies have and the power of predictability of people, frankly. We'd have this debate when I said it's an argument. My wife would say, oh, they're listening to me.

And I'd say, no. They just know that you live in this zip code. Your income is this. You're married to me. You're interested in these things. And they know from your credit card receipts, you last bought a cutting board 18 months ago. And they usually last about 18 months. That could very well be what's happening.

And it quite often is. People I don't think want to believe that we're that similar and that some system can find out that's similar. I mean, when Facebook introduced the like audience feature, at first it took 20,000 email. So you'd say, here's 20,000. customers we have. You upload the emails and you say, go find me people like these. And the conversion rate from that group would be twice what it was from just advertising on Facebook normal, maybe three

times. And then Facebook soon said, oh, we only need 10,000 emails. Oh, we only need 5,000 emails. Now I think you can give them on the order of hundreds, a couple hundred. And they have so much data. They're so good at it. So this is 100 of your clients. You load it up and say, build me a like audience. And they can build you a custom audience that's like that. And here's the people who are 99% similar. Here's the people who are 98% similar. This is what my Facebook agency did, where you break out those groups and you advertise differently to them and you optimize your conversion on each one of those. That's where people call it creepy advertising sometimes.

How did they know that I was talking about this or needing this? But it's just data. The more they get, the more places they're plugged in, the more tools, you're on WhatsApp, you're on whatever. You have an API into Android. Google's got their fingers into Android all over the place, whether it's texting or whatever. Who knows? I don't know what they're using, but no one reads.

needs an 80-page terms of services. We all just click OK through it when we get a phone, right? That's what these companies have built. That's why they're so effective at getting the right offers in front of the right people in the right time. And I think it's fantastic. I always tell people, I'm happy to do that. I think most people have this idea, well, there's a person sitting there listening to me and going, oh, let's advertise cutting boards to Patrick, but that's not. It could never happen that way. It's massive, massive computer systems, crunching through enormous amounts of data and then putting it all together and then having this marketplace for other people can come in and put offers in front of you. And if you happen to need better car insurance,

or you happen to need an umbrella for that trip, I mean, I think it's great personally that they show that to me. I've watched them get more effective over time using Instagram. Early on, the ads were okay, like there or whatever. I'd see things that I like. And then pretty soon I found that I bought 1,200 bucks worth of stuff through Instagram in like six months. And I was like, but there was stuff that I really loved. They knew to show that to me. So if they get better and better at that. I mean, for me, it's only exciting. Everything is a risk and reward. So that's what these guys have done. And Amazon has a slightly different, I mean, obviously can do this to an enormous degree because we're all buying so much there and they know what you're buying. Because Amazon is so search driven and so intent driven still, it works around that paradigm. But Amazon has many other places where they're working. Right. They buy enormous amounts of Google advertising. They're buying advertising on Facebook, on Instagram. You look at my umbrella. You may get an email tomorrow from Amazon if you didn't buy it with that umbrella in it, right? And if you don't buy it, tomorrow you'll get an email with a different umbrella.

So I've been fascinating to see there's the boycott Facebook and everyone goes after the big advertisers and says, hey, we're going to get them if we get P&G to stop advertising on Facebook. Facebook's revenue barely takes a blip. There are a lot of people who figured out that this works. And those are not huge businesses, a local pizza shop who could use it effectively. But you need that expertise. The big companies have to do a better job. And they are over time of making it easy for the small guy to do.

the more they do that, the more they increase their revenue and throughput. And I think the more utility and value, they provide to everybody. Thinking about your dual expertise as a capital allocator and an expert at reaching the right customers on these digital platforms, talk a bit about how edge erodes and returns on spend fall over time as more people crowd a platform or a marketing strategy. How quick is the half-life? I assume if you were the first person on Facebook making use of these tools, you made an absolute killing and a very high return on your spend and that that comes down over time, like any edge

in any market. Say what you've learned about that, the evolution of edge and return on spend and how you need to stay evolving. You're absolutely correct. That's how it happens in any marketplace without having a unique edge. You're still making money, just maybe not as much. I've never been fortunate enough to be the first guy in one of these two ecosystems. I don't know whether my team just missed it or I didn't have the right business, but like snap when they started launching it. Because it's funny. Most of these things will launch. The pricing, it's always market-based pricing. You need technology to interface with it. We use some fantastic technology to do our automated bidding and things like that, right, and bid management. But you have to understand that.

So you're bidding on Google a keyword and Facebook and audience person, their attention and Amazon combinations of those. And yeah, look, early on, like Amazon advertising was phenomenally effective for the people who first started, let's say, a couple years ago. They didn't have to spend much. And they were crushing it. And we saw that in a number of the businesses we bought and looked at, And they're more upset because they were getting a 10x return on their advertising early on. And now it's three. But they still make money at three. But you can see life is about directionality, right?

If you've gone from 10x to 3x, you're kind of p-oed. You're not super happy. But if I enter the market at 3x and I can still get my profit margin, I'm perfectly happy. It's great. As a marketplace, these things will settle out to a place that makes sense for the bulk of the advertisers. Where it gets weird. During elections at my Facebook agency, we would actually pull back advertising for many of our customers. And actually, towards the end of the year, Christmas, we pulled back advertising

from many of our advertisers because the prices just go ridiculous. First of all, in elections, they're not trying to make money. They're just trying to get it in front of a ton of people. So it's a market distorting element. And sometimes at the end of the year, a lot of our products weren't holiday products. So why waste your money when prices double for everyone else who makes a lot of money selling in the Christmas season? So we would pull back, but those are just market distortions that you just got to be aware of because it is market-based pricing for these things. The advantages aren't going to last very long, and you can't build your business counting on that. You might get lucky and walk into that, but you certainly can't plan on

anything like that for an advantage, long term. How much your time do you spend thinking about the Thrasio brand in sort of like an analog to Shopify where everyone had bought something on a Shopify store probably before they knew what Shopify the business was? Thrasio probably has a similar quality, which is a lot of people listening, have probably bought one of your products and they're learning about you for the first time. But at some, point, your scale reaches a stage that you have more options. You have more optionality to build a brand or create your own products with the data that you're gleaning from all your customers across the different businesses that you've bought. So

how do you think about that piece of your future that's obviously very different from what you're doing now, but the more successful you are, the more optionality you create? First off, let me talk about the screw up here. Not really screw up, but like Thrasio is the It's the worst name for a company, I think, just about ever. Certainly with the URL, thrass.io. There are investors of ours today who still call it thrass. And I don't know if it's just because it's fun and remembering, but they didn't know. It was thras, yeah.

But it was never intended to be a consumer-facing brand. The story of it is kind of funny. I don't know if you know the history behind the name, but I've worked in one of the highest-end strategic branding and design agencies in the world back in my New York days, learned at the feet of giants at a company called Frankfurt Balkin, fantastic people who are legends in branding and advertising. We did these naming studies. People would pay us millions of dollars for it and name something.

They named Adobe Acrobat. It's a great name, whatever. But at the same time, then you see Steve Jobs go, let's call it Apple. I like apples. And everyone would say, oh, that's a crappy name. But it turns out to be great. Or Google. I remember seeing them hang that sheet out the window in Palo Alto back in 98.

And I was like, that's the stupidest name I've ever heard. And who needs another search engine? How many of us said that, right? We got excited in Tomey and Alto Vista. They're all crushing it. No one needs Google. I've been very dumb in my history also. So when it comes to a name, like, I don't get tied up in it anymore.

And certainly not one that wasn't meant to be a consumer brand. Josh thought about it for a while. My partner, Josh, called me up one day and said, very early and said, what do you think about Thrasios? And he said, Thrasos is an Amazon queen. She was an Amazon warrior. Oh, that's awesome. And it means boldness or confidence in Greek.

It actually means borders on cockiness, but let's stick with boldness. Because I don't want to be thought of that way. nice kind of tie in what we do. So I just said, fine, great. He said, well, let's do it thrass. dotio because dotio is cool. So I said, fine. I just registered the domain. It wasn't even a discussion. It wasn't worth me spending a minute of time thinking about that or debating it because I was like, look, we're going to acquire stuff and whatever. So here we are, 150 brands later and thousands of products, starting to think about this and look at it in another way. And there's a couple interesting dynamics here. One is that brand on Amazon serves a very different function. So when we talk about

all the product searches starting on Amazon. 77% of those, I think, are unbranded. People are going there and they're typing, they're looking for umbrella or cutting board. They're not looking for Patrick's umbrella or oxo cutting board. What does that mean? What has taken the place of brand today? And I think we all could agree. I was looking for a set of army men the other day. And you can imagine, it wasn't for me. It was for my six-year-old. But he's looking at the picture with me trying to pick him. And I said, how about this one? He goes, no, don't buy that one. Buy that one. He pointed another one. I said, well, why? He goes, it doesn't have enough stars. That one has more stars.

He didn't read, but he can see the stars, and he knows this. And I said, well, there aren't enough reviews. He didn't get that part of me, but he got that. Brand is now represented in so many ways by what the intelligence of wisdom of crowds has said. There's a lot of reviews and good ratings. So if you go to buy a spatula or something and you land on the page, and Oxo, a brand many people know is there, you might buy it because you know the oxo brand at that point, but you didn't go there looking for it.

And if Oxo happens to be there, but on the bottom of the page with three star reviews and 82 of them. At the top of the page is Carlos's great spatula with 8,000 reviews at 4.8 stars, which one are you buying? Brand can serve a function at the bottom of the funnel converting there, but it's not at top of funnel. It's on Amazon. We have also entered the world in the era of thousands of microbrands. This is what the explosion in D2C has done in Shopify in no small part, right? What a fantastic company. Because of this great supply chain and manufacturing, and commoditization, all this stuff, people can launch products they're passionate about. So now we've got a passion project and everything from razors to skateboards to whatever.

People can create micro brands around there. And consumers are getting more comfortable with buying that. They don't demand, Nike has great branding or whatever. And people still buy Nike shoes. But there are other no-name shoes that people are buying are small brand shoes that are getting throughput because of the world of social media of all these online marketing channels, those other stuff, on Amazon, frankly, all these things. And non-clothing in particular, it's an opportunity.

brand didn't mean that much in travel coffee mugs, things like that. Yeti has done a phenomenal job there building a brand. Other than that, people want functionality and reviews and ratings. And when we acquire business, you acquire a brand. We only buy third-party sellers who are selling their own brand, not a reseller. What these brands mean is something very different on Amazon. There's some crazy names to them, amsy stuff or Hercules tough and things like that, which may or may not be good consumer brands long term, but again, it's not important in that

ecosystem. And now when I start looking at a D to C, when I start looking at building a direct effort, brand can start to mean something. So if you think about the consumer product space, so you're familiar with the smiling curve. Yeah. If you look at a graph, so value is on the y-axis and product life cycles across the X axis. So if you look at the very left on the X axis, what's the high point there is in the life cycle of a product, that's where the value lies. So that is in patents, the idea for the product. The squatty potty is not a complicated product, but it's a great idea. And they sell a, pardon my friends, they sell a shit ton of them. So there's value in design patents, things like that.

So there's a lot of value in that. But then you move along the life cycle and you're getting closer to manufacturing, which is the nadir of the value curve. Manufacturing has become no value. Building your own factory and making these things, it's not valuable. It's amazing to me that China has figured out how to drive value out of that and make money. But you even look at Apple, you get your new phone. What does it say inside there?

Designed in Cupertino. It doesn't tell you it was made in China or Indonesia or wherever. Foxcon has a factory, right? And power to Foxcon for doing what they've done, but there's less value in that manufacturer. And certainly in a space like ours. And then you keep moving along the curve. It's about selling it and marketing it, getting into people's hands. And brand that can exist there also because that helps you sell it. That helps you build a defensible moat. Yeti's a fantastic product. But it's a brand that represents a lifestyle that people buy and pay three times the price for a cooler than you really need to because you associate with that. I look at that

smiling curve and look at the places there's value. And I think about where we need to be and where we need to play. Brand is obviously someplace. We really need to think and think about it intelligently. But while we're moving so heavily in the Amazon ecosystem, it's reviews and ratings, right? Stars and a number of reviews is the brand. But what do we do with that for this? We've had products grow from a couple of million dollars. You want to talk about hitting earnouts for people brand that was doing less than two million. And it's going to be a $25 to $50 million brand this year, less than two years later. And it's going to keep going from there. It's fantastic.

We've got some that are $100 million. So what do you do with that? The opportunity to sell it in other places, I feel like our products should be available anywhere the consumer is. That could mean retail also. Then you need to have something there. So there's opportunity to understand how brand plays in this ecosystem. We've also thought about how brand works across all these products.

Today's world, people are a little worried about what they're buying sometimes on these sites because is it some random overseas company that has faked their reviews and fake their ratings? and my battery's going to explode and burn me, which has happened. We have a brand that goes across our products called Zaba. It's just trust what you buy. We only buy great products, and we ensure that whenever they say they have a certification or something, we've got the certification.

We do that. We make sure it's there. Make sure the product is good, high-quality product and a good value. I think you'll start to see more of that. It's across the board. So that serves a function also. And all that is separate to Thrasio. Who does a Thrasio brand need to mean something to?

I never intended it to be in front of consulting. And hopefully it doesn't end up there because it's just not a good consumer brand, but it could. But for us, Thracia needs to represent something to the selling community, to the investment community, to possible employees and things like that. And I think we've done that, but not massively intentionally yet just by being who we are and being good actors in the ecosystem. But the story starts to get distorted. And I hear sellers in Europe who think of us, oh, you guys are cheap.

You're the cheap company with a formula. No, that's not quite the case at all. And I'll show you a lot of people who have done very well with this. So we have to start to be more intentional about how brand plays a role there. I think it's evolving. We're always learning. We're going to be learning how brand interacts with all these various channels and how brands can play in this new world.

And I've got to continue learning there. Our whole team does and figuring out how all these things will interact. But looking again at that smiling curve, I think that's a hugely important part of what we do. We are building brands. We are doing a fantastic job. The person who started that loves to see that. They walk into a store now and they see their product on the shelves and their super happy. Now, we couldn't do that with everything right away as quickly as we wanted to,

but we are moving that direction. We're building. I mean, we're barely two years old, I guess two and a half years at this point. So we've got a lot to do, a lot we want to do. How many businesses have you personally started and sold? You added the sold qualifier, which is a good one, because I started a number of them that didn't quite get there. Some of those were really small. I mean, I've started over a dozen companies, and it really depends how you count. I got two people. I started a company. had them focused on something for a while and then it didn't go anywhere. But I did lose some money on that. I've sold, I think, six of the last count. And that includes the one we took public in 2000 and then

later sold. What united maybe all 12 at the very beginning? Like how did you alight on the original idea for each of these things? Is there any common thread? Well, I've always found there's not necessarily a common thread. It's seeing opportunity. I've become very predisposed to things that can have a very clear path to making money or are making money right away. I'm the poster child for the dot-com boom and the bust. The bust in particular is the part I remember. You remember feeling that slam into the ground. That was when you start a company, raised 50 million with the idea that you might be successful or not. And that's that whole venture Silicon Valley mindset of startups, which I feel gets too much attention in the world of startups, given that we have

a couple million entrepreneurs in this country at any one time that are starting everything from a corner store to a taco truck to, you know, the next Facebook. So for me, when I did that and when there's so much risk in building a company that you don't know will be successful, right? Market risk, execution risk, technology risk, stuff like that. You know, you can only do that a couple of times and get kind of burned, I think. It's tough to do. So I started leaning towards things that really had a clear path to make from money. So like a Facebook advertising agency, we were profitable from the minute we launched it. We had clients before we started it, really. What did you learn about getting customers early on in those businesses' life cycles or even before the thing actually existed?

A friend of mine who went through Y Combinator, he said, in his class, there were two really types of entrepreneurs. There were the tech people who had just great chops and could build stuff, and then they were the NBA types who couldn't build anything, but could talk a good game. It wasn't just the NBA type, because I'm not a big fan of MBAs, but we can get into that another time. It was more about an execution focus and a customer focus on the people who weren't so tech focused. So that tech group would often want to lock down in a closet for eight weeks and build something great and then release it to the world. And it said the other group would go out, pretend they had it, find customers and say,

oh, yeah, we've got this. And then behind the scenes, just do the work with spreadsheets and a bunch of people, you know, and then figure out what the customers really want, how they're really going to use your stuff. And that just stuck with me because that's so, so important. Through I Combinator, he said that latter group, the ones that went out and faked it, pretended they had something and then built it for the customer, were invariably more successful and could come out with something better. What did you learn about when something was going to fail? You mentioned six were sold, so half failed. How did you know when to shut off the lights? I mean, sometimes it's painfully obvious. So I had a company that our primary business was selling event tickets. It had gone great for the last 10 years until March. That was very obvious. The revenue literally went to zero overnight and it just couldn't keep up, couldn't keep going. And the company actually still was around. I just sold my interest in it, but it's a shade of what it was and hoping for things to come back.

I think that is one of the biggest challenges for entrepreneurs, and I see this a lot. It's this weird dichotomy you get of the messaging that's always, the entrepreneur has to believe more than anything and barrel through all the things that get in your way and the people who tell you know that'll never work. But then sometimes you kind of know it. It's just, hey, that's not working. Maybe the people are right. Knowing when to listen to that and how, I wish there were a very clear rule to put in place for that. I don't know if there is. That's why I like that customer focus.

I've looked at small businesses and someone's all worried, do I have a business or not? I'm like, when we got started with our preventive maintenance software company, we had an access database product. It was not anything sophisticated, yet every nuclear power company in the country was using this software, this data to help them do maintenance. We had company paying us, you know, we went out and sold it to somebody and paid us $50,000. Anytime anyone's willing to write a check, a fairly sizable check for what you're doing, you've got a business.

Maybe it's going to be a $5 million business. Maybe it's going to be a $2 million business. Maybe it'll be a $500 million business. but you've got something. And that's again that goes back to that customer proof. If you don't have that, if no one is willing to write a check, you can give it away. Then people don't value it. You don't necessarily know if it's useful. You want to know that someone's willing to open their wallet and cut a check for what you're doing. And that's when you know you've got success. That's easier to see. If you've been at it for 10 years and no one's paid you

and somehow you stayed alive, maybe it's time to hang it up. What's the downside of MBAs? I know some terrific MBAs. I think my partner has an MBA, but It's this thing that you don't learn entrepreneurship from a book. Frankly, I think college is a waste the time too. And that's a whole other thing we could go off for a while. But for most people, almost for anybody, I don't know anyone who's really needed their degree. Certainly not a four-year kind of thing. So, you know, an MBA, I think it's quite often, it's just, it teaches a rigidity in thinking. Entrepreneurship is a class. And the way it's always taught, I find is just that it's the Silicon Valley kind of mindset. How do you start a company? Well, you write a business plan, you pitch up to some

people, get some friends and family, or go raise money from a VC and that, boom, you're successful. That is not at all success. I mean, the businesses I've seen are successful at a much greater rate are the ones who bootstrap, who get customers, who raise their money from their clients who pay and get revenue right away. You know, get something going. Now, that's not to say Facebook will be out there. Businesses without revenue that grow phenomenally well and are fantastic businesses at some point. For your day-to-day entrepreneurship and your better odds of success, it's really more about building something that makes revenue and doesn't have to be the next $100 billion company. I feel like people with MBAs are much more, at least with regards to entrepreneurship, much more geared towards

this. Just tell me the steps and I'll do them. And that's just not how it happens when you get out there in the real world and build a company. So they can get flustered and lost when they're faced with crazy adversity that takes to build something. For the companies that did work, what were the most common painful periods of the growth of those businesses? Building the company is just about people. That's all it is. Whether you're building the next great biotech company or you're building an enterprise software company or an agency, it literally is all just about people and getting a bunch of people excited to do something together, to go after the same goal, making sure you all know exactly what that goal is. The challenges that I've always found are the

big ones are always around people. Scaling is a particular unique challenge around people. I always find that the first kind of break point in scaling an organization is around 30 people. For some reason, somewhere in there, that's where you, the first time you start to have to have regular management structures and meetings and communication because there's just, it's larger than the number sitting around the lunch table talking about what we're doing. Some people have trouble at that point. It's just this weird inflection point companies go through. When you've had to hire a lot of people, so let's say it gets well beyond 30, what have you learned about doing that effectively, like seeing far enough around the corners so that you don't get caught

flat-footed when you need twice a number of people? I've scaled teams twice. Once in the late 90s, we got to about 300 people with Opus 360 and Free Agent.com. We know, a big chunk of that came through a large acquisition. And I learned some stuff there. But then Thrasio has been unlike anything I've ever seen. I mean, pace of growth here is unbelievable. And I got a sense of it early on. And I think I learned a ton from listening to podcasts like yours and other places also people have done it. Because very few people people have lived through massive scaling, 600, 700 people in 18 months and whatever and growing from there. I've been saying this to my team all along. You want to grow, you got to let go. It's this thing like you can't do everything. It's more important to find people to do your job. I always say my lazy

manager theory, which I thought was my kind of unique theory until I heard Bill Gates has a very similar version of it. But when I'm hiring a manager, someone's going to manage people essentially and manage essentially delivery of something. I want them to be lazy. I mean that in the sense that I want them to hire fantastic people to do their job, because they will always find something else to do. And if they have that extra time, they can focus on something strategic for growing the company. So you want to hire the best people you can that'll do the best work they can and get it done. So I always tell our managers, I was always saying, look, you should be striving to work 20 hours a week.

And if you get there for like a month or two, great. Super quality of life. It's awesome. My hunch is you just never will. But if you keep pushing in that direction, hand off your stuff, that is so super important. As the leader of those businesses, what do you keep? So obviously, you need to set the example of being the lazy manager to some extent. What are the things that you think is important to stay at the founder or CEO level? I'm a huge fan of the book, The Outsiders. And this isn't the old story

of Pony Boy and the kids in Tulsa, Oklahoma, the movie. This is the outsiders, but the eight great CEOs. I know you know the book. It's fantastic. What great lessons in there. I think it was Terida, who said, I don't give myself any day-to-day responsibilities. So I'm not in the loop on anything day-to-day that has to get done. First off, that I can focus then on the things that I find add the most value at any one time. To me, thinking about businesses, like thinking about a whole handful of levers you might have in front of you, the right lever at the right time can give you the greatest possible gains. But to have the freedom to think about those things, you can't be doing something every day that has to get done. Oh, it's just an hour of the morning where I got to

fill in this spreadsheet, well, that's taking a valuable time and mental space of yours. The example I try to set, and I think every one of our senior managers can do this is don't give yourself anything that is a day-to-day, week-to-week responsibility that has to get done. Let yourself sit on top of it, particularly when you're managing people, it's even more important because you've got to spend a lot of time on those relationships. What other areas of e-commerce and maybe extra points for somewhere that you probably don't even expect to participate in, but I'm just fascinated by the evolution of e-commerce where, I think, while now, we've sort of thought like Amazon just sort of won this or Walmart or there's a

couple dominant major players. My guess is there's probably room for a million different kinds of businesses to be built, especially post-COVID and sort of with this new way that consumers think about getting their stuff. What else intrigues you in the world of e-commerce? Where else could people that are interested in this topic go study? eBay is still a humongous company. Moving 100 billion plus of goods, I mean, they're doing a lot. I mean, that's an amazing place to work too. And it doesn't quite work for us in our model, but it's fantastic on what they're doing. Etsy is another phenomenal company that has created an incredible marketplace. And then Shopify's making phenomenal moves. Toby's brilliant. I love the story of that company

and how they've built it and what they stand for and where they're going. And it's going to be fascinating to watch because they're building a network of shipping centers. They're going to have something that's more competitive with Amazon over time. And look, Amazon, you could say it's one in the U.S. perhaps, but it certainly hasn't won everywhere else around the world. And this is a global world, man. I mean, 20% of our sales are outside of the U.S. There are other marketplaces overseas and other places. And people shop differently there.

As we talked about earlier with China, it's discovery-based. It's live shopping. So many people have thought about and tried to get QVC or Home Shopping Network for the Internet in the U.S. hasn't worked. But maybe it's because we have this legacy of those things and we have an Amazon. In China, that's in many ways what this live shopping is all about. And these live sellers, I mean, it is unbelievable what they can move in a 24-hour period. Some of the top Chinese live sellers have moved nine figures of goods

in 24 hours. It's incredible. They're many businesses. I think the space is evolving faster than anyone can think. Instagram finally integrated Apple Pay. It's one-click shopping, right? It's what it was about Amazon. Now I'm on Instagram and they show me something that I think is awesome. I can just double click and I've got it. The reason I didn't before was I didn't want to go type in all my information on my phone again and again and again. You've got people who've created Shopify pay, Amazon Pay, Apple Pay, where my information is stored and can be reused quickly and easily. So that's just taken out friction. As you do that, it can increase the ways in places that people sell.

It's fascinating. It's not something that's very easy to predict. I will listen to podcasts and stuff all I can to try to get a sense for what's happening and what's coming. But I also think it's going to be different everywhere. Latin America has 4% e-commerce penetration. And it's got 650 million people with average incomes in the 10,000 range across the board, vibrant, rich market waiting to happen. And it hasn't yet. So who's going to own that? How are they going to

and what's that going to mean? It's going to be fascinating to see. Huge opportunity. It might be kind of a strange question because one of the fastest growing companies, maybe ever, certainly fastest in terms of valuation growth that we've seen. So you're probably managing a lot of your time is just figuring out how to remove growth bottlenecks or things like this. But what keeps you up at night from a risk factor standpoint? Like what are the things that most worry you about competitors coming in or the multiples going up on the companies you're buying. What do you think the big risk factors are to Thrasio? So as you can imagine, I've been asked this by every single, you know, PE firm and

whoever we've spoken to in investors. And it's always funny. You won't like my answer is I sleep like a baby, dude. I always happen. So Josh will be awake all night. So this is the benefit. One of us can worry and freak out and is much more operationally focused. You know why? And I don't think he needs story either. Look, I've done a lot of companies in a lot of different spaces. Things move on a grander scale than you think. I told my team this early on. I said, I've got faith in this team. I've spent a lot of time building a team and this great team and how they work. We cannot predict what's going to happen. All I can do when I hire people in the startups in early all, I say is, all I can guarantee you is a bit of chaos, hopefully a lot of fun and some good people. We don't know

what's going to happen, but I can tell you the shit's going to hit the fan at some point. But I've got faith that will recover, that will react to it intelligently and well and move ahead. And if you've got that, then you don't really worry about. Now, I remember the first time I had some situation at one of my first startups. And I mean, I lost sleep for weeks and we're freaking out. We missed a delivery date and all. And everyone's losing it. That does nothing for you. They're not worrying about it and just working the problem. Make sure he has the right people in the room focused on that problem. And then he's just, all right, see you later. You guys solve it. My team is way closer to all these issues. And we've got a supply chain issue. I had a supply

chain is a genius. He's brilliant at supply chain. And I've never seen anybody be able to do all this. He's been two steps ahead everywhere. But when he's got a problem, I just want to make sure he's got the resources he needs and the right people in the room to solve it because I'm not going to solve that. I don't know the first thing about what he's doing. That's my job as a manager is to do those things. And it's his job as a manager of his team to do that. I've been through enough shocks and enough different businesses that I just a while ago just said, screw it. Don't worry about it. They're going to come. And as soon as you let go of that and don't worry about it, then you're not surprised by it. You're not freaking out by it and you just work through it. So that's why I sleep well at night.

You brought up Bryant's quote about action produces information. I'll certainly remember this conversation as a great example of that, that a lot of entrepreneurship is just getting going. Don't study or think too much. Go do and learn by doing. I'm bummed to have to turn to my traditional closing question. But thank you for such a fun and lively conversation on building a business. I think you probably know my final question for everybody, which is to ask you what the kindest thing that anyone's ever done for you is. You know what I just said in my head when you started gotten to this. I said, oh, shit, I forgot to come up with the answer to this because I know you're going to ask it and I haven't gone there. So I have thought about it a bit. I mean, there are so many

kind things that people have done throughout your life and what you do. But I have to say like my mom did something for me. So when I was young, I was a computer geek. I just loved computers. And growing up in Oklahoma, there wasn't a lot of outlets to learn about them and stuff. And I got a VIC-20 where I learned to do programming. But I wanted something more. And when the first Mac came out, I was just enamored and I had to have one. And we couldn't really afford something like that. It was $2,500 for the Mac 128K with a printer and an external drive because you needed two drives because they were floppies.

And you had to swap the operating system on the floppy and whatever your storing. So I needed that. So it was like $2,500. And she said, you know what, if you can make half the money, I'll put up the other half. He both incentivized me to work and then helped me produce value. And I'd tell you, that computer version of enormous amount of life from me afterwards. She did it. I mowed a bunch of lawns.

I got halfway there. I think I probably didn't even get halfway there. My mom put up the money and got it done for me. And look, it's easy to say your mom or dad have done the nicest thing for you. They have for a lot of us. But that's the thing that jumped to mind. The first time I think I heard you asked that question of somebody, that's what jumped to mind.

That's my answer. And I'll stick with it. I love it. It's so cool. I love the dual kindness, but also in sense. to get you working and understand the value of work and reward and feedback loops, it's awesome. Well, this has been so much fun. I really appreciate the time, have been looking forward to it and delivered as I knew you would. Thanks so much for teaching us all today. Yeah, dude, thank you,

a million. I've been very excited to talk to you. This is fantastic. This episode was brought to you by Clavio. In this four-part mini-series, I sit down with Clavio customer Nomad and discuss their origin story, why they chose Clavio for their business, and how your brand can grow online sales with Clavio's e-commerce marketing platform. In this week's episode, Nomad co-founder Brian Hahn and I discussed the origin of Nomad and how the business got started. So, Brian, I think a neat place to begin would just be with the origin story of Nomad. What were you doing immediately prior?

What was the spark of insight that led to the formation of the business? I was actually living on a boat in the harbor and working in commercial fishing. So I was not thinking about entrepreneurial activities much at all, honestly. I was thinking about going back to grad school. And so I was thinking of this whole path and how long it's going to take. I thought I was going to take six years before I get my master's and then really get into a job where I'm actually producing results. And I just felt like this eternity. And then my friend Noah, who became my co-founder, came down to the boat and kind of had this wild idea for this credit card size charging cable.

I just kind of thought for a moment, like I could wait six years to kind of start my life. life or we could start it literally next week. And we just went nuts, you know, made Kickstarter video and just got going and launched on Kickstarter. And before you knew it, we were on Kickstarter and we did pretty well. At the time, it was so new. This was like in the days when Pebble Watch was the biggest thing on. I remember.

Yeah. And, you know, we raised like 150,000. And at the time, that was big, big. And we thought that was all the money. we needed in the world. That was it. We're going to, whew, it's going to be so easy to produce this. We have $150,000. What could possibly go wrong? And quickly we realized that we had no idea what we were doing. It was way more expensive than we thought it was. And we were out of money so quickly. And we had to just get into that cowboy entrepreneurial hustle. What did you do in those early days

after you burned through the money? How did you design it? Who did you work with? What are the nuts and bolts of getting from nothing to, I don't know, your first $100,000 of sales or something like that. So the sales was actually the easy part. We hustled hard and a lot of it was about talking to press and just being really organic about that outreach. I think a lot of people, especially at the time, thought you needed to use an agency and there was no way to actually access press writers. It's like TechCrunch and The Verge and everything. And we said, now we're just going to literally like find all relevant writers and just reach out and keep reaching out, keep reaching out, preaching out. And it worked great for us. Somehow we were able to convince them all that we were

on to something. I think that is something that's important to remember. You really do have to hustle and even if it sounds like there's no way you're going to get through to the New York Times, we got a New York Times article before we shipped our first charge card really. And if you just hustle hard enough and you really care and believe in it, you can cut through. To find more episodes or sign up for our weekly summary, visit investorfield guide.com. Thanks for listening to Foundersfield Guide.