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Podcast

Advice Line With Serial Entrepreneur Marc Lore

How I Built This with Guy Raz

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  • Diapers.com Acquisition
    • Marc Lore founded Diapers.com, which was later acquired by Amazon for over half a billion dollars.
    • Despite the successful exit, Lore had mixed feelings as his vision for the company was cut short. Transcript: Guy Raz Mark, welcome back to How I Built This. Thank you, Guy. It’s great to be here. So you were first on the show back in 2021. And we, of course, heard about how you founded diapers.com and then jet.com. And if I remember, you got the idea for diapers.com back in the early 2000s when you had young kids. And even though margins on diapers were pretty razor thin, I think at one point I remember an investor had said to you, you were selling a dollar for 90 cents. Acquired by Amazon for over half a billion dollars in 2010, which was an amazing, but also I think you had sort of mixed feelings about that acquisition of that end at the time. I did. Marc Lore I did. We had a big vision for what we wanted to accomplish, and it was cut short. So yeah, it was, I mean, you would think after a sale like that, we made obviously a lot of money, me and my co-founder. But we said, do you want to celebrate? Do you want to go grab a drink to celebrate this? And we’re like, no. I’m like, no, I don’t want to either. So it shows you what it is to be a missionary versus mercenary. It was not about the money. It was about, okay, the dream is basically dead now. And (Time 0:04:31)
  • Jet.com and Wonder
    • After Diapers.com, Lore launched Jet.com to compete with Amazon, selling it to Walmart for over $3 billion.
    • Wonder, his latest venture, initially involved food trucks with full kitchens, but pivoted to a brick-and-mortar model. Transcript: Guy Raz That was sad. And for those who remember the episode, you went on to take on Amazon. After that happened, you launched another online shopping platform called Jet.com, which then sold to Walmart for over $3 billion four years later. And these were just amazing pivots in both of these stories along the way and well worth listening to. Somebody actually asked me recently, I went and spoke at a conference and somebody said, name five of, just off the top of your head, of the best entrepreneurs. And Mark, you were on that list. No question that I’ve interviewed. Oh, I appreciate that. In all the 700 episodes of this show. You are right. You were absolutely on that list. Before we get to our callers, because you are going to help us answer questions from early stage founders today, which is super exciting. I think maybe a year and a half ago, you were at the time were launching about to launch Wonder, which it was it was going to be a business where trucks like food trucks with full kitchens Inside would come out. You’d order food. The truck would pull up in front of your house and make like a perfect, you know, medium rare steak and perfect crisp french fries and deliver to your door from the truck. That has changed a little bit. (Time 0:05:50)
  • Pivoting and Risk Assessment
    • Objectively assess the risk of maintaining the status quo, not just the risk of change.
    • Be open to pivoting, even if it means admitting past mistakes, when you see a better opportunity. Transcript: Guy Raz It take you a long time to kind of say, you know know what, I’m going to let go of this thing and focus on this part of it? Marc Lore Yeah, I think, you know, this is what advice I always try to give entrepreneurs, but it’s sort of, you have to be truly objective about what the risk of the status quo is. Yeah. Because people, it’s easy to see how risky it is to make a change because there’s unknown. And people define risk as the unknown, whereas the status quo doesn’t feel as risky because you’re kind of doing it now. It doesn’t feel risky to just keep doing what you’re doing. But I recognize being objective that if we just kept doing what we were doing, that was extremely risky. So it made the decision to move into brick and mortar very easy, even though it meant going into the board meeting and telling the board, 450 trucks on the road and 30 million in revenue, We’re going to take that to zero. We’re selling the trucks. We’ll take revenue to zero. But being able to have conviction and know that it’s still the smart decision and that the brick and mortar had much bigger profitability potential, higher return on capital, like All the things that you would want. Plus for the customer, it unlocked multi-restaurant ordering, better on time delivery. The way I think about it is you have to have the mentality that you start off a startup and you’re sort of digging for silver, but you got to be on the lookout for gold all the time. And you might just see gold. And when you see it, you got to go for it. And it doesn’t matter what egg on your face. It doesn’t matter money you lost. Everything’s a sunk cost. It doesn’t matter what you told the board, what you told the press, what you told employees. You have to go after the gold. (Time 0:08:30)
  • Chomp Chocolate’s Pivot
    • Ben Bailey, founder of Chomp Chocolate, built a chocolate factory from scratch for $700,000.
    • Due to rising cocoa prices, he pivoted to a “build-your-own” chocolate bar model. Transcript: Ben Bailey Hey, Guy and Mark. My name is Ben Bailey. I’m the founder of Chomp Chocolate in Salem, Oregon. We are a cocoa bean-to chocolate factory doing the whole process, and we make vegan milk chocolate for everybody. Amazing. Guy Raz Ben, thank you for calling Chomp Chocolate. Okay. So you are a bean-to chocolate, and that means that you manufacture chocolate bars, you do everything yourself? Ben Bailey Yeah, I actually built a chocolate factory and didn’t know what I was doing, but figured it out piece by piece. And we do the whole process from roasting the cocoa beans to packaging the bars in the factory. And we do oat milk chocolate bars, peanut butter cups, and then we just did a pivot to build your own chocolate bar, kind of like a build a bear workshop only for chocolate. Guy Raz Wow. Okay, cool. And you’re in Salem, Oregon. Yes. And tell me how you did this. I mean, you have a chocolate factory, there’s machinery, it’s expensive. Most who start chocolate brands, they outsource it and they just kind of sell the chocolate, right? They’ll have the recipe. Tell me how you got into this. Ben Bailey Long story, but keeping it short, I’m an entrepreneur. Mark, I sold basketball cards when I was 10 years old, went to all the card shows, sold candy to kids on the bus, took their lunch money. Don’t feel great about it, but learned some moral lessons, mercenary versus missionary kind of stuff. Started two e-commerce companies in New York City, very small exits, took a little bit of time to get away from New York City and back to Oregon, my hometown. And growing up in a small conservative farming community, I saw that a lot of things have changed in the the environment. I came back to an orange sky because of the wildfires here on the West Coast. And I also had a little bit of a confrontation with factory farming of animals, and it didn’t really sit right with me. And I love chocolate. I have a sweet tooth. So I set out to create the best vegan milk chocolate replacement. So it’s not a compromise for people when they have the choice between our chocolate and traditional milk chocolate, that it’s an easy switch for them. And yeah, so kind of a big overreaction, but I had sold two e-commerce companies and put every single penny I had and then some into Chomp. Wow. I’m curious. Guy Raz So can you give us a sense of how much it costs to buy that factory? Ben Bailey So I put $700,000 in is everything I had and that got us open. So basically from a concrete box rectangle, I kind of sat on the floor the first day, documented it on Instagram, and then learned everything from antimicrobial floors to shatterproof Bulbs and the whole process. Bought the equipment. A lot of ups and downs just to get open. And then we opened September 21. Okay. And so now you make chocolate bars and you sell. Guy Raz So first of all, I want to get to this other Build-A side to it. But do you sell chocolate bars to consumers or in stores? Yeah. Ben Bailey So my wheelhouse is direct-to online, so that’s kind of why I took the plunge into building a factory. And I knew I could kickstart the company with email marketing, paid advertising. So about 70% of our business is currently direct-to and then about 30% is wholesale retail. We’re in about 400 grocery stores-ish right now. But yeah, we did $400,000 the first year we opened and then 750,000 last year. And this year we’re set to do a million dollars. And 70% of that’s coming from e-commerce. So. Wow. Guy Raz And, and so you, and now tell me about this build a bear model here. You’re. You can build your own chocolate bar? Ben Bailey Yeah. So back in March, cocoa bean prices just went through the roof. 70% of the world’s chocolate comes from West Africa. We actually don’t buy from that region because of some ethic issues. But a lot of the bigger companies that usually buy in West Africa, they had crop failures, which drove the prices up. So we had done something at the chocolate factory a year before where we invited the community to come through the factory and build their own chocolate bar. There’s nothing like it. It’s so much fun. You get to pick all your mix ins, you get to name your bar, choose your wrapper. And I thought, what if we could take that online and went on a deep dive through Build-A Workshops business model. And they do it online too. And it actually performs very well. And so now you can go on our website and we found a way to kind of like, you know, offset the margins we lost during the cocoa bean crisis until either, hey, maybe this is a permanent pivot We take, or maybe we go back to the other stuff, or maybe kind of a combination of both. Guy Raz That’s cool. I’m looking at your website now. And I kind of want to do like a gummy Swedish fish chocolate bar. It sounds really delicious, actually. I think it’d be like a chewiness. All right. And tell us what’s your question? What question you brought for us today? Ben Bailey Yeah, so my question is, you know, this is definitely my mission era of my life with this company. And my initial goal was to get this out into grocery and retail. And that’s proved to be a super crazy challenge, especially doing the whole process and not using the co-packer since we are, you know, doing every part of the production and fulfillment And marketing in-house. So I’m wondering if I should, even if cocoa prices come back down, if we should continue and lead with this build a bar model. It’s doing really well. (Time 0:10:28)
  • Focus on Unique Offerings
    • Focus on unique offerings like customization instead of competing on commodity pricing.
    • Highlight the quality and process of your product to differentiate yourself. Transcript: Guy Raz And so I’m wondering what the best option for us to do is. All right. Let me bring in Mark Laurie. Mark, you don’t have to answer Ben’s question just yet. You may have questions of your own, but please, let’s bring you in. Marc Lore Yeah, sure. Sure. I do have a couple of questions. Nice to meet you, Ben. Very cool what you’ve built. I’ll have to try it out. Who is your primary competition in sort of the vegan chocolate bars. How do your costs compare? Ben Bailey Yeah, our primary competition, I’d actually say now is mainstream chocolate, because like, some of the bigger companies launched plant based versions of their chocolate. We is unreal a competitor, I would say unreal is, they’re not strictly vegan, though. So we’re like, I think we’re one of the primary only vegan companies, which i’m not sure how much you know of a difference that makes to people what we’ve noticed like with distribution Is um taking a chance on a smaller company um even if our quality in my opinion and our taste is better and we we have um more of a special process they’re still only going to carry the big Companies that put out that version uh like hershey’s even hershey’s does a an oat milk they do yeah they put out like a little bit after we launched our peanut butter cups are the best Seller for us and they they launch plant-based reeses too we’ve also had to say no um to like a lot of big stores uh like over 2 000 stores in the last year because you know i can’t i have the Factory and the production equipment and technically we could produce more chocolate, but funding another crew and then the purchase orders that are 30 to, you know, net 30 to net 90 Is just really difficult. Um, and we’re doing our own fulfillment too. And it’s, it’s been a, I’ve raised a little bit of money, friends and family. Um, um, but I feel like build a bar might be a way to, this higher margin model that funds the backside of the business. And we can kind of take control of our own destiny, being primarily an e-commerce business. Marc Lore Yeah, I personally, Ben, just hearing your whole story, I mean, it’s going to be difficult, I think, to compete on a commodity basis, doing it yourself. It’s going to require a lot of capital. I know I’m pretty close with some of the big manufacturers, and they’ve invested hundreds of millions, if not billions of dollars in plant and equipment to get the cost down. And I’m not sure just the higher quality on a commodity basis that people are going to pay that much extra to get vegan chocolate. I think the way you’re set up, though, you can do what no one else can do. There’s no way a big company can do the sort of build-a type approach in chocolate. And so you could really own that market. And you have the ability to be so much more flexible, and your system’s built for flexibility. And that flexibility will give you margin pricing power, right? And people will pay for it. It’s gift. I think the market for Build-A chocolate is still massive if you owned it. So if I were you, I would push that hard and see how big you can get it. And then you could always move into other areas if you start to tap out. Guy Raz But I think you’ve got a long runway there personally. Essentially customization. And I should mention, when you build a bar, you get a customized label. You can put your name on it. You can do all that stuff. Incredible. Incredible gifts. Ben Bailey A lot of business-to opportunities too we’ve seen. And Mark, I think you’re right. Competing with this commodity level, I think i know guys talked about this too is you kind of find out what consumers care about or at least what they’re willing to to pay for and unfortunately Some of these mission-based things um and i don’t blame the consumer but they don’t really matter as much as you initially think they do so i think build a bar is kind of my way to almost Kind of go into the back door and build a brand that’s really fun. Maybe even open physical locations where you get to go build a chocolate bar and go to like – yeah. And like have these really fun experiences with your family and maybe there’s other experiences you have when you walk into a chomp-ville. Marc Lore Yeah. Wedding favors, showers, things. I mean just like you could think of a customization in chocolate, endless possibilities there. Guy Raz I guess what I think is interesting is I think you’re right, Ben, that consumers don’t really care so much about where you’re sourcing it from and the mission. And unfortunately, they’re not going to care if you’re buying ethical chocolate. Some people will, but most people don’t. But I do think what they would care about is the fact that you’re doing everything. You’re buying these virgin beans. You’re roasting them. You control the process. You’re grinding them. You’re using your ingredients. I think you should push that a little bit more, especially on your website. I mean, I think that knowing that level of quality does matter to a consumer. They might not care so much about the ethics right now. I don’t, you know, some people do, but I do think that quality people do care about. If they know that that’s what differentiates you, aside from the fact that it’s customizable, that you really are doing everything in this process to bring consumers the best tasting Chocolate bar. That’s something that I think would be interesting. Marc Lore Yeah, I agree there. I agree with you, Guy. I also think being able to make a case that you’re sourcing literally the highest quality beans in the world and maybe even different grades. I mean, maybe even educating people the way they do with with wine, you know, like, where these these grapes are from this very specific region of Oakville in Napa, at this, you know, Elevation, and, like, almost a terroir of like the cocoa beans, and literally charge some some crazy price because of the exclusivity of it and make it almost like a beautiful box, a Beautiful, you know, almost like instead of giving a thousand dollar bottle of wine or really high end cigars, you’re giving this like really high end, multi hundred dollar pieces Of chocolate and tell a story around that. I think there’s something potentially there. And again, you’re uniquely positioned to do it. Ben Bailey Yeah, I know. I think those are great ideas. And I’ve always kind of thought about how my farming background ties into it as well. So I think, you know, chocolate is a lot like wine and it has terroir and it has a story too. And a lot of the beans we’re buying are from small farmers as well, because we’re not buying these big commodity beans. So I think those are amazing ideas. I think there’s a lot of untapped territory there. So yeah, thanks, Mark. (Time 0:16:00)
  • Baby a GoGo Origin
    • Lindsay Shores founded Baby a GoGo after struggling to find diapers while traveling with her family.
    • Her company offers compact, travel-friendly diaper kits and expanding wet wipes. Transcript: Lindsey Shores Hi, I’m Lindsay Shores. I’m calling from Salt Lake City, Utah. I’m the founder of BabyGoGo, a company that provides and creates innovative baby products to make parent life easier on the go. Cool. Guy Raz All right. Well, welcome to the show, Lindsay. Baby A Go Go. Tell me what your products are. What do you sell? Yeah. Lindsey Shores We currently have two products. We have a diaper kit that fits in your back pocket. It’s a vacuum sealed compact diaper kit has one diaper five wipes. And after usage, you wrap it back up, seal it up with a sticker provided on your wipes, and it becomes an odor free sustainable back. So easy way to stash in your purse, or if you’re in a public bathroom, a way to seal it up and make it a lot less gross. And then our other product is a magic wipe. It’s a small disc that fits in your hand an on-the wet wipe and once you puncture the middle it slowly grows into a full-size wet wipe so that’s very useful for parents on the go and all consumers On the go so if you’re familiar with the do you remember those washcloths that you throw in like a tub of water and it expands yeah similar to that but it’s a little more magical because It’s very unexpected. Guy Raz Wow. Okay. So these are like travel diapers and it’s a one-off, right? Because I remember, my kids are now teenagers, but we would always pack a, I can’t remember what they were. There was different brands. We would pack the diapers in there, one or a few of them. And then there was a thin wet wipe. We’d put that in there. Right. But there’s not, this is just everything in one simple package. There’s one diaper, some wipes. So it’s designed really for like, I guess, if you’re at the airport and your baby is just like pooped all over the place. You’ve got to go to the bathroom. Exactly. Yeah. Yeah. Do you like talking about this subject? Lindsey Shores I do. Guy Raz I love it. I love it. Lindsey Shores Yeah. It’s definitely, I know Mark’s a big lover of diapers and the disasters and messes. Number one and number two. Guy Raz Yes, exactly. I have to know how you, I mean, I have to know you came up with the idea because it’s a great idea. And so much of how I built this is those moments where people are like, we have an episode about Larry and Lenny’s protein cookies. And really, these guys were bodybuilders. And one day they were like, I’m sick of chicken and egg whites. Like, can we put the chicken and egg whites in a cookie? That’s how it started, you know? And then they got to $100 million business. How did you come up with this? Lindsey Shores Yeah. So I was traveling a few years back with my family. At the time, my youngest was one years old. And we went to a family resort, a beautiful, very family-friendly place. I always pack diapers for two to three days and then get to the destination, go stock up. No brainer. That’s always how it works. So going to this destination, I thought, of course, I’m going to find diapers. I was running out on day three of our day eight trip. And I searched and searched and searched the stores and nobody had anything accessible for babies or infants, food, diapers, wipes, all this stuff. So my next best option was to take a half a day and go into town, take an Uber, pay the cost of that, leave my family. It was like, this is crazy. Then it hit me that there’s multiple moments at malls. You’re at the zoo, you’re at the aquarium, you’re at Disneyland, you’re in all these places that you need these diaper kits that are not convenient. So I jokingly told my husband at the end of that week of our trip that like, I can’t believe this is such a huge void in the market. I’m going to start a business tomorrow and fix this. And I did. (Time 0:26:49)
  • Mitigating Retailer Risk
    • To mitigate retailer risk with new products, offer them on a returnable basis.
    • Focus on placement and consider consignment to build sales history. Transcript: Lindsey Shores Question is, there’s always a really positive response when I’m speaking to retailers and buyers about these products. They’re really excited about them. They immediately understand the need for them. But because they are new products and a new space, there’s not much to compare it to. So my question is how to take the risk and build more credibility in an untested product market and get within the door without offering a discount or a testing phase that might not necessarily Be the hook they need and could be a big loss for our company. Guy Raz Okay, Mark Laurie, I think you know a few things about diapers. Marc Lore I do, and retail as well. But is the margin structure in such a place that you feel good about, like the retail selling price? Well, what is the retail selling price? Lindsey Shores Yes. Yes, the retail selling price is $5.25. Marc Lore It’s a good price. $5.25. Yeah. Can you do it for $4.99? Lindsey Shores It was $4.99 actually about a year ago. And because of inflation, it’s $5.25. But depending on who retailers we’re talking to, yeah, the $4.99 is still a possibility. Okay. Marc Lore And you make good margin at that. Yes. It’s real good. I mean, have you offered it as returnable? I mean, that’s always a protection for the retailer. Lindsey Shores Yes. That’s not something necessarily highlighted. So that’s a great idea. Marc Lore Yeah. I mean, that’s the easiest is like put it on the shelf, make it returnable. And like, it’s not the kind of thing that spoils, right? So they return it to you, you just sell it somewhere else. In fact, I mean, I would even probably start on consignment to get some sales history. But if you’re really strapped on cash and there’s no possible way to do that, the next best thing is to say, yeah, make it 100% returnable. No period of time to return it. If it doesn’t sell, we’ll take it back. Tell the retailer you will stock all the shelves. Make sure you’ve got kind of one shot to make a first impression. So make sure you have good shelf space. It’s on the counter where the right, you know, customer eye level and, uh, uh, and have a little maybe point of purchase kind of display unit that looks really cool and literally have That box of, of, of 20 or however you put in there and have it right there on the counter. Okay. Awesome idea. Yes. Yeah. I mean, I just feel like this is a no-brainer, Mark. A no-brainer. I mean, it’s such a great idea. This is the same response I’m getting all the time. The only thing I worry about, it does sound a little bit expensive. If you’re saying that the demand is there, then it’s a home run. But I would think that at massive scale, if you’re doing millions of these, that you’d be able to get the retail selling price down even below $4.99. Lindsey Shores We can do that. Just speaking and testing out, speaking to a lot of retailers and buyers, that’s often the response is, oh, we’ve got to do these for $4.99 and now $5.25. And depending on what airport you’re in, some have suggested $7.50. And a lot of people I talk to during testing period and phase, it’s like, you guys are dads. It’s at the point that you need it, a lot of people say, you don’t care the cost. You don’t care. You don’t care. Guy Raz It doesn’t matter. Marc Lore Yeah. There’s definitely the market for, I’ll pay whatever because this is a necessity right this second. And then there’s also the price point where it’s like, hey, I’ll take a few of these. You never know. I might need them. It’s hard to say, I’ll take three or four of these and suddenly it’s 20 bucks. You could buy a whole box of diapers for that. So I’m just trying to think about how to make the market size much bigger. It’s really what you can do at scale. I’m always thinking about scale and working backwards. And I would say, you know, at sort of 10 million units, what’s your cost of the display and the packaging? And then figure out what the retail price would be off the back of that. And obviously, your cost is a lot higher, but I would sort of grow into it. I would basically take no margin in the beginning, you know, and get the right price point, create much bigger market size, and then eventually get the scale you need. So, so the combination, I would do the airport thing and the sort of emergency charge, we need to charge make a good margin on it, but simultaneously be working on the much bigger opportunity Lindsey Shores Um of a scaled version of it okay love that um definitely consider that we started at the ddc idea of subscription model but to mark’s point it was just too pricey to stock up i have you know We have customers that do it it’s not the everyday customer and so um yeah definitely excited to roll out into airports and start getting more feedback there. I want to see these vending machines in the bathrooms. Yes. Yeah. Marc Lore Yeah, vending machines. That’s smart, too. Yeah. Guy Raz Super cool idea. Thank you. Lindsay Shores, Baby Agogo. Theme parks, too. Theme parks. Yes. Yes. Yes. Definitely. Congrats. Thanks so much for calling in. Lindsey Shores Thanks, you guys. I’m the biggest, biggest fan of the show, so I’m so happy to be here. So great to meet you both. Guy Raz Thank you. Good luck, Lindsay. Lindsey Shores Thank you. (Time 0:30:57)
  • Tenth Mountain Whiskey’s Dilemma
    • Ryan Thompson, founder of Tenth Mountain Whiskey, started his distillery after bartending and observing the craft spirits movement.
    • He’s now at a pivotal point, considering equity partners or focusing on regional growth. Transcript: Ryan Thompson Hi, Mark. Thank you for having me. Nice to chat with you guys. My name is Ryan Thompson. I am from Vail, Colorado. In 2014, I started Tenth Mountain Whiskey and Spirit Company. We are a philanthropic, award-winning craft distillery named in honor of the historic Tenth Mountain Army Division. Guy Raz Thanks for calling in. Tenth Mountain Whiskey. Tenth Mountain, I believe, is no longer in Colorado. I think they’re in Fort Drum, New York. They’re on the border with Canada today. You’re exactly right, Guy. Ryan Thompson I’m impressed with your military knowledge. Guy Raz Many years ago, I was a reporter. I covered the Pentagon. So that’s the only reason why I know that. But cool. So cool. I had a cool name. And tell me how you got into this business. Ryan Thompson Yeah. When I first moved to town in the late 90s, I bartended around town under the ski bum lifestyle, skiing the 80, 90, 100 days a year and bartending at night. In 2002, I started a restaurant that I still have my thumb on today with my two original business partners 23 years later. About 12, 13 years ago, I was watching what the craft distillery movement was doing. I homebrewed just for fun, for friends and family, and was watching what a couple of competitors and other ski resorts were doing. And I thought someone in this town was going to make whiskey sooner or later. And I just thought, might as well be me, right? Guy Raz So you guys bought a still and you bought all the things that you need? Ryan Thompson Yeah, that’s correct, guy. You got it. We distill, we mature, we bottle all in-house. We have a tasting room at the distillery where we hold events, do tours, and hold tasting classes. And we have an off-site tasting room, which is at the base of Vail Ski Resort in Vail Village as well. Guy Raz All right, cool. I’m curious, right, because there’s a lot, and I’m in Northern California, where the wine industry is going through some challenging headwinds right now, right? Because there’s all, every day it seems like there’s another article about alcohol and being bad for you. And, you know, I know that younger people aren’t drinking as much as, you know, people my generation and older. Are you seeing any headwinds at all right now? Ryan Thompson Yeah, certainly. You nailed it, Guy. Almost every day an article comes out in regards to alternative opportunities to relax and enjoy cannabis or… No and low-alk movements, the high and dry movement, if you will. And so that is part of my question. So we’re at a pivotal point within the business. We’re just celebrated our 10 year anniversary. We’re doing well. Thank you. We’re doing well here in the state of Colorado. We self-distribute in the Vail Valley. We have a large distributor that distributes outside of our area, but within the state. And so about 80% of our sales comes from within the state of Colorado. About 20% are in a number of other states and distributors. However, 80% of my headaches comes from that as well. So a little bit about the 80-20 rule, right? And so I own 100% of the company I’ve gotten this far without having to sell equity. I have an SBA loan, bagged, barred, and scraped as much money as I could put together over the last 10 years. However, I’m to a point where if we continue to grow, do I look to sell off some equity and bring on some investors? Or given the structural market shifts within the industry, do you think it’d be smarter to maybe pull back some of our distribution in some of these outlying states and just focus more Locally and then our direct consumer models as well. (Time 0:39:50)
  • Regional Focus vs. National Expansion
    • Focus on maximizing market share within a specific region before expanding nationally.
    • Deeper regional penetration increases a brand’s value for potential acquisition. Transcript: Guy Raz A lot to think about here because, Mark, obviously, I know you know a little bit about this market too, and it’s complicated. Every state has different regulations. So the question, I guess, is should he double? There’s a couple questions. Should he bring on equity partners, but also should he double down on where they’re doing the best or really try to push into expanding into some of these markets that are also proving To be a bit of a headache? Marc Lore Yeah, I have a couple of questions. First, nice to meet you, Ryan. Great, great story. Thank you, Mark. You as well. What percentage of the market are you in your current state in Colorado? Ryan Thompson A percentage of the overall market, I’d say we’re about 10%. So there’s certainly some room for growth there. Marc Lore 10% of the whiskey market in Colorado? Correct. Yep. Okay. Ryan Thompson And what is it about your product that is special relative to other whiskeys? Certainly where our distillery is, we’re at 6,300 feet in altitude. So it’s an ambient, dry, arid climate with some diurnal temperature fluctuations, which adds some different flavors to our products. Certainly matures our whiskey a little bit quicker than other areas. Our Angel Share is mostly water that evaporates. And so we’re able to get some higher proof whiskeys and do some special single barrel picks. And so we’re well known for our whiskeys. We make a bourbon, a rye and a single malt. We make four other additional spirits as well. And then certainly the amount of respect and support we give back to the military, both active and veteran soldiers alike. Marc Lore One last question. In terms of your goals, would you be happy doubling the size of your business over the next few years? Are you really saying, no, I really want to go for 10x or 100x? Or no, in the next few years, if I could double the size of the business and keep 100%, I’d be really happy with that. Ryan Thompson So originally 10, 12 years ago, when we were starting, we wanted to be a national brand. And that was the original goal. Given the industry market shifts, I’m thinking it might be smarter to pull back and just be a regional brand. However, I still have inside me that I want to grow this. I love the challenge of it. It’s a tough industry. It’s an exciting industry. I love all aspects of it. And so in one hand, it’s do we lose the battle to win the war and pull back? Where on the other hand, if you’re not growing, you’re dying, right? And so it’s a little bit of both that I’m having to struggle with here. Guy Raz Are you growing? Are you on a path to grow this year? Ryan Thompson Yeah, Guy, we have been growing about 10% year over year. This year, we’re going to be about we’re going to be flat, which in the industry from what I’ve been told is a win. Yeah. Marc Lore So if you’re 10% share in Colorado, and 10% growth, that means you’d be going from 10% to 11% share if you just focused in Colorado, or 12% share is 20%. It feels like just from the outside looking in, given all the things that you’ve said, where you have a competitive advantage, I would double down on that competitive advantage that You have in the state of Colorado. It’s working. The brand resonates with that audience. You’ve got physical brick and mortar. People are feeling and touching your brand. And if you only have 10 share, I mean, you can go to 20 share. That’s why I was asking, 20 share and double the size of your business. That’s some pretty good growth over the next few years if you were able to double your penetration. I think the level of focus is not to be underestimated. Like you said, there’s a lot of complexity in going into other states. You don’t have the same marketing power that you do in Colorado, and it takes a lot of time. And so I think there’s a benefit of focusing and saying, hey, we’re going to double share in Colorado, and this is how we’re going to do it and get everyone thinking on the same lines. And then after you start getting that real traction there, maybe you pick a second state that’s closest in that you think would most likely be a state to resonate. Right to me on the outside thinking about taking the brand national without the same marketing budget or bang or that some of the bigger players would have. Ryan Thompson Right, Mark, exactly. I appreciate that insight and your opinion there. And that’s exactly what keeps me up at night is trying to figure that out. And so certainly respect your career and love your insight to that. So I really appreciate that. Guy Raz Yeah, the challenge is the next state over is Utah. And I don’t know how great of a market that is. Ryan Thompson Yeah. I think we probably look to go north to Wyoming or south to New Mexico first. Guy Raz Right now, I may have missed this, but did you mention your annual sales right now? We’re a little bit north of 2.5 million. So one question I have for you is what’s sort of the end game for me? I mean, Vail is a really important, you know, if you’re talking about building a brand, Vail is a great, especially a whiskey brand, a great place to do that because it attracts, obviously, Skiers from around the world. It’s one of the probably the five greatest ski areas in North America. I mean, is there a world where you would one day want this brand to be acquired by a Diageo or a bigger multinational? Right, Guy. Ryan Thompson I certainly love what I’m doing. I love growing it. I love the challenge. I could see me doing it for a number of more years, but I get asked this question often and everything’s got its price, I think, certainly. We’ll see if there’s a price I can’t or an offer I can’t pass up, then it might be something I’d entertain. Marc Lore Maybe one day. If you are thinking about selling it, then it would be more valuable to have deeper penetration in a regional market than a shallow penetration in a national market. So that’s something to consider as well. Guy Raz Got it. Marc Lore Thanks, Mark. I think that’s great advice, Mark. Guy Raz The brand is called Tenth Mountain Whiskey and Spirits. Ryan Thompson, thanks so much for calling in. Ryan Thompson Guy, Mark, I appreciate your time. Thank you very much. Thank you, Ryan. Good luck. Good luck, man. Yeah. (Time 0:43:19)
  • Hiring for Success
    • Prioritize hiring individuals with a proven track record of success.
    • Look for “stars” who have demonstrably made an impact in their previous roles. Transcript: Guy Raz Before I let you go, I want to ask you about, you know, here you are, you’re still a young guy, you’re only in your 50s, and you’ve accomplished all these things. And you’ve got a whole new business now that you’re that, you know, we’re going to be hearing about for the next, you know, 20, 30, 40 years. To when you started diapers.com and even before with what you were working on. And you could give yourself advice and say, hey, you need to know this. I’m coming to you from the future. What do you think you would have said to that guy? Marc Lore Oh, there’s so many lessons. If you’re asking for like what’s the number one lesson? Guy Raz Sure, yeah. Marc Lore I think I have to – I could only pick one, I think people. I think I would, I’ve learned so much about the type of individuals that can really help propel a company. And at the end of the day, you win or lose, it’s down to execution and it’s people. And how do you find the people that are going to be most successful in an early stage startup? I want somebody that showed a demonstrable level of success in everything they’ve done in their career. They don’t have to go to the best school, but in the workforce, they’ve shown a demonstrable level of success. They’re in a company, they’ve been promoted, and when they move from one company to another, it’s a big step change. Guy Raz They make an impact. Marc Lore Yeah, stars make an impact, and when they move, it’s noticeable. And those people are the ones that, I mean, 20% of your folks do 80% of the work, and if you can get those top 20% or even top 5% if you’re lucky enough to get that, that could make the company. And every company that I’ve had, there’s always a few people that are top 5 percent. And those are the people that really drove and made the company what it is. So I would just, I didn’t really know that back then and just hired people. And just, you know, I just, I was like, thought I can interview somebody and find out if they’re good. And you just can’t. It comes down to resume. You have a history. Guy Raz You’ve been in the workforce. What have you done? That’s actually really great advice. It’s because you’ve got to surround yourself. Great entrepreneurs are not great entrepreneurs. They’re great people who surround them. That’s really – I think the greatest entrepreneurs are often the greatest talent spotters. But you’re right. It’s hard because you can talk to somebody who really liked them and it just doesn’t work out. Yep. Marc Lore I call it honeypot. It’s like, oh, I can get a beer with this person. They took a good game. And in an hour, you’re like, oh, I really connected. I like this person. But then they’re not able to really push the ball forward. And there’s only a small percentage of the population that can truly invent, create and make stuff happen. And there’s a certain resume that that it shines through. And now I can spot those. And so I would teach myself how to how to spot that if I went back in time. (Time 0:50:13)