This Week in Startups - Outer CEO Jiake Liu on standing out in DTC, go-to-market innovations, pitching at Remote Demo Day & more | E1165

Episode Date: January 23, 2021

Check out Outer: https://liveouter.com FOLLOW Jiake: https://twitter.com/jiakeliu FOLLOW Jason: https://linktr.ee/calacanis

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Vanta makes it easy for companies to get a SOC2 report fast. Twist listeners can get $1,000 off for a limited time at vanta.com slash twist. Hey everybody, hey everybody, welcome to another episode of this week in startups. My name is Jason Calacanis. I am an angel investor in the Silicon Valley. I run a firm called Launch. You can visit that firm, launch.co. We don't have the M.

We just have launch. com. And this podcast is something I started to meet founders and talk to them about their businesses because I'm passionate about startups, passionate about entrepreneurship, and investing in these great companies. And during the pandemic, we had a concern that we're hearing from our portfolio companies. Hey, it's getting harder to raise money.

It was this big question mark. Will founders be able to raise money if you don't meet with investors in person? So it's going to be a really challenging year, we thought, if for six months or a year, people can't meet in person, then no company can ever get funded. Well, we were sitting there in the pandemic. We said, well, what if we started a remote demo day? We just said anybody who wants to pitch to investors, we'll create that space, if you will, for people to meet companies.

So we started Remote Demoday.com. Just a little throwaway idea, throw up a Squarespace website, and we started meeting companies. One of the companies we met was Outer, O-U-T-E-R. And you can visit their website, Live, L-I-V-E, Outer, O-U-T-E-R.com. And we said, this is an amazing company, and we were able to get a small allocation. shouldn't invest in the company. And we thought it was an amazing idea.

We like direct-to-consumer companies. I thought I'd bring Jake Liu on the podcast to talk about what he's doing without her because D-C is really hard, direct-to-consumer. This is like Dollar Shave Club, right? This was this phenomenon where he would sell products directly to customers and get rid of the distribution and the marketing and everything in between the customer and the product and maybe make products that were so transcendent and different that people would be drawn to them, right?

And that's what Outer is. and Jake Lou, welcome to the program. How are you? Thank you, Jason. I'm doing well. Glad to be here. So you heard my little preamble about the remote demo day and raising money during the pandemic. You were able to raise your Series A from Sequoia. Did that start right before the pandemic? You had met them already, and then you closed it during the pandemic. Is that correct? So a quick correction we raised from Sequoia, China. China, but we did just announce the funding actually two days ago.

but as you know, we closed that in October of 2020. Yeah. Yeah, I mean, we actually didn't know them before. They reached out to us when we did our seed announcement, funding announcement in June, which was around led by Mucker Capital here in L.A. And, you know, that conversation went really well, and three months later, we closed around with them. And explain to the audience what Outer is and why you started it.

Yeah. So Outer is the first. authentic consumer brand for outdoor living and we are starting with the first product which is the perfect outdoor living outdoor sofa. We like to call it to be as comfortable as your bed as durable as your camping gear

and it's completely 100% eco-friendly recyclable. It also has this patented design we just got the patent granted about a month ago that's this thing called outer shell. It's basically integrated piece of cover that's built into the cushion itself to cover the cushion when it's not used easily, right, with one hand. And so you get to enjoy your outdoor time without the hassle of rain covers or a wet cushion.

We're starting with the sofa, but we're quickly expanding, you know, our product categories into outdoor rugs. This year, we're coming up with a slew of exciting outdoor furniture products, but we're on our way to create the number one outdoor living brand in the world. How did you come upon this space of outdoor furniture, and there being a potential opportunity there and the DDC space. So I don't come from furniture background at all. In fact, I'm a computer engineer, and I built a company before this in the enterprise

SaaS space. So as far away from consumer and furniture, as you can imagine, yet I have a cousin who owns a patio furniture manufacturer, and his business has been booming over the last decade. And I actually helped him in 2016 built a store on Wayfair and Amazon that turned out to be one of the fastest growing vendors on Wayfair. And I saw that, you know, there's a lot of potential in this space. And the problem was that the product that they offered wasn't differentiated at all. It's the same product you can find from Costco, Home Depot, some of these like lower end, you know, we call them disposable furniture now at Outer because they totally are. You just use them for

a year or two and you have to throw them away and recognize that there's an opportunity to build a brand in the space because there's just so many inherent problems that we can probably go into. What we've seen in direct to consumer is that if the product is really transcendent and the marketing is really clever, then there's a really good chance for a great outcome in terms of connecting with customers and as a business. Is that your experience as well that in order to win at D to C, the product has to be differentiated? And, you know, you have to have some sort of marketing approach, a go-to-market approach that is either unique or world-class?

Totally. I mean, once upon a time, you know, you could definitely go to Alibaba, find some products, repackage it, build a really shiny website, turn on your Facebook, you know, faucet, and there you can build a probably a couple million dollars, you know, business that way. But as customer acquisition costs go up on Facebook, Google, all of these channels, there isn't really that arbitrage on, you know, marketing anymore. So I do think fundamentally it is about business fundamentals, right? Customers only care about differentiated products that are better than incumbents,

not just with the shiny coat. And so we take us, for example, you know, we spent, I think, 14 months on just the fabrics of our sofa. We basically said that there's no fabrics out there in the market. Everybody knows umbrella. Everybody knows some of these other performance. outdoor fabrics, but they don't meet our requirements when it comes to comfort, durability, and eco-friendlyness, especially the third eco-friendlyness component. And so we decided to set out to kind of find our own yarn suppliers, really to understand how fabrics are woven and made,

and it iterated on a lot. And that turned out to be a very differentiated offering. And so it's wine-proof. You can pour coffee on it. We have a video on YouTube of us pouring black coffee on this white fabrics and just wipes right off with water. And so I do think it's detailed product decisions like that that can really build a brand in 2021. And that requires understanding the product in market over time and constantly iterating, correct? Like you have to understand where this product lives, outdoors, in the rain, in the sun. And that is, you know, when anybody who's bought outdoor furniture before knows this pattern of like you buy outdoor furniture, it gets stained, you buy expensive covers.

They get stained. You cover them. And then you stop using your furniture because it's covered and it's arduous to take all the covers off, put all the covers back on. It's just, it becomes like an annoyance, right? And then you wind up buying stuff that doesn't have sofas because you want just benches. And then those are uncomfortable. You don't use them. I've been through this.

Like being a, you know, California boy for the last decade or so. More now. Yeah. Getting close to two decades. It's just a lot of work outdoor furniture, correct? That's right. I mean, I grew up in Alabama and, you know, outdoor living is a thing, you know, tailgating, everyone has a yard.

And obviously, having moved to LA for almost a decade, you know, outdoor living is definitely like a lifestyle over here. It's just so nice today. It's actually like balmy today. It's like has been really cold. But yeah, I mean, totally. It's all of these kind of, it's like waking up in the morning, you have a coffee in hand. You want to go outside, just sit down and at your couch, right?

And you have to now put your coffee down, remove. this huge rain tarp that's probably covered in dust and bird poop and you don't want to touch it and then and then you know and then after you do it the cushion is still damp you know from the do and you sit on it without knowing that and your your butt is wet. We call it the wet bottoms. You got to change your underwear, change your pants. It's a disaster. It's a disaster. Yeah. And the cover that you guys came up with is so clever because it was designed to be easy to use, right? You just flip it right over. Boom. You're done. Just like a laptop lid one hand. So coffee in hand or phone on the other hand, you can just use one hand and open it up.

Even after it closes, like in the clamshell format, it has a little handle because if there's a torrential rain that's come, rainstorm that's coming, you can just pick up all the cushions in one go instead of stacking them up like pizza boxes and, you know, so it's, that is definitely the number one. We have like a looping animation of outer shell and action. It's like a five-second animation. It went viral on Instagram, and I think everybody relates to that pain point. It does, there is something about marketing on social media where if you make a nice gift or you make a nice looped video, it can really pull people in.

And this is, I love this escalation of excellence that's occurred. Everybody is looking, whether it's you with outdoor furniture or eight sleep, one of our investments that is working on beds. You know, they just sit there all day long and they go, how can we make sleeping, you know, how can we get people better sleep through this product? I mean, they're literally doing that with software and, you know, hardware and just the design of the app and everything. When we get back, I want to go into the next piece, which is you have a very unique go-to-market strategy that I'm not sure how well it works. But when I saw it, I was just like, wow, that is such a brilliant idea. Whoever came up with that idea has to be brilliant. Therefore, it makes it a great investment when we get back with Jake Lou on this week in startups.

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All you have to do is go to gusto.com slash twist. that's G-U-S-T-O-com slash twist. Welcome back to this week and startups. Our guest today is Jake Lou from Outer and you can visit them

at L-I-V-E-O-T-E-R dot com. Sofas are pretty affordable. What is a, you know, a sofa set-up cost typically? So our three-seater sofa is about $3,500. So it's not a cheap product in any sense, but there's a lot of value

if you shop at restoration hardware, if you want to get non-disposable furniture, like we mentioned earlier, where you have to replace every two years, we warranty it up for 10 years, right? It's a very, very worthwhile investment because one, it's going to last you 10 years and two, you're going to be using it every day instead of, you know, once every two weeks or something like that. Yeah. And so it's not the cheapest, but it is the best. And it's going to last for a long time and you can feel good about it because it's using

sustainable materials and building. But you came up with a really good idea for showrooming and for your go-to-market. Explain your show-rooming idea and how that's worked in practice. Has it actually worked? And if so, what percentage your sales are driven by it? Yeah. I mean, the punchline here is it does actually work.

Okay, good. Explain what it is. Yeah. So our concept that you're alluding to, Jason, is called Neighborhood Showroom. And so you can't really, understand it as Airbnb meets retail, right, where instead of our customers going to a furniture store, you are going to an actual customer, a real customer's backyard to experience a product in

person. And so, you know, we launched this concept in May of 2019 along the launch without company. And in the beginning, we were really just doing pilot tests in LA. We were asking, are people crazy enough to list up their, you know, backyards on a, on a website? site. Turned out, yes, a lot of people were really interested, mainly I think because, you know, potential visits don't, they don't even have to go into your living room, right? Typically, you have like a back entrance or like a side gate. And people really enjoy just meeting their neighbors and, you know, connecting over their shared love of outdoor living. And it really provides potential customers away, especially, you know, for DTC brand like ours, you know,

who don't have distribution and retail footprint to. then, you know, leverage their five senses to see, touch, feel the product in person before them making their purchase decision online. So fast forward, you know, two years, almost two years now. We are in close to 500 locations. Since, you know, since I pitched you, Jason, and I think in August, you know, we probably double that number. And then we are on, on track to double that yet again to hit a thousand showrooms, actually well before the summer. And we, we hope to emerge as the number one and the biggest crowdsource retail platform in the U.S. What, do they get a percentage of every sell they do? So is it become like a business for them?

Or do they just get a discount on when they do the showrooming? It's a good question. Everybody asks that. I think, you know, it's really easy to draw analogy to MLM models, right? Like the Herbal Lives and the Hamways and the Maricades of the world. We were really careful in the beginning to not cross that line because that doesn't provide the best customer experience, right? It's really pushy and it's kind of awkward. You're inviting your friends, but you're trying to sell them something. So to answer your question, no.

We don't pay commission. We pay a flat fee per visit, anywhere from $20 to $50, depending on where you are, your availability and all of those components that we have built a system to qualify. And it's really just paying for your time and your space. Got it. So if somebody comes and looks at it, you just give them $20. You send? Yeah, exactly.

Yeah. So it doesn't matter if you buy or not. Yeah, we give them the flashy. So what is the most number of visits somebody's had in a week? Has somebody had like 10 visits in a week and, you know, or five? That's a, yeah, good question. I got to look it up. I think probably 10 is about the right number, right?

Like, we don't intend to turn our homes, like our customers home into retail stores. I think the neighbors who start complaining, like, people just go in and now in parking, right? It's meant to be a very flexible, like very at will, you know, like meeting something. someone, yeah, they have to go through the scheduling process and they can vet each other. They can communicate beforehand. If people book like Rover, for example, like dock sitting, it's kind of like a very similar experience because you have to find out like what time you want to go, right? It's not like Airbnb where it's just like dates because you're just going to be there for 15

minutes. So, yeah, so they host that. I'll be it, you know, during the pandemic, we've paused the physical visits because we definitely don't want people to feel uncomfortable and we don't want to be. reliable for that. And so we pivoted into kind of like a virtual format where, you know, yes, you can't go and physically see touch and feel. But the one thing that a lot of our customers really care about is answering this one top line question, which is, will the outer sofa work in my city, right? You name your city. Because you're in San Francisco. I'm in L.A.,

you know, someone else may be in Maine and New York City, Miami. All of those places are very different. And so all they want to know is, okay, this clearly works in California, because you're a California company, but does it work in the humid environments of Miami? I want to see if my neighbors have it, right? And so even if it's virtual, it kind of answers that question is like, okay, wow, there's a lot of showrooms near me, and it seems like the product works well.

And I can talk to the host, in this case, the customer, and to get their candid feedback over the phone call, text, or email. So the pandemic does impact this? How does the pandemic impact? building and shipping and inventorying all this product because I've heard that, and I don't know if it's true, but during the early days of the pandemic, supply chains were obviously impacted,

but that seems to have been worked out in general. What's the state of manufacturing, I'm assuming you're manufacturing in China? That's right. So my family factories is in China. And yeah, so in, I think in, if you remember, China got really hit really hard in December, January. So December 2019.

and January of 2020. And so there was a pause of manufacturing around like February or so, but it quickly resumed, I think, by the end of March. What followed was really some back, you know, backed up, you know, ocean freight and logistics. Here's stateside and actually just between China and the U.S. But, you know, I think all things consider, things are back to normal except for the ocean freight part. apparently, you know, a lot of containers due to COVID, rampant COVID here in L.A.,

specific to L.A. Long Beach port, all the containers got backed up and you just can't get the empty containers go back to Asia to get more stuff out. Oh, that's fascinating. Yes. And that's always been the problem is getting all of those empty containers back. And Long Beach is the largest port in America, I believe. And it's one of the largest in the world, I mean, not compared to China. and people are spending more time at home and people were moving a whole bunch during the pandemic. I'm guessing people being at home

and people spending more time at home and people wanting to spend more time outdoors because the virus doesn't spread outdoors as much would be like three different factors causing your sales to spike. Number one, people are spending more time at home, Number two, they need to spend more time outdoors. And number three, they have more time on their hands because there's less to do, right?

Then you can, that should translate in some way to either watching more Netflix or doing more shopping. So did sales boom because of the pandemic? It definitely did. I mean, we, we noticeably saw, you know, a huge spike in from, from March to May, kind of like in the beginning when the, one of the, one of the, like when San Francisco ordered the shelter at home and then LA ensued and, you know, all the cities that followed. And yeah, it's due to those reasons that you mentioned. Also, like the e-commerce penetration, you know, have gone from what, what was it, like, 13% to like 27% in the matter of three months. It's like five months of e-commerce,

five years of e-commerce penetration, like that happened over five months, right? And so that's definitely to win, as well as our retail competitors. the pottery barns, the R.Hs of the world are shutting down their doors, right? And so all of those factors. And if you look at like Home Depot, right, that's just a good indication. People are trying to do more DIY, remodeling the backyards, and they're just trying to make their home more of like a safe haven and, you know, so more comfortable and all that. So we definitely benefit from all of those tailwinds. Yeah, that is something that specifically happened, you know, in Los Angeles, I noticed that when I lived in New York City, Manhattan and Brooklyn, there was a big focus on going out, right?

You had small apartments and you went out, much like living in Tokyo or Paris or other places, London. It was more about what you did when you left your house than when you were at your house. Your house was for sleeping and taking a shower and maybe storing your clothes and everything else occurred outside of your house. But when I moved to Los Angeles, I was shocked that people had screening rooms in their house and multiple seating. areas outdoors and a guest house and a gym in their house or converted their garage or one of their parking spaces into a gym. Everything was about staying home. And that's one of the things that during the pandemic, I think, has spread as a trend across the entire country and perhaps the world, I don't know, but in America, seems like people are like, wow, I need to have a compound,

like even a mini compound, like turning your 2,000 square foot home into a compound so you can have an extra office and clearing out the garage and putting two desks in there or whatever. Do you think this trend sticks with us after the pandemic wanes and you have insight into China and what's going on there post-pandemic? Or do you think people go back to cities and city life becomes, as it always was? Yeah. Answer that question when we get back from this quick break on this week in startups. Do you ever wish you got to invest in these incredible IPOs in 2019 or 2020?

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Welcome back to this week in startups. Jake Lou is here. He's from Outer. I'm an investor. Got to put a little bit of money in. I squeaked into that last round. You can go buy a bunch of Outer stuff.

It's incredible. Live Outer.com. L-I-V-E-O-T-E-R.com. I do not have a show-room at my house, so don't show up in my house. I was thinking about it. I invested in this company right after I bought a bunch of outdoor Italian furniture,

which cost twice as much. And I'm just kicking. myself because it's just not even as good. Before we went to break, I was asking you about, do you think people are going to be going back to City Live and you have a bunch of insights into China? You grew up in China, correct? When did you? Yep, I was born and grew up in Shenzhen. Oh, in Shenzhen? That is so funny. I went to Shenzhen in 15 years ago, 2005, maybe, to ask my wife's dad if I could marry her. And he was in Shenzhen. And going to Shenzhen in 2005, there was only

one hotel really and we all got there and the place was completely under construction there would be five blocks of just empty parking garages and then a 20-story building then two blocks

and then a 30-story building and everybody went to bed that night we got there and I couldn't sleep so I just went downstairs and I was like what can I do and there was an amusement park and I went to it

alone. And there were a bunch of school kids there. I was the only white guy there. And all the school kids who had come from the north down to Shenzhen had never seen a white person before, an American. And they swarmed me to take pictures and wanted to touch my hair and like stand next to me and we're smiling. It was, I mean, talk a little bit about how Shenzhen, which was the first autonomous economic zone. Is that how they referred to? Yeah, you got it.

Yeah, it was the first autonomous. So what was growing up in Shenzhen. unlike and what has Chen Zhen turned into this city north of Hong Kong? What is 90 minutes north of Hong Kong? It borders Hong Kong. It's connected by bridge. So depending on, you know, from downtown to downtown, yeah, you can probably, you know, be there in 90 minutes.

Yeah, I mean, Sunjin is, I think, is dubbed the fastest growing city in human civilization, right? Yeah. And it's kind of amazing to think that even in early 90s, it's just a fishing village. And what happened was, yeah, so the Chinese government dubbed it as the autonomous economic zone where there's more free trade. And it does border, you know, the Pacific Ocean to the south part of China, border in Hong Kong as well. And so, yeah, I mean, I moved to Shenzhen. So I was born in actually closer to Shanghai, so like the southeastern part.

But I moved to Shenzhen when I was maybe like five to attend elementary school. when I was there, you know, it already was pretty modernized. I think it's probably the most modernized city in 1995 with skyscrapers, people were driving European cars. And I remember like- Shang, no, no, Shenzhen. Yeah, it was the most American, except for Hong Kong maybe. Probably, yeah.

Of mainland China. Yeah, it was like two years before Hong Kong returned to China from the British rule. So a lot of it, yeah, was kind of like mimicking Hong Kong. and yeah I mean I went to elementary school there just seeing skyscrapers literally going up every weekend it seems like you know it was pretty crazy the tallest building in China man-made lakes like the overpass I mean I think there was just like an overpass it just appeared out of nowhere in front of my home like you know over a weekend you know it's just like just crazy stuff like that and I love Shin Zhen in 2002 and I went back you know a few times but every time I go back like just like just cannot It's like they layered another city every time you go back, right?

Yeah, it's like it goes vertically. It's population since I went there has doubled from 6.5 million to 13 million, 2000 to 2020. I mean, it's pretty amazing. It's a fun city too. I mean, now it's a lot of good food. It's a lot of fun.

The nightlife is great. Food is amazing. It's kind of like an immigrant city like L.A. Like a lot of people just go to Shenzhenjans for, you know, opportunities. You know, like Foxhans over there have like 60,000 employees in their compound over there. And so it's, and obviously, Tencent, all the technology is kind of like the Silicon Valley

of China, right? Yeah, it's a very cool. And then north of it is a thing called Mission Hills Golf Club. And I've told the story before on the pod, but have you ever been to the Mission Hills Golf Club north of the city? I have not. So my father-in-law takes me there. And the owner of Mission Hills is his friend.

and we have this like incredible, you know how they do, you know, a dignitary dinner or lunch in China, you know, like bringing out all this incredible food. Multi-hour event. Yeah, and we're, and we're, you know, hitting golf balls. And I asked him like, what, how did this become like a golf course? And he said to me, oh, like, you know, Yosemite?

And I was like, Yosemite, I don't know what you mean. And he's like, in America, like Yosemite, like, I was like, you mean like a national park? He's like, yeah, this was a national park. I was like, how did it become, it literally is. a 12-course golf club. So there are 216 holes. And I think they had five or six courses at the time built out. So they're now up to 12. So imagine 216-hole golf course. In other words, it's 12 golf courses put together into one club. And he said, yeah, you know, I used to run the park, the national park, and then they transferred into this crazy, huge, you know, golf course.

It's something to see. The scale of things in China is just insane. So, people in Shanghai, people in Chezhen are back to normal life, correct? Yep. As of I mean, June of last year, people were back to work, you know, people partying already. I'm seeing all my friends in Beijing. I think it's spiking up a little bit because of the winter over there, but yeah, I mean, for all intense purposes, back to normal life. Wow. And so they've just figured out a way to track and trace, right? That's how they solved is everybody has phones. If you have an outbreak and do they test everybody constantly at parties or at jobs and factories are they doing like mass testing how did they get control of it do you think yeah i think it was the really

swift action in the beginning by the the central government but but probably the local governments to to basically contain the the spread um there was like a very strict lockdown if you remember in wuhan right where nobody can leave the city and i do think it's that really intense uh you know like lockdown that have opened up the city. I think less than five months after its outbreak. And so, yeah, I mean, I mean, there's probably like a philosophical debate here, you know, whether it's like safety and freedom. But I can tell you that, you know, all my friends in China are pretty happy that they

were locked down for a few months and now they can enjoy normal life, whereas, you know, we're kind of locked down here still. But hopefully the vaccine can take hold. Yeah. And the two countries that are doing the best jobs with the vaccines. or the three, China, United States, and then Israel, Israel on a percentage basis, but on a raw number basis, both China and the United States have done over 10 million vaccinations at the time we taped this in the 13th month of 2020, January, 2021.

And we are now doing 700,000 a day, which when we hit a million, two million a day, we'll be having 1% of the population, basically getting on the other side of this. So it feels like this could come back, but they're all back to normal life, we'll be back to normal life. and then we'll see what the trends are moving forward. But it's been very weird. Some companies in our portfolio have done dramatically better during the pandemic. And in some cases, because the pandemic, you're obviously in that bucket. How have you dealt with hiring people and how do you look at running the company now that you basically have raised all this money and had this massive growth spur in a pandemic where you can't meet with people and have a central office?

I assume. It's probably the number one thing that I'm thinking right now as we, you know, close the funding and we're in massive hiring mode. And, you know, look, we scaled from 10 to 30 people in 2020. And I haven't met most of my team members in real life. So, yeah, I mean, I would say that, you know, one thing for us is that my co-founder, Terry, he's actually in San Francisco. And so from day one, we developed this remote work culture.

So we worked really well across Zoom and Slack. And so that actually was a pretty natural transition for us, even when we started working from home in March of last year. But I, you know, onboarding people, interviewing people. It's all done through Zoom. I mean, if we could, we do like a social distance meeting in LA. But one thing that's positive out of this is that we now have, I think, two team members out of Tennessee, you know, a couple people from the Bears.

a person from San Diego, we have two, three people in Argentina, we have two people in China. So everybody feels, even though they're remote, but everybody feels like they're under the same roof, right? Because like, even if you're in LA,

you're meeting over Zoom. So. Right. See, that is the key. If everybody has to be, on Zoom, we all have the same amount of screen real estate.

When you're in that gallery view and, you know, it's whatever, three by three or, you know, four by four, however big your organization is, everybody gets kind of the same amount of real estate.

And so it does create one class of employee, of team member, as opposed to when you had the headquarters folks or the folks who were in the main conference room, but then everybody else is dialing in. The people dialing in are kind of forgotten about, right? Like they're kind of like, yeah, second class citizens. They're not, you know, in the halls of power sitting next to the CEO or the CFO or the chief product office, wherever it is. And yeah, now everybody.

But you're able to hire faster, right? Because you're not looking for people just in Los Angeles, the concept of this horrible discussion you had to have about the commute and the hours people work and people saying, oh, my God, like, I got a commute. And do I really want to take, I'm down in Redondo Beach. Oh, I'm in Venice. Oh, I'm in downtown L.A. Do I have to come to the office?

This whole uncomfortable conversation goes away. When we get back from this quick break, you're an active angel investor. I want to understand how you balance angel investing with running your company. congratulations on being in Steezy, one of our great companies as well, the dance company. Ghost Easy. Yeah, Ghost Easy.

They're crushing it. What do you get out of it? And then how do you keep it from becoming a distraction? We get back on this week in startups. Why is SOC2 compliance critically important? You hear it all the time. Sock two, sock two.

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On average, the Vanta customers get their SOC2 compliance in just two, three, four weeks. Compare that with three, four, or five months without Vanta and you understand why everybody's going crazy about it. I just had a twist listener, John, email me. He's got the drone startup, Kitty Hawk. You may have heard of them. They're very famous. And he says Vanta was essential in helping them get SOC to compliance up and running. And he loves their tie-ins to Google, Slack, GitHub, and AWS, which are all essential

apps that run Kitty Hawk's awesome business. Vanta, again, is giving twist listeners a $1,000 discount on their subscription right now. And I know many of you take advantage of it. V-A-N-T-A-com slash twist, Vanta. Vanta.com slash twist for $1,000 off. Okay, let's get back to this amazing episode. Welcome back to this weekend startups. Our guest today is Jake Liu from Outer, go buy a sofa at liveouter.com,

L-I-V-E-O-T-E-R.com. I don't get a commission on it, but I am an investor. So my beak has been wet. Your angel investing, tell me, how did you get into angel investing? And then how often do you invest? How much time does it take for you? And then how do you balance it against running your own company? Yeah, so I am a very amateur Andrew investor.

I got a little bit better after reading your book, which is, as you can see, it's in the background right here. And I got into it, it's probably just serendipity. I think Steezy was actually one of the first deals that I did. And it was brought to me by Vince, who you know as well, who sits on the board of Steezy. Yeah, Vince Thompson. And it was when they were just, you know, a team. of four, I think, and they were, I think, at 20,000 MRR, kind of very early. And now, as you know, they've skyrocketed.

Incredible. And I just was just really, I think I just got done building my previous company, and I really loved their passion. I mean, I think Evan, CEO, was a developer at another company, and then the Connor, the co-founder CMO was working in a marketing agency and but they were both passionate, you know, hip hop dancers and they were like in a professional team that won awards and stuff like that. And like, just hearing them talk about the business, like there's nothing else they would be doing with their life besides building Stizi.

Like it's their life's mission. Even nobody funded them. That's what they would do. And I was really moved by that. And I, you know, I was like, well, I don't have a lot of money to invest, but how can I, you know, get involved? I mean, this, this energy is infectious. And I think that's how I got.

into into investing. And I think that philosophy of just learning from, so I'm learning a lot from Evans and Conner, even though we're in different, you know, kind of like spaces. But it's just that cross-pollination of ideas. And I tell them that, you know,

hey, I'm not going to, I can't write a big check, but I can talk to you as a founder. I'm in a trenches with you. Yes. In a lot of cases, maybe only a few months ahead of you, if any.

And, you know, you can be really candid with me. I'm not in it for financial reasons necessarily. I really just want to learn. I want to, you know, help out. And so I think it's been, I don't think it's been a distraction in the sense that I really do appreciate like cross industry conversations.

And it just doesn't, it kind of broadens my horizon a little bit, kind of learning about like logistics and in the world of B2B in the world of, you know, in the case of a recent startup that I invested in, property real, you know, property, real estate and tech and all of that, which is actually related to outer what we're doing, right, because we follow the real estate market. So I'm just really doing it. I think it's a superpower to fuel my own thinking

about how to build my company better. Anyway, so that's probably like a long... How do you keep it from becoming a distraction? I mean, the fact is you're writing small 10, 25K checks, I take it? Yeah, so I don't necessarily... There's not that much skin in the game. There's no due diligence necessarily.

I'm usually... Obviously, I'm not... leading, right? So, like, I'm following another investor. And, uh, and I really just meet the team. Like, I get to, to see them. And then usually the decision is made within like a couple of days. And, and if they will take my check, you know, that happens. So it's not, I don't actively seek out deals, right? It's just like, if investors come to me, it's like, hey, Jake, what do you think about this? You know, what do you, uh, you know, meet the founders. Um, I do that. And if I can participate, I do it that way. So it's quite passive. Let's talk a little bit about to the extent

you're comfortable with it. The relationship between China and the United States, sure. And you know, you have Sequoias in China. They're investing. Then you had Trump for four years seeming to be at odds with China and constantly deriding them and the Wuhan virus and things got really weird. And then we've spent all this time kind of integrating our two economies. And obviously you're kind of like the perfect example of this. You have Sequoia, China investing in a company based in California. The product is made in China. It's sold in America.

You are somebody who grew up in China, who now lives in America. Tell me what's your take on the relationship between these two great nations? Yeah, it's actually a passionate subject of mine. And it could be touchy, you know, because of politics and the environment that we live in today, unfortunately. But one of the things, I don't know if you've heard about it, Jason, is this, a theory called the golden arches, uh, theory. Have you heard of the Catholic? I mean, I know McDonald's golden arches. Uh, but the goal, give me the golden arches in this regard. Yeah. So it's basically the concept, uh, the law that no two countries that have McDonald's have ever

gone to war with each other. So another word to say is a capitalistic truce, right? So it's like two capitalist nations are less likely to go into war with each other. I like that is the concept that I think was inspired by the book, uh, uh, homo-hagin's came up with it I think I remember this yeah the golden arches area

conflict prevention once the economies become sufficiently integrated both costs of going to war and the amount of contact between the two countries

will increase yeah that makes that's right that's complete sense yeah yeah so in you know

in short war used to be the number one way of getting resources and that's why that's why countries go to war but if there's

really healthy commerce relationship then there's no reason to have bloodshed because you can get what you want by just trading, right? And so I am a firm believer in globalization. I do think that's the story of human civilization. It's just the story of globalization as we go from our tribes to villages to cities to countries to then earth, right? And so having been someone who grew up born in China and deeply ingrained in that society,

my wife is from China as well and really receive education and you know have my career here in the US I feel like I owe both countries and both societies a lot and I feel but if you ask me are you a Chinese person or

American citizen? First of all I'm American citizen by the passport but I think of myself more of like a global citizen as in you know I travel between the two countries a lot I feel like two countries have things right and wrong. They have strength and weaknesses. And so I do think it's all about how do you have the two of the most powerful nation, the biggest economies, kind of exist in harmony because there's no other way, right?

Because whether you like it or not, it's the two most impactful economies in the world. And so all of that is to say, you know, I really want to, one of the things that drive me at Outer is how do you bridge the gap of understanding, you know, between the two peoples. about each other. You know, the concept of mating China used to be derogative because it implies cheaply made goods. Yeah, you used to be Japan was like high quality. China was bad quality. Now China is, yeah, transcendent quality, right? Like, unbelievable. I mean, our iPhones are made there. Yeah, and I think a lot of them misunderstanding. And they built the Tesla giga factory in like six months. Yes. It's incredible, the speed at which they can go. What do you think are the things that Americans don't

understand that are virtuous about China, the Chinese people, the way the country operates. And what do you think China gets wrong about the United States? Having, you know, you are the golden arches yourself, right? And your family, you're the perfect manifestation of it. What does each country and people not understand about the other that they should understand about the other? That is, they can learn from each other. Imagine someone who grew up in a very affluent community, right? And they have a wealthy upbringing and they have all the resources they want. They got a really good education.

And they met someone who struggle through, you know, their youth and their childhood and maybe come into, you know, making some money. And, you know, when they talk to each other, you know, it's easy for the former person to look down on the other. I think China, you know, I think it's important to keep in mind that China even, like said, like, Shenzhen in the early 90s was a fishing village. This was 30 years ago. Yeah. I was born in 1989, you know, so it's almost that time. So it's like China just quickly risen to the number two economy in the world. And so there are a lot of things that they

don't have the fundamentals of, you know, like the American economy. And that's built through generations, right? And so I do think, you know, you ask me what American people get wrong about China, it's that I think at the end of the day, people just want better lives for themselves, for their families, right? I think that's a universal value. And, you know, we won't talk about governments here, but like just the people, I mean, there's no, I guess, like, bad intentions, I think, in both cases, but it does, you know, make sense to think from their perspective of, like, what was your upbringing like? You know, in my case, I didn't grow up in a very affluent family and I witnessed kind of like the transition of a country that was looked down upon

up to global economy. And so, but the negative of that is that now that China is, you know, a big economy, then we as Americans probably, you know, asked them to do a lot of things that they just can't do overnight, right? Like environmental issues. LA in the 60s and 70s, it was one of the most polluted cities in the world. and then they were able to clean that up, right? China, I think, and India, actually,

were, I think, the two of the countries that made most environmental improvements in the last five years or something, they planted most trees, green grineries, they're now able to start investing a lot more into that. And so the growing pain, right? It's like if you have to go through industrial revolution again, like you have to, yeah.

Yeah, no, I think we're very quick in the United States to look at the growing pains of another country and say, hey, you should be where we are by now. And then other, we don't take a minute to say, well, how long did it take us to get to this level of democracy or how did it take us to get to this level of environmental awareness or worker protections, whatever it is? There's incredible documentary that I saw a decade ago called Last Train Home. I'm sure you've seen it. Have you seen it last train home? I have not.

I got a, well, I mean, it's going to confirm a lot of stuff you already know, but highly recommended for folks, because it talks, and this is obviously very dated now, because a decade in China. time is like we're talking about here. It might be like 40 or 50 years of change that occurred in American time. But it's just about, you know, over 100,000 people going home for the new year in the spring, right? And all the factory workers would go back north to the farmland where they previously had worked and see their families and this idea of getting that last train home for the new year and then coming back. And what you, what I felt in that documentary, and listen, it's but one point of view was The middle class in China was reminded me very much of, you know, what I've heard about the middle class emerging here where the idea of getting to have a car or your own apartment or to be able to go to a restaurant or a club with your friends or have a vacation to, you know, a lot of Chinese would go to Australia, right, for vacation or to New Zealand.

like the idea of taking a proper vacation or being able to buy something you covet like a handbag or a car. It was really meaningful for people, right? And we forget that many of the people who are going to work in these factories, we're concerned about them. But a lot of them were like, wow, this is a lot better having this apartment or even living in a dormitory. Well, this dormitory has heat and running hot water. And they show like people were literally coming from farms that had a spicket for a village of cold water for everybody to share. right? And no heat. Like this is an incredible change in lifestyle, an amazing upgrade of going from living, you know, in a very rural setting with very little resources to living in a very

modern lifestyle, right? Yeah, totally. And, you know, I think if, you know, if Korea and Japan, which you mentioned were any indication, even Germany, many people didn't know that in the 20s, Germany, German engineering wasn't known worldwide as the epitome of engineering. It was a group of engineers that came together and said, we want to change that, you know, for the better. And Japanese electronics in the 60s, they were looked down upon, right? And now they were considered kind of like disposable, right, before Sony. Sure. Yeah.

And Korean cars, right? It's another good example with Hyundai and like IKEA. Yep. I think, you know, the next decade in 2020, whether we like it or not, you know, Chinese manufacturing, Chinese made goods are undergoing the same sort of transition transformation from this cheaply made goods to something that's high quality and that's, you know, they have differentiated products and offerings innovation, right? The idea of us copying, even the tech world, that's a perfect example.

It used to be China copying everything from the U.S. And there is now the reverse, which is true, is TikTok, take for example, right? Like the Silicon Valley is copying from China in a lot of ways, especially in the consumer tech world because it just iterates so quickly in that market. And so I do think there's still a lot for the two countries to live. learn from each other. Industries in general, and that's one of the core reasons why we raised partner web with Secure China is because we have so much to learn from China. And, you know, I do think that the bridge between the two countries, you know, if I can be a small part of that

and make a very, very tiny dent in improving understanding, especially in the tech world, you know, that's, that will be my, my mission, yeah, for, with, without her. Yeah. And if you, if you just look at the average hourly salary of a factory worker in China, you know, it was under a dollar up until, you know, 2006 and then quickly went to $2 in 2010. I'm not sure at the hourly rate of a factory worker in China is today. I think it's $4 or something. Do you know? It's about like, I don't think there's like a minimum salary, but it's definitely like in

the $4 to $5 range, if not higher. Yeah. So it's really changed over time. And that means that other places, whether it's Sri Lanka or Vietnam or other countries, are actually now India, Pakistan might be cheaper or competitive, right? They are. Yep. They're cheaper. And they are cheaper.

And that's why a lot of manufacturing, including tariffs as well, that's why a lot of manufacturing is going to Southeast Asia. And so Chinese manufacturers, including my cousin's factory, they know they can't just compete on labor cost. It is about innovation. It is about creating better products. They have to go through that manufacturing upgrade. that's fascinating when you think about it. Over 30 or 40 years, China has gone from being the cheapest to nowhere near the cheapest,

and they now have to compete on something, move up the stack, right? So innovation, quality, brand, they have to add something more to the table. This is the story. If we were looking at the country, if we looked at the planet as, you know, an ecosystem, as you were saying,

one people, all moving towards some goal. It's almost like each country kind of gets an operational, to take this work and ride it to a better outcome for all their citizens, right? And I think that's something that as politicians fight over stuff, we can take the win of people, the number of people living in poverty is going down in the world and the quality of life and the average salary is going way up. We may not feel that in America. We may not feel that when we're on Instagram and we're comparing the best moments in a rich person's life to, you know, the everyday moments in our lives, it may feel like a big, a big disparity.

But in fact, it's the entire world is removing people living in abject poverty, people living under a dollar a day. I think it's under a billion people now are living in abject poverty now. And in our lifetime, it'll go to zero. We're close to it. Yeah. Which is just amazing to think about what capitalism has done. The idea of people living for under a dollar a day will go away.

It is extraordinary. We can take that win In this messy process We can take that win All right In terms of Chinese food Can we talk about Chinese food for a minute? Totally

Roast pork Peking duck Shanghai dumplings Roast whole pig Go ahead and rank for me Peking duck roast pork Or the other two I was going to go with the

I was going to go Shanghai dumplings And then also The whole roast pig You know when you get the whole roast pig As opposed to just the roast pork The whole rose pig would be like very, it's like you don't get that anywhere, right? It's almost like a feast, like some sort of events. Yeah, I got that in Hong Kong.

Last time was there where you take the skin off of it. Oh, oh, the Hong Kong, yeah, the honeysuckle, like the roast peak. That one is what I'm talking, the honey's side, right? Oh my God, yeah, yeah. It's really hard. I mean, why not get them all? I mean, you can get them all in the Singapore Valley here in L.A. Exactly.

You know? So you went, but your Peking duck was number one for you. And then Rose Park. Picking duck, yeah. Yeah. Yeah. See, me, it's the same thing. Peking duck is my number one.

And then we now have that, what's the Taiwanese place? Ding Tai Fang. Deng Tai Fang, yep, it's a chain. Ding Tai Fang, yeah. Is in L.A. They're in L.A. at the Century City Mall. And then there's one here. And then obviously they're in Vegas, I think.

Now they opened up, DTF. And then they obviously came out of, I think, Shanghai, right? We're no Taiwan. Man, they have some really great Peking Duck and roast pork. Incredible. All right. Well, listen, I look forward to meet you in person. Go ahead.

Likewise. Next time maybe we can meet at one of my favorite Peking Duck restaurants in LA. Well, we should do that. Which one? Which one is your favorite? So it's called the, I don't even know the English name. It's in San Diego Valley. Uh, San Gabriel Valley. Yeah. Yeah. Where the restaurants don't have English names, that's why you know. It's authentic. That's when you know you're at the right place is when there is literally no English. Like you can't find it on Google. Yeah. Yeah. Yeah. But it's a really, if you haven't been to the San Gabriel Valley, Chinese food scene, it is, I mean, big dim sum scene, big lines. You think better than China.

You know, I agree with you about Korean food as well. With the exception of Korean soups, which I will say when I, or the ja jam yang or like noodles in, I think the noodles and soup in Korea were better than in Ktown, but everything else were as good. but because of the quality of the beef on average and the quality of meats and produce here in the United States is just so world class that if the right chef comes from China or Korea and uses the ingredients here, they're just going to be... It's just hard to get high quality ingredients, right, in Asia?

Yeah, that's right. Yeah. Yeah, the meat quality is just so great here. All right, now I can't wait to come meet you in person. Thanks for including me in your journey as an investor in continued success. And I like the book you have on your shelf there. That's a good one. Thank you.

Personalize that book for you. Did you put that book out for me? Yes, but it is definitely one of my favorite books, you know, of 2020. Yeah, so it's on my shelf for sure. Yeah. Thank you. All right. And thanks for doing Remote Demo Day.

People were just super stoked. You were, I think we had five or six times the demand for your deal. Then we had allocation. So hopefully we'll be able to. to put more money in for members of the syndicate.com the next time Jake raises money. It was such a good experience, so thank you for inviting me to that. It was really good.

I mean, I pitched on Shark Tank with my co-founder the year before, and I had the same kind of adrenaline rush for that event that you put together. Oh, that's great. Yeah, and I loved it. I loved doing it. If you're a founder, just go to Remote Demo Day.com. We're doing it 10 times in 2021. It's now become like...

Howdy recommended? Yeah, it's become one of our great deal flow tools is just we just ask that anybody who we have a remote demo day be actively raising and give us a modest allocation so that we can not leave the people who come to it high and dry that you're not raising money, but it's been great and it's free. So if you're a founder, go to Remote Demoday.com and apply. All right, Jay, continued success and we'll see you all next time on this week in startups. Bye-bye.