This Week in Startups - E1017: Open Office Hours LIVE! Jason helps founders with their biggest challenges: scaling as a solo founder, reducing churn, raising capital in a heavily regulated field, pivoting from one-time payments to SaaS & more @ WSGR

Episode Date: January 10, 2020

0:46 Mehak from OnDelta (ISA School for Growth Hacking/Marketing) asks Jason best practices on scaling her business as a solo founder 10:18 Ketan from HireClub (Career coaching SaaS) asks Jason about transitioning his business to help with natural churn 20:59 Benjamin from Infection Control (Hardware infection control for sickest hospital patients) asks Jason how to raise for a medical device in a heavily regulated field 33:13 Tom from TribeXR (VR training for practical/creative skills) asks Jason how to pivot from a one-time payment to subscriptions 43:58 Corbin from LUU (Aromatherapy alternative to nicotine vapes) asks Jason how to separate his startup from JUUL and other vaping products 53:04 Thomas from Wash Day (On-demand laundry logistics app) asks Jason how to compete with large laundry incumbents as a bootstrapped startup

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Get 10% off your first month at betterhelp.com slash twist. That's betterh-e-l-p.com slash twist. All right. Next up is Mahek. Like, don't give a heck. Don't give a heck. What the Mahack? What the Mahack?

You have a business called On Delta. And it's Lambda. for growth hacking and marketing. And so I've heard this idea a couple of times. For people who don't know, what is Lambda school? What is special and unique about that? And how did that inspire you to do on Delta? Yeah.

So on Delta, we're a growth marketing school and it's free for our students up front. And what that does is it hedges the students risk in having to pay money to get an education, and we take on that risk. So if we do a good job and help them learn what they need to know to get a job, we take 15% of their salary. In perpetuity. For two years. Yeah, the opposite of in perpetuity. Yes. So what is the average salary of somebody coming out of your school? Between 50 to 60K. Got it. So 15% of that over two years would be 15K. 15K. And is it a virtual school or an in-person school? It's virtual. We are currently conducting classes on Zoom. Great. How many people have gone through the program? So we just launched in September. We have

10 students going through the program, and we've had 600 students apply. Ten students went through the program. Are currently going through. Currently going through. And how many weeks is the program? Three months. Three months. Twelve weeks. And when they come out of the school, you're going to help them find jobs? Or they're just on their own? Yeah. So we've developed relationships with hiring partners. So currently all of the students going through the program are also interviewing for jobs. We've already placed too.

And yeah, we were doing hiring partners as well. So for people who don't know, this ISA, income sharing agreements, are becoming very popular. They're a little bit polarizing because people are like, oh my God, you're going to take people's salaries? Isn't that horrific?

We're going back to sharecroppers or something like that. And then you go, yeah, but they would only get that, 15% for two years, not in perpetuity, and they only get it if the person successfully is employed. In other words, if the person comes for free, you lose money on that individual, probably thousands of dollars, teaching them. If they don't get a job, you lost that money. If they do get a job, it's capped what they're going to send you.

Exactly. So we... Is there an actual cap on dollar amount? There is. Which is what? 21K. Okay, so you're being incredibly generous with this. I would just keep it at 15% and have it be uncapped. Yeah, so we're partnered with Leaf and they manage our income share agreements. And whenever we were going through their process of signing up and creating our contracts, we actually originally had it at 30K, but there's a lot of laws being passed now around income share agreements. And to stop us taking advantage of the students.

Great. So more regulation on the people who are interested. and providing better value than these predatory schools, as well as the schools that are lauded universally, and then put students 200, 300K in debt. So literally have one group of people who are saying, I'll defer any compensation for myself in exchange for a capped amount of the salary, which would be the perfect market system. It's literally the perfect capitalistic market-based solution because the person doing the training you has to take on all the risk, which means you were not going to let people into the program who don't take it seriously, right?

Absolutely. And you only take 1% of the people who apply or 2%. So yeah, so we just launched. So we're now just trying to figure out how to start scaling things up to where we can start accepting more students. People are like education can't be solved. People say housing can't be solved. These are going to be very easy to solve.

Yeah, I think it's just teaching people. what they need to know to get a job. Yeah. Like literally, there are people who think the government should pay $200,000 to send them to school. And it's like, you'll never make that money back. Also, what they're teaching in marketing school right now, we have a kid who was going through our program, got a bachelor's degree in marketing, and learned billboards. Billboards.

Yeah. How do you put things up on billboards and partnerships? It doesn't make any sense whenever you think about even Facebook ads. and actually how much it's changing the market and how people are selling things. So what's your big challenge? Biggest challenge is I'm a solo founder, so it's just me. I'm teaching six hours a day right now. I studied computer science.

I'm also doing development for our tech. I'm doing our hiring partner relationships. Where are you based? Here in San Francisco. Okay. Do you everything and becoming a venture capitalist? I'd associate now. Haven't thought about that?

Not really. Not interesting to you? I mean, maybe, but I think the thing that I'm really excited about is I studied in computer science and I dropped out after two years because I just didn't see it working for me. I didn't want to go work and sit behind a desk at a big tech company. And the way I learned was by working. And I took up contract gigs and I built up a six-figure agency over four years. Amazing.

And yeah, I now want to help other people break out of the norm. do things that they want to do. Okay. Being short-staffed is a bummer. Did any of the 10 people going through the course pay in advance? Because Lambda gives people the ability to pay $20,000 or I think you're capped at $40 or $50. What do they cap to add? So I think Lambda is $15K up front.

Uh-huh, yeah. We offer $12K up front. Did anybody take that? We've had a couple of students that are interested that I think might be doing that in January. Great. So what I would do is I would say we're going to have 10 spots, five paid, five deferred. And just keep yourself to that. This way you at least have some money to live on and then to hire a second person. And you can just be explicit with people. We have seven on the deferred and three on paid. Well, we have five deferred, two discounted, three full fare. When we finish each of those slots up, because we think that's the most socially appropriate way to do this. And we care about. you know, people having access to this education. So a full half of the slots go for free. Two are discounted or a combo.

And three are full fare. And just don't be afraid to make a little money here and do a little good. Yeah, I think the interesting thing for us is I have money saved up from running my agency. So for me, it's, I can pay my salary and that's not a really big problem. I think right now it's how do we, I don't have enough to pay for bringing on someone else full time for 12. once. So it's now I'm just trying to think through like I don't think we're ready to raise a seed and I don't really want to either until like six, seven months from now. So the thing that I'm trying to focus on is what are those things that we need to do to set ourselves and put ourselves

in a place to where we can scale? Yeah, I mean, there are options to go to an accelerator. That's a quick way to put 100K in the bank and get back to work. So I would look at that as well. Yeah. Well done. I think it's fascinating. And I'm hiring an associate right now. Okay. Nice to have met you. Give her a big round of applause. Thank you. Small business owners wear a lot of hats. You know this, I know this, because we are wearing all those hats right now.

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That's G-U-S-T-O-com slash twist. Thank you for Gusto for supporting this podcast and for helping me get my payroll and benefits done. Okay, let's get back to this amazing episode. Okay, next up we have Kedan and Katen. I pronounce it right? Yes. Okay, say it one more time.

Ketten. Ketan. I got it. What does it mean? It means palace. Okay. I like that. Did you build them or live in them?

How did you get the name? You know, my family, everyone's name with a K on the boys' side. And so that was just part of the pattern that we had. I love it. No expectations there. Your company is Hire Club. Yes. And you're doing career coaching as a service.

Yes. Okay. We have an investment in that space called Marlowe. Are you aware of them? Yes. They do executive coaching. Is your company similar? In some ways, yes.

We're more consumer-oriented, but yes. Oh, consumer-oriented. Okay, with their enterprise, yeah. So what's your biggest challenge? So we actually applied and got into the launch accelerator of the summer, and we ended up turning it down because we ended up raising a 500K pre-seat. Mazel. And everything's going really well.

We've grown 330% this year. And we have slightly pivoted from, we started as career coaching to help you find a job, which obviously has some churn in that. Because you find a job. and you don't need the service. Exactly. Sort of like eHarmony. If they do their job,

you never log into EHarmony again. Exactly. Hopefully. EHarmine doesn't do their job, though. But what we have since kind of change into is career coaching for everyone on a daily basis, not just for executives, but anyone who wants to get ahead in their career.

And it's interesting. Our job customers, we have an LTV around 1,000, but our long-term coaching customers, our LTV is approaching 3,000. Right? So people are using coaching for over a year to help them get ahead in their career. And this is part of the challenge working on that transition from, you know, career coaching for a job to career coaching daily.

And I think we're ready to potentially raise our next round from someone like a syndicate or someone that can see the potential and all the value we're bringing. And to give an idea, we've, to date, raise salaries by over a million dollars. So we've made a massive impact in people's lives already. Yeah. So be careful doing math like that because I'll do it too. Is that like one person got a million dollar raise or a thousand people got a million dollars? a thousand dollars. Our median is 17,500. Is the raise? Yeah.

After you coach them. Yes. From their last job. Yes. So the question then becomes how much of that is attributable to you versus just the inherent lift that people get when they leave one job and go to another. That's a good question. I mean, some of the percentages that we've seen, so we had a $45,000 raise two weeks ago,

that was a 42% raise. Why don't you charge based upon the raise that you can get somebody? That's a good question, similar to some of the, the ISA models are very popular right now. If you do the math, if we raise dollars by a million dollars, and let's say we charge 10%, that'd be $100,000, right? We've made more than that already because it's a long-term product. What is the product itself?

If I open it up as somebody who's paid for it, what do I see? So it works a lot like a cell phone plan. You get minutes to talk to a coach. And the product we do is we match you to a coach automatically based on an Agavibu. So you can say, hey, I'm looking to work on these specific skills. will match you to a coach, and then you can do sessions with them virtually or video or phone. And it's kind of invisible.

It's all done through your phone. What do coaches charge per minute? We pay our coaches $100 an hour. And the consumer is paying what? On the average order of values, $150. Got it. So you mark up 50% which means you have a 33% take rate.

It's the average, the 42% is where we end up at. Really? Yeah. How do you get that extra 10%? We've raised prices. Okay, perfect. Great. And so when I'm asking him these questions, these are like probing questions where I'm doing the math in my head. Because I just want to see if he knows his numbers well. I'll do this with founders all the time. And they don't even know how much revenue they've made. Or then we go into diligence. And what they said they made, they didn't.

Right. Or there's some crazy explanation. Sure. So just make sure every time you talk about numbers, you just have them nice and tight. So what's your big challenge? What's that? What's the big challenge here? They transitioned from the career coaching that find a job to career coaching that's daily on a consumer level. You know, our customers are very close to us. We send about 20,000 messages a month. Yeah, okay, very simple. You need to create a new product called Year 1.

And in the product year one, you tell them how to be absurdly successful in your first year with the company you land at so that you get this huge raise in a year. So what we did for you giving you that 17.5 raise, we want to make it 25%. So you tell people in your marketing, the average person using Hire Club receives a jump in salary of 17.5. And if they use Hire Club's year one product, we believe they'll average 20%. So we show the next level. Right. And 20% compounding is very powerful. And you literally make year one. And year one is how many people in the company, how many people in the department have you had a one-on-one discussion with? Who have you invited to lunch? What additional work did you take on? How did you grow? Yeah. What skill did you add proactively in your job?

Who did you mentor in your job, right? Because you know how business owners thinks because you are one. Right. It's really super amazing when, you know, I have such a high functioning team. I'm very lucky. If right now, you know, something like this TV felon just shattered, you would see the two or three people who work for me run over and deal with him. And that is what you're looking for as an owner. You can actually teach people to be that ideal employee. Right. To be accountable. To be an accountable employee.

Not one of these employees who wants to take off on Christmas or something. Well, it's a joke. It's about that slam piece of it. I know that was a slam piece. That's a difference discussion. No, let's talk about it. Sure, why not? Away?

Yeah. Well, a lot of what we actually do with people come to us coaching is difficulty to work. People often have bosses that don't treat them well, right? And people want to get coached through the process of how do you manage up? And I would say that, you know, if you are running a team and your team is overworked and you're not providing more resources, that's on you as a leader. Yeah.

Right. Now, there can be other parts to it. Yes, you can always have companies and employees be more accountable for their own work. but when you have receipts like Slack messages that show people's... I think that's the overarching lesson. Right. Is just if you have human resources issues, Slack is not the right place for them. That's a good one, yeah.

I literally tell everybody, like, just anything that would be even remotely close to an HR or legal issue, let alone legal, actual legal and HR issues, call me on the phone. Do not text me, do not email me, do not Slack me, those issues only on the phone. And I would say people in their position, the employees at that company, you know, if they had someone supporting them, they might have dealt with the situation differently. In fact, even what you're doing today is a form of coaching, right? Office hours is a form of coaching. It's very powerful to get personal transformation that way. Yeah. So, Churn, what they did at some of the dating sites and wedding registries like the not is that then they added like baby center or a baby product because they're like, well, first comes marriage, next comes babies.

They're a program for the next level. Baby carriage, yeah. So yeah, you just got to, and see if you can create a product for that. It's a no-brainer. And then even after that, there's another product, which is these mastermind groups. Yeah, we're already working on that. Yeah, so that's where, like, peers, I guess, is a facilitator and peers do that. So if you're doing really well in this first one, I would start thinking of it as a funnel.

Top of the funnel is free advice for people, free content that you have on your website or YouTube, where you just do free coaching. Yeah, we have a Facebook group of 30,000 members where we do that. Perfect. So that's your top of funnel. The next piece of the funnel is they hire you for what dollar amount? Starting at $120 a month. Perfect.

So some group of people care enough about their career that they'll spend $1,400 a year on it. Right. Pretty impressive, right? Yeah. They're making $17,000. That makes sense. Well, and then you go to the next phase, which is I would do hire club intents, which is an intensive, which is an intensive, which is an intensive, which is an intensive, which includes in person or, you know, $120 a month. So you have the $120 a month, but you have the $500 a month, which is an intensive, which includes in person or...

We have that as a plan. It's $5.50. Perfect. Yeah. So you're already doing it. Then just, you know, every six months, add a new product based on what you learned on the last one. Okay. You will be fine.

Okay. All right. Well done. Thank you. Higher club. New year. It's a new year. It's 2020.

And the new year is about growth and change. And if you are running a startup, like all the people listening to this podcast are. LinkedIn is going to help you find the talent you need. The right hires, you're going to set you up for a strong year. And let me tell you something, when you get that right person in that right position, oh, it's so great. Isn't it the best feeling when you make a great hire? Well, LinkedIn jobs screens candidates with the hard and soft skills that you are looking for.

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Okay, thanks again, LinkedIn. You're great for supporting the podcast. I really appreciate it. Okay, let's get back to this amazing episode. All right. Next up is Benjamin. He is from NEVAP. You do some kind of infection control,

a hardware infection control for sick hospital patients. Yes, yes. And I see you have something on the table here. Yes, I do. Is that it? That is it. Show us the product. Remember, most people are listening, so there's a plastic bag in front of me.

So in the hospital, when a person undergoes a surgery or stays in the ICU for an extended period of time, they put a breathing tube inside the patient. Putting a breathing tube inside a patient increases their risk of a pneumonia. six to 20 times? Not 6% or 20% to X. 600,000% Yeah. It also depends on how long.

So if you have a major surgery, like a cardiac surgery, or you stay in the ICU for a long time, your risk of getting a pneumonia, a deadly antibiotic resistant pneumonia climbs literally every day by X percentage depending on what condition you have. And it is called intubation when you intubate somebody. you stick this tube down their throat into their airway. Yes. So that you can pump air in and out and have it not go into the stomach. Exactly.

Now, the problem is it's a plastic tube that connects your mouth to your lungs, which was never the purpose of your biology. No. And so the bacteria that live normally in your lungs and your nose utilize this plastic tube as a highway into your lungs. Right. The ones that survive on a plastic surface are usually antibiotic resistant. And so these people who are very sick already get sicker. Got it. What does your solution do?

So we actually have a breathing tube. It is FDA cleared. It is CE marked. We are selling it here already in certain hospitals here in the Bay Area. And what it does, it removes the bacteria by removing the fluid that accompanies the bacteria so that none of the fluid is able to enter into the Got it. And you created, developed, and patented this yourself. Yes. Amazing. Well, thanks for doing that and saving people's lives. And you've done studies on this? We have a new study coming out in critical hair medicine in February. It compares actually what the big companies are selling, which is a type of suction breathing tube and ours in a tissue model. And what we find is our devices removing 15 times more. more fluid and basically keeping the airway dry.

So what's your biggest challenge? My biggest challenge is there is no AI attached to this. There is no electronics. We operate in a very heavily regulated field. Yeah. It's a medical device. It's a medical device. And fundraising for medical devices is out of favor because it's very hard,

very capital intensive. but we've been able to get this product to market, sell it for gross margins upwards of 85 plus percent for less than a million dollars in funding. Great. Who put the million in? Angels? High net worth individuals. Yes. Who are in the space or not in the space?

Some are kind of in the space, but most of them are not. Got it. So you were able to convince people who don't even know about medical devices to invest in a medical device company? And some people who are in health care and medical devices. But that is a massive achievement in and of itself. But when you went to the next series of investors, which would be venture capitalists or seed funds,

in other words, professionals who were not in the medical device space, they very quickly responded to you and said, I don't do medical devices. Right. Which is what I would say to you. I don't do these. It's impossible for me to even know what you're doing or even determine if there's a market for this.

So you have no choice but to, follow the path of either getting high net worth individuals, continue to have them fund the company, or become profitable, or medical device savvy VCs. That's really your only choice if you're looking for funding. Unless there were grants, and there might be grants too, or pre-orders. Because this is not a moonshot.

This is, it's here and now it exists. Most of the grants out there are set up to fund things that are very hard. in terms of technology. Okay, so putting grants aside, is it a profitable product? What does it cost when you sell it to a hospital? How much do you make when you sell one? So the price that some hospitals are paying is somewhere between $25 and $17 per device. We operate at about an 85% gross margin at this point.

We have a number of... Are you competing on price with the other people selling to the vendor? Absolutely not. And you have two hospitals with it now? Yes. and how many do they use a quarter or month each? It's seasonal. So we just had another hospital re-up an order last week for 50 devices.

15? 15. 50, 50, 50, 50. 5-0. And they'll run through those in six months or something? No, they'll run through it in a month or two. Got it. So ordering in bulk and getting those orders ahead would be great.

Is there a distributor in the hospital space that you can win over who would buy 10,000 of them? Yeah, we actually have nine distributors that we're talking to that are interested in basically taking us on and putting us into their product catalog. This class of device happens to be a place where they have not been able to get this class of device and they know that the big companies have basically taken this and have neuro-euro. on your monopoly. Let me ask you a candid question. Do you feel like working on this product for another 10 years? No. I didn't think so. Seems like mission accomplished. I think hiring a banker and firing

up discussions with the people who already make these for selling them your IP and brand. And then just making a five-x return for your investors might actually be the best solution here. because the other solution would be, can you come out with one of those new products every six to 12 months and build a medical device company that builds products over time? And is that something you want to even do? There are a couple interesting spaces where we can build additional products that are along the same sales channel. Got it. Maybe for the next foreseeable future.

So, for instance. If there's no appetite with investors, that should indicate to you that they see this as, like a contained business that's achieved its goal. Mission accomplished, thank you for saving what could be, what, thousands of lives a year? Hundreds of thousands. Hundreds of thousands of a year.

Sell the patent to somebody, make your money, and then go do it again. And then when you go do it again, are you independently wealthy? Not particularly the wealthy. Yeah, okay. So I suggest you become independently wealthy

by selling this company. It's worked out for me. I mean, like, take the win and then go, Because you seem like also like an inventor to me. Or is that, am I accurate? Yes. Am I, yeah.

Stereotyping you? No. Okay, good. No, I mean it just by like being a product genius. Like you seem like a product genius when you were talking about it and explaining it. Like I can tell when somebody understands the details like on a very precise level. You feel like that mad genius product guy who is going to do like five more of these in their life and three of them will not matter and two of them will change the world again. getting this off your back and letting people who are good at scaling a business, scale a business,

which you have no interest in doing. And it's just going to frustrate you and make you depressed and be like, oh, God, I've got to talk to 50 more people to get five sales. I talk to another 50 people to get six sales. You know, like there's some grinding out person who has a thousand medical device salespeople already on their staff who can then just come to people and say, would you like to have less people die? And they'll be like, yeah, it does cost $15 more to not die. and they're like, yeah, we'll spend the $15 more than I die, you know.

And then take the wind and go on to your next one. Is there a banker you know that might be good? I don't know the medical device space, but I know about bankers. So when you do a search for medical device bankers, and then the way you would actually do this is look for medical device companies that had great exits. And here's your homework. Then go find the founders of those companies and email them and say, I like you.

I am an inventor of medical devices. Congratulations on your sale. I am a huge fan of what you did with X product. I built Y product. Here's a video of it. Here's a picture of it. We're starting to get traction, and I know that you exited your company.

I'm thinking it might be a good time for me to exit, and I would love to just chew the fat with you for 20 minutes and see if you can help me figure out what to do here. I could use some advice. So you're being vulnerable. you're asking for advice, and before that, you're really addressing their success. You're making it about them in the first half, a little about you, and then back to them, because they're so brilliant, I could just use you a little bit of your help.

That's the kind of, like, email that might get 20, if you email 20 founders who've done this and you follow up three times with each of them, like into submission, you're going to get four of them to do a meeting with you, and they're going to know more than I do. So don't be afraid to ask people who've been there before for help. Founders love to help other founders. They love it. The person always jumped out of her seat with advice. He's just like, I know what you need to do.

It happens. I do it too. And so lean on those other founders and see how they sold their companies. They might be, one of them might just go, you know what? I know the guy at this company. I know the gal at this company. Do you want an intro? Because I'm sure they'd be interested in this.

And then boom, now you're two-thirds of the way there. Okay. Email founders of companies who've done it. Report back. Okay. All right. Good luck. Well done.

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My name is Jason Calcanus. I'm an angel investor in over 200 companies. And if you'd like us to invest in your company, go to launch.co. And let's talk. Tom is with a company called Tribe XR, which provides virtual reality training, put a headset on, I guess, for practical and creative skills. So it's a how-to training environment. And is this in market? Yes. Yeah. We're live on all the major VR stores. Got it. And how many VR headsets have been sold in the last year in 2019, let's say? So something in the region of, I think, four to five million. Got it. So. So, so. So, So the extremely hyped up VR is going to change everything has resulted in the iPhone sales for two days. Yes.

Got it. Why do you think virtual reality has fallen so flat and consumers are so not interested? I think this has been the beginning of consumer VR. So the first actual viable consumer headset is the Oculus Quest. and by that what I mean is the price point is cheap enough that people can afford it. What does that cost, the quest? $400. Great.

Which is about half the price of a base iPhone. Yeah. Okay. And what is your business do? What kind of skills am I going to learn in your VR environment at Tribe XR? So we started with a focus on music. So we're sort of a hybrid between musician, which I know you interviewed the CEO and masterclass.com. Great.

So we started with... I also interviewed the CEO. And I passed on investing in master class like an idiot. So third time lucky. So what we've done is we virtualize the actual equipment that people learn on. And so we've started with a focus on DJing and music production where there's a very high entry cost for hardware to learn their skills. We virtualize all of that.

And then we offer asynchronous and synchronous training. So being trained by a real person or trained by the machine. and the ability for the people whilst learning to also connect with other students and share and then perform. That's basically it. How is it going so far? How many people are using it, used it in November, let's say. Okay, so in November, we had something like 2,000 users. We have 10,000 paying customers so far.

We're running at about 25 to 30K a month revenue and it's growing. What does it cost to buy the software? At the moment, it's $20. A subscription or one time? So we'd love it to be a subscription, but the industry isn't yet set up for that. Oh, so if you want to, you can't do subscriptions in VR yet. You can't through the stores. You could directly, but if you ought to be featured through the stores, it's not yet functional.

When do you think they'll have that? January. Oh, okay. It's right around the corner. Yeah. All right. So what's the biggest challenge here? Well, the pivot from a one-off to a subscription payment and how we handle that with customers.

Great. I've got a couple of tips here because we are investors in FitBod, Calm, tone-based, Steasy, and a bunch of other subscription-based services that are doing brilliant.org. Subscriptions are great. Consumer subscriptions are great. And that was a big question mark. We'll consumer subscribe to stuff, but they are. They love it.

And so the first thing you don't want to do is charge a price that feels like if they pay for the year, they're getting an amazing value. Calm, I think, when they started, was $10 to buy the app. Now it's like $6 a month, $60 a year. $60 a year for music lessons would be one lesson. Or here in California, it'd be 15 minutes. Like, it's an incredible bargain.

So I think $99 a year, you would get a lot of people to sign up. And then it takes the pressure off the individual when you charge by the year, if they don't use it for three months or six months, they use it for the other three or six months, they don't feel terrible about it, right? I got enough value. Just like right now I can't find anything to watch on Netflix. I watch the Irishman, and that's it.

Now I'm done with Netflix until Ozark comes back. Am I going to take the time to cancel my Netflix account for Ozark? Am I going to cancel and then re-sign up when Ozark comes back next year? No. It's like three or four months away. Who cares? So that's what you're trying to do. That's what Disney's doing.

That's what Netflix is doing. That's what Spotify. does. They keep adding more and more features. They keep the price nice and low. So it's not as a no-brainer. And you also want to make sure that you get people to sign up for the year. Because if they're signing up monthly, you're creating 12 moments of cognitive dissonance and anxiety for them, as opposed to one every year. It's much better to just do one a year. Okay. Yeah. That's my best advice. Agreed. Because yearly. Yeah. And we're trying to go to work out where the price point is. And I think we have

if you like, the problem that we see is that the market is not yet conditioned to this type of business model. So that's really where, you know, you don't want to be the first company that people put up and say, okay, those guys are trying to kind of grab too much money. We want to present what we're doing, which it is as sort of high value proposition to the end user. Yeah, I mean, $60 a year is a. essentially free for most consumers who, and it's certainly free for 100% of consumers who just bought a $400 headset. Yeah, it's four salads, is the way that we think about it. Yeah, in San Francisco. Yeah. Maybe three. I mean, putting any protein on that salad. Yeah,

exactly, we put chicken on for $23. Yeah, so I wouldn't overthink it. You have a lean company. Yeah, so with three full-time. Yeah, so fortune favors the bold. I would, would switch hard into the subscription business, make it yearly subscriptions. I would leave the existing product out there for, what is it, 20 bucks to buy? Yeah. And I'd raise the price of that to 50 bucks to buy one time. You still might have some people choose that. And then I would add some features and make the new one. You could make Tribe XR classic and then make Tribe XR Pro. And you could use the classic one. That's our first app. If you want to just pay one time, pay 20 bucks for that, that's great. And then in that app, say, but we have a new version.

That's even better. Go here. Yep. And then you get to restart all of the reviews. I don't know if people write reviews in HR. Yep. They do? Yeah.

So we have, yeah, we're one of the top rates at. Perfect. So then it would, that would lean me to say, if you have great reviews already, to make that the pro version, if you can technically do that, to make the other one the classic. But the stores are very tricky about changing the offering. So you need to bring that up with them now. you have a good relationship with the Oculus store people?

You do? Yeah, so we're one of the first 100 products on Quest. Perfect. So I would talk to them about, hey, here's what we want to do. We want to preserve the existing revenue line here. And we want to have this pro subscription version so we can compete with Eusician and other people who have really demonstrated that a one-year commitment is the better model.

And then you have to make that decision which profile in the app store gets the good reviews or not. Because then you can have this out-of-sync thing that could occur where people could have bought the original one and the new one they don't like it for some reason. Then they trash it and you get bad reviews. So you got to really think that through. Jamie Siminoff with Ring, the doorbell,

he had something called DoorBot originally. And the reviews were so bad on Amazon, he's like, I'm just going to change the name of the company to Ring. I got the domain name. And I'll just turn off those old Amazon pages and then we'll start the review cycle fresh. which is essentially what helicopter operators do in Kauai. You ever take a helicopter in Kauai?

I haven't. No. Anybody ever take a helicopter ride in Hawaii? Great. Check your safety rating? No deaths. No deaths. There's been five crashes, but no deaths for any of the existing helicopter companies.

Do you know why? If you kill some people in your helicopter, you shut the company down and you start a new one. Now you've got a perfect track record. It's literally what they do. We have no deaths as well. There have been some VR debts, and there has been many VR humiliations where people just fall. I had one other quick question. So because we're a lean company, we're within touching distance of profitability.

And we're at the same time being in a VR company, we're sort of cash constrained because the investment market is only now starting to hear. up again. Is it heating up again? The beginnings, I think. There's a couple of good examples. Which app is making the most money right now? Beat Sabre. And that makes about 50 million a year, something like that. Beat Sabre makes 50 million a year? Yeah, something in that region. I want to play that. It's great. Is it? Yeah, really, really good. And they were making 20 million in a year before this headset came out. So it's pretty successful. How were people playing it previously on PlayStation? On PCVR and PlayStation. Yeah. Got it. Wow. It's better in VR, though.

It is, yeah. So they just stole George Lucas's IP with lightsabers. And what do they call it? What's the name of that again? Sabre. So beat Sabre. Beat Sabre. And Lucas didn't try to sue them.

That's like, that is so lame to, like, they could have just used regular swords. Yeah. And instead, they're literally using lightsabers. But they were playing to the early adopter gamer market. I'm just talking about the law. I'm respecting somebody else's trademark. I mean, they literally put Sabre in there. Well, Facebook.

just bought them. Oh, really? Yeah. To make more? I believe so, yeah. And Facebook's other top title is Lucasfilm ILM product in VR. Ah, okay. So maybe there's going to be some reconciliation.

Something like that, yeah. Oh, so you're saying Disney's going to work with Lucas to actually make it an official lightsaber? No, I think Facebook sees, I think Lucasfilm and Facebook are pretty close. Got it. All right. Great job. Let's give a big round of plus.

Well, done. Welcome back to office hours. My next guest is Corbyn Brown. He is from a company called L-UU-U. L-U? The correct pronunciation is Lou. Lou?

Yeah. Got it. And you do aromatherapy alternatives to nicotine vapes like Jule with no nicotine in them. Yeah. So essentially, just to give some background and our pain point are what issue we're facing right now,

essentially what Lou is, is the alternative to e-cigarettes. So what we found within the market right now is a huge nicotine epidemic. And the only way of quitting these nicotine devices is through abstinence or cold turkey ways, right? So what we provide is this alternative. So when you look at Jule, it's the undercut or the alternative to cigarettes to negate like carcinogenic effects there. But we're the alternative to Jules because we're focusing on nicotine, which is the harmful effect there. So you sell a vape pen?

Well, we don't like to use the word vape due to the stigmatize within. the media now. Okay. So, for example, like, when the Trump administration was saying that they're going to ban all flavored vapes, we want to encompass them that because we have no nicotine innervate. All right. So for simplicity's sake, you're making a vape, even though it's, you don't like having to call it that, but anybody reasonably would look at it and say that's a vape pen. It's a vape pen that has the flavor in it, but not the nicotine. Yeah. So. And it's designed to get you off of nicotine flavored vapes. Yeah. So the idea is essentially, Essentially, when a user uses an e-cigarette, they gets that addictive factor of the hand motion going up, taking a hit, right?

So using the loo, essentially, that same formation can happen where the hand motion, the oral fixation, and exhalation can stop that person's urge from happening when using like a jewel or something like that. How much of the addiction is the oral fixation and the habitual nature of sucking on this pen versus the delightful nature of nicotine to certain individuals? So, yeah, of course. The idea is that, yeah, if you still want a head buzz, you're still going to use e-cigarettes. But I'm saying. What percentage of it? Would you say that is the addiction part? It really depends, usually the user, but I would say probably one out of two, maybe.

Would it say that they would- No, no, that's not my question. If you look at somebody who's addicted to it, how much of the addiction do you believe on a percentage basis is the nicotine versus the behavior? Oh, probably would say 60% is the nicotine and the 40% is the behavior. Got it. So you're addressing the harder part, the nicotine. Yeah.

The vape pen allows you to still get the behavioral stuff, but you reduce the 60% as opposed to, say, giving people nicotine gum and breaking the vaping habit. Yeah. So the idea, essentially, is what we're targeting is nicotine as a chemical because the alternatives right now all include nicotine within them, but we're targeting the substance. I get the business. So what's your biggest challenge? So essentially, our biggest challenge is since we're one of the first products to make this new market, we're the first battery and pause system to, who come pre-filled with non-nicotine juice. Since we're like a first mover,

we're being miscategorized as an e-sigarette or an E-NDS. So essentially that inhibits us from using certain marketing platforms and so and so forth. Got it. So you're not going to beat the marketing issue just by calling it your belief it's not a vape-pen. If the world believes it's a vape-pen, it's a vape-pen. So I don't think you're going to convince Google doesn't allow vape-pen advertising. Yeah, like Facebook, Instagram, and there. Yeah, so you're not going to win that war.

but I think this is one of the rare instances where you can fight up and you can start a battle because you're on the right side of history. So if you branded this as and did a micro site or a mini campaign of ending jewel addiction, made a funny video about this or something that would appeal to people, and you leaned into that fight, that might be pressworthy. And then instead of using ad, dollars, you would use PR dollars. So you try to get on Good Morning America or try to get on the local news or try to get into a parenting magazine and say if your kid happens to be,

and maybe you market to parents, if your kid is addicted to these and you're addicted to them as well or your household's addicted to them, put these in the house. And then there's one that has, do you make one that has like half the amount of nicotine or light nicotine? So currently what's in the market now is essentially they sell juices with lower concentration concentrations of nicotine, but the prevalence of non-nicotine juice is not found within it. And in regards to your talking about, like, fighting it head on, we do plan on doing market campaigns with specific influencers to target that age group and stuff like that. That's what you want to go after is like, say, listen, we need to get people off nicotine.

We need to stop Jewel because Jewel never, does Jewel provide juice that doesn't have nicotine? So like any big e-cigrate manufacturer, it's funny enough, creating this product required multiple factories due to the fact that e-sigrant manufacturers only provide nicotine juice as an like an option when making said product. Got it. So you had to actually find somebody willing to make a non-nicotine. So essentially, yeah, connecting means of production. Wow.

So they're controlling the means of production. Yeah, I get it. That's interesting. It's also sinister. Like when you think about it, like if Jewel wanted the high ground and if they actually did care about addiction, they would release the product you're talking about. It wouldn't be a need for you to do this. I mean, a couple things in regards to that.

One thing we have to look at reputation of a company. right? So just past month, Jewel released a million contaminated pods knowingly to their consumers. Another thing, in regards to our product specifically, we make sure safety is an uphold importance. We had our products tested and verified by a third party laboratory Anderson Material Inc. that came back that we had no nicotine or harmful chemicals. So safety is a big concern for our consumer. Yeah. So I think doing a, I think you have the right idea by fighting it out with them and that influencers was another thing I was going to bring up maybe influencers talking If you can get an influencer to kick their nicotine habit with your product and document that journey in short story format on Instagram, Snapchat or whatever, that could be very powerful.

Yeah, definitely. And it's one of those things. I think it's honestly just coming down to just a lack of education within the public that this product exists and that there is alternative is there to be. Yeah. Fight up. That's the general advice I have for you. Fight up. Fight with them and see if they take debate.

Yeah. Like if you literally got Stopjewel.com. or Jewel is evil.com, they're going to have to send you a legal letter because you have their trademark in your domain name. But if you did that, you actually could fight it and get a lot of press out of it. You then send the document to TechCrunch,

to Wall Street Journal, to New York Times, and say, look, we're trying to just make a cartridge that helps we get off of it, and Jewel is trying to stop us. And then you put that on the Stop Jewel website. Definitely. You just keep poking the tiger and see if they take a swipe at you. Keep poking him.

I'm serious. That's sometimes how the world changes. There was this, in the 80s, they did something called the Pepsi Challenge. Coca-Cola was so dominant. Pepsi was much sweeter when compared to Coca-Cola when it came out. I don't know where they stand now. Same amount of sugar. Oh, it's the same.

Pepsi is still a sweeter beverage. Anyway, Pepsi, just on a mouth feel, was much more sweet, especially to consumers who only had Coca-Cola or RCola. So they went to all the shopping malls, all the different places, and they did something called the Pepsi Challenge, where they would take a can of Pepsi and a can of Coca-Cola. They would pour them in a glass, put a box over it. They would move the glasses back and forth. People would taste it. And they'd like, oh, my God, this is so delicious.

This is the Coca-Cola I've been drinking for 50 years, like my grandfather. And they would like, your grandfather's going to be very disappointed. You drink Pepsi! You drank Pepsi! And it was like this incredible thing, right? Definitely. So you think the best approach isn't necessarily full force hit every e-cigarette company, but rather hit the big name Jewel in order to like game more PR and stuff like that.

Yeah, I mean, it's just so synonymous that like there's no reason to go after the number two or three player. Just go after the number one player. State your case with the public. See if they buy it. See if they build your products. And do we know that the vape pen without the nicotine is also safe? Yes. So in regards to that specific question, I mean, yes, there's a bunch of news in recent news that in regards to.

to like people dying, but that has more correlation with THE vapes. And then without the nicotine in it, it's even more safe. And we've done tests for diactyl, for example, which is linked to popcorn lung disease. So maybe some more of the cheaper brands use that, but us as a brand where you make sure safety is our primary concern. Yeah. So I like the idea of saying we make safe vapes as a gateway for you to solve your addiction. Or is that not true?

Do you want people to buy your vapes until they die? So there's other reasons people buy our vapes. So essentially one of them could be people enjoy the flavor. You can't really find that our specific flavors on the market anywhere else because of the lack of innovation that's happening within our market due to the fact that people are focusing too much on e-cigarettes. And then the second thing is some people like using it just purely to be in a social scenario of hitting something, but not necessarily want it being domed or high or whatever that case is.

Awesome. Well, good luck with it. Big round of a plus. All right. Next up on Office Bowers is Thomas Peters. He is the CEO and co-founder, founder of Wash Day, an on-demand laundry logistics app, something I have seen multiple times a year

since investing in Uber, everybody thinks that this is one of the next most logical ones is on-demand laundry service, which has existed for a long time, even before the on-demand economy. People did pick up and drop off dry cleaning, certainly and maybe to a lesser extent, laundry. How is Wash Day doing?

Doing well, actually. It's been, it's got revenue. within the first two months that's existed. What's different about wash day than me just using my local cleaner and telling them come every Monday to pick stuff up and drop it off on Tuesday? Well, actually the story, how it started initially was I was training for the Hawaii Iron Man and I was just piling up my clothes in the corner and didn't have time to do it because I had a three-hour bike ride that day.

And first thought came to mind was, why can I just go on an app? Yeah. Have somebody come and get it. and I couldn't think of the name of a single one, so that's where initially started. Got it. But a lot of them, they're just local.

They, there's services out there, but all they're doing is putting a service layer on something that already exists. Dry cleaners is just storefronts. We know that and they don't do anything there. They do it elsewhere. There's no logistical system behind any of them. What is yours?

Point to points. Hub to spoke versus point to point. What does that mean? So in logistics, you know how airports work, rail yards work. Everything comes into. one center and goes about out. All of them right now are kind of do point to point. And I have a

background in the trucking industry. Point to point is no money in that at all. So you don't actually wash the clothes. No, we do. You do? We do. We have a center. So everybody drives, you pick up people's laundry, drive it to your center and then drive it out. Right. How many cities are you in? Just South Orange County right now. How's that going? Really well. Actually, I have a waiting list. Again, started. Just wondered, like I don't think, like you said, I had the same doubts about it as you. So I started thinking out, started looking at, started using some of them, came to find out they're even slower than they are expensive. So that became the biggest problem that I saw there. That's why most people don't use them.

When I started polling people, would you ever use this? No, why? First off, I don't know anybody. Second off, they're expensive. They're really slow. I have a washing machine at home. By the time I might as well just do it myself. So that became a problem.

So, okay, let's look at that problem. Then started using some of them myself, came up here to San Francisco, used some of the two of the bigger ones that. are up here and I think it was up here for four days. What are the big ones here? Rinse is one of them. The other one's laundered. There's about three or four of them now. Yeah.

So I don't live here. So I was here for four days, use both of them. I actually had to call both of them and go pick them up myself because they weren't going to make it back in time before I was flying back. Yeah. So problem there.

I'm already seeing people nod their head so they know what I'm talking about. Yeah. So decided there had to be a list, statistical system. And a lot of them don't have end-to-end control. Got it. So who's your,

you're going to just compete with those people like Wrenz? You plan to roll it around across the country? Well, that's kind of the question I came. Because so far it's doing really well, have a waiting list. The app is only invite only. Again, South Orange County, off people I polled. Someone would see it. Their neighbor would see him doing. What is that? My neighbor wants to do them. Yeah, go ahead and let them give them the invite, give them the link. So it just grew from that. No, no marketing. So you want to try and figure out if you should make that, you should raise money or stay bootstrapped? Yeah, because it's completely bootstrapped. And I plan to keep it that way.

I guess it's from that perspective. Do I say, yeah, maybe there is something a little different here. Is rinse in your market or those other ones? No. No. Yeah. So a good strategy when you're behind and there's well-funded competitors ahead of you would be to go after the cities they're not going to go after because they're underserviced

and just lean into that and seeing if you can make it work. And then franchising is another thing that underdogs tend to do. So if you found somebody super qualified in, I don't know, pick another SoCal town, Laguna Beach or something. Maybe that's the same place, but, you know, whatever it is, San Diego, and see if you can do it in two cities. And then if it becomes a phenomenon and you've got a decent margin, you might be able to convince venture capitalists to invest in it. I think people are pretty sour on the space because they think the margins are too thin. What is the margin? If you have, you know, let's say a two-person household, how much do they spend on their laundry every year?

Well, right now it's about 80. $80 or so they'll spend, well, with us, they're spending about $80 a month right now. 80 a month. So you're spending $1,000 a year on. Yeah, and that's what currently I haven't raised the price. I kept the price pretty limited. Just because it's so new, I want to see if the, I want to see if it would work first. So walk me through the economics of the $80 a month service.

Right. That's $2.40 pickup and drop-offs? Just they spend about 80 months. So it's about, right now we charge about $10 a bag. I don't, I don't implement the transportation fee yet. Got it. haven't implemented the full price metric. So that's what you're going to want to do is get to ground truth very quickly here.

Do not subsidize this. You've got to find out if when it hits 120, which might be what you need a month, to make this work, if it actually does work. Because right now you're masking yourself a little bit from the truth by not having the margin. And when you come in, there'll be five or 10x the scrutiny on this specific type of business on demand than there was previously because look at the world. Everybody loved Uber for a long time. and now the public markets are like,

you did $1.7 billion, a billion rides last quarter? We don't believe you. We believe this business doesn't work. And you're like, but we only lost a billion on $1.7 billion rides. If we made the rides a dollar more, we're trying to grow. Like, what don't you understand public markets? The public markets are like, listen, we just don't want to play this Silicon Valley, lose money game.

Just make it profitable. We'll buy more shares. But prove it to us. So that's the system you're a, leasing your company into. So this were founders, a lot of times they're thinking, well, I don't know, 10 years ago or 10 months ago, this worked. Why can't I do that? It's like, well, because, I don't know, soft bank's not giving those kind of deals anymore or, you know, some companies run away with the market. So you have to understand that you're going to release this company into a specific time

period where there's a specific feeling and a specific perception of this being very hard to make profitable. So the only way you're going to qualify in my mind for smart dollars in the venture community, smart dollars in the C community is showing the union economics are tremendous. So you might as well just get to that point now. Because if they're not going to be tremendous, then why are you wasting your time doing it? It's just like it has to have great margin. So you've got to add the delivery fee, you got to add that, or you got to just say, listen, it's a subscription service. You get, this is the way I would sell it in a high-end community like this. We are an elite, you know, service. We charge this amount per year, and you get this many pounds,

and then incremental pounds are this, and pick up a drop off as included. And just try to skim the cream of the most elite households that need this. Because the elitist of households, I've read in the Wall Street Journal, the new thing is to have a laundry room. And the laundry room is the now like the new den or something or the new office. Like how many washing machine and dryers can you have in your room and having a giant island in the middle for folding? And literally if you look at the homes in Atherton or in Los Angeles, the big selling feature is the laundry room. You know about this trend? It's bonkers.

So those people don't qualify because they're like people with movie theaters in their house. But that next year down, people who don't have enough time. is the wig win. And that was the win. That's why I started. It was because I didn't have time to do it. Yeah. So that's the big win.

And so I would charge them for the year. Say, listen, or you buy it 100 pounds at a time. So it's, you said a dollar per pound. Actually, I don't charge by pound. That was one of the biggest complaints people had. They don't know how much it, like, I have a bag. I don't know how much that weighs. I'm not even about to guess how much that weighs.

So how do you charge them by bag? It's just by bag. Strict bag, strict number. Got it. Kind of like if it fits, it ships. So are they, packing the bag like maniacs and squishing it and what we do is probably all seen it they're the mesh ye tall hamper's that you can buy for cheap yep so just distributing those out for free and they fill

them up and we pick them up and drop them back off in the same great so i would do it as like you know you buy 20 bags for 40 dollars each at the beginning or 50 dollars each of the beginning it's a thousand dollars and you can just not worry about it so if you can get some of those big wells to do that but you're going to have to figure out the unit economics if you intend on raising venture dollars. People are really skeptical right now. Yeah, like I said, that's kind of where I'm at. It's making enough. I have another business that's doing well enough.

I don't have to worry about that. See, if you raise the prices. Yeah, I'm slowly taking that piece up. Be bold. Yeah, I had a, so, like I said, our biggest customers, married couples with kids, both of them work. So that's where I'm found through all the testing. That's the group that was every time they told me yes. Or they'd always send me a picture of their laundry room that was a disaster.

Said, yeah, please do this. So that's really where the market all started. And even going in some other tests with some other stuff, because we're going back into somebody's house, reached out to a couple local companies, hey, what do you think about putting some marketing material inside there when we take it back to you, back to that person? Yeah.

And even started to venture a little bit into the data because like I said, it was started because of my own workout clothes when I was training. Anyone that seen my workout clothes is going to know I wear Under Armour a lot, and I, Under Armour would love to know that, that I'm actually wearing their stuff. Yeah, I would be careful trying to go down the data business. It was just a test. Yeah. It was just a test.

It's fine. I mean, it's just a hard, everybody thinks there's a data business locked inside of every business. And really, there's only one company or two companies that actually make use of data in that kind of way. You know, arguably Google, Facebook, and Amazon are in that kind of group. where they use the data, but it's so valuable, they don't like to give it to anybody else. So this idea that there's like the data has value and people want to buy it generally doesn't come to fruition.

All right, good luck with it. Get the unit economics right. Well done. Let's hear for Thomas. Thank you. Hey, this has been a great episode. Thanks for coming, everybody. Thanks to Wilson-Sinni.

Yeah. Appreciate it. Okay. And let's just one more time. Let's give it up for Jason for coming out playing sick.