Wunderkeks Has Two Daddies
Introduction:
This week, we welcome another new panelist to the podcast, Hans Schrei, who is co-founder of Wunderkeks, an e-commerce bakery in Austin, Texas. Hans tells Jay Goltz and Liz Picarazzi why he and Luis Gramajo, his husband and co-founder, sold a business in Guatemala, immigrated here in 2019, and started a cookie business from scratch, going from selling at farmers’ markets their first year to doing more than $5 million in e-commerce last year. Hans also explains why he doesn’t think it’s enough just to make a delicious cookie, why he’s trying to raise seed capital, and what would happen to his visa if Wunderkeks were to fail.
— Loren Feldman
Guests:
Hans Schrei is co-founder of Wunderkeks.
Liz Picarazzi is founder and CEO of Citibin.
Jay Goltz is founder and CEO of The Goltz Group.
Producer:
Jess Thoubboron is founder of Blank Word Productions.
Full Episode Transcript:
Loren Feldman:
Welcome, Jay, Liz, and especially Hans, the newest member of our 21 Hats Podcast team. It’s great to have you all here. Hans, we want to introduce you. I’d love to hear a little about what you do. Your company is called Wunderkeks. What does it do?
Hans Schrei:
Yeah, well, thank you. I’m so happy to be here, Loren. Well, at Wunderkeks, we make the best cookies ever, and we ship them nationwide. But more than that, what we’re doing is creating conversations that build safe spaces through food and beverage products.
Loren Feldman:
What do you mean by that?
Hans Schrei:
That means that the way we approach what we consume now, there’s so many brands, and it’s so saturated, that brands have become the new external signifiers. And we use them all the time to say who we are. And this is particularly true of food, because fashion is changing. Something like an iPhone is no longer a status symbol, so what we consume is who we are. So there are many of us who will say, “Oh, I will put up a picture of my independent coffee shop cup up in my Instagram.” Or someone else is still very proud to do it with Starbucks.
So the point is that we get behind the brands that say who we are. And so that’s the thesis we’re getting at. So you can go way beyond the actual product and the function of the product, to allow for people to say who we are. And you can harness that to bring a positive message, which in our case is, to really make a point about the need to have conversations around the creation of safe spaces for everyone.
It started definitely from our perspective as gay men—gay immigrant men—but then we figured out, this is for everyone. So the whole point is, if I am seen carrying a Wunderkeks cookie, then that means that I am the kind of person who is an ally, who will not judge me for who I am, who will probably open me to a safe space.
Loren Feldman:
How important do you think that is to your brand?
Hans Schrei:
I would say absolutely vital to the brand. Because, I mean, we make cookies. We’re very aware that we’re not curing cancer. They’re very good, but they have a ton of competition, if you will. And realistically, that is true of most foods. There are a ton of different options, more now than ever. So if you keep talking about, “Oh, the cookies are delicious,” they are—but so is the guy next door’s, and there are a ton of substitutes to it.
So the only way we get people to commit to our brand, to really enjoy it beyond tasting the cookie, which is something that will never be replicated, is by having them use it as a way to say who they are. So a way that we have put it that I really love was thinking about in the context of the hero’s journey. The mistake that a lot of brands use is that they position themselves as the hero. So everyone as a brand tends to want to be Luke Skywalker, and the customer doesn’t see it that way. The customer wants to be Luke Skywalker, and the brand needs to be Yoda. I don’t know if that makes sense, but that’s the analogy I use.
Loren Feldman:
I think I get what you mean. We’re definitely going to talk more about your mission, but can you give us a snapshot of where the business stands right now? How big is it? Employees? Revenues?
Hans Schrei:
Yeah, we came to the U.S. in 2019. We started at farmers’ markets. For the first year, that’s what we did. When the pandemic hit, we pivoted to e-commerce. And last year we did $5 million in revenue, and 99 percent of that was e-commerce. That’s about 3 million cookies.
Liz Picarazzi:
Wow.
Loren Feldman:
That’s a lot of cookies.
Hans Schrei:
Yeah, it’s insane.
Loren Feldman:
What do you expect to do in revenues this year?
Hans Schrei:
We are probably gonna hit the same number this year. There’s a lot to be said about what happened with all e-commerce businesses after the changes in the Apple privacy settings. So that forced us to basically relearn our business midway through last year. So we saw a drop in production. So we’re thinking that we’re gonna recover in the second half of this year.
Loren Feldman:
All right. We’ll get into that some more, but I’d love to talk to you about how you wound up here. You mentioned that you and your partner are immigrants. You’re from Guatemala. Hoe did you choose to come here?
Hans Schrei:
We had the business in Guatemala, the bakery. I started about 10 years ago, and we were doing fine. It was well-respected, well-known, in Guatemala. It’s a tiny market, so it was a tiny business anyway. And we took a vacation to California, and we drove the coast from San Diego all the way to San Francisco. And this was a few months after Luis and I got engaged. Gay marriage is not legal in Guatemala, but we never thought much of it. We were actually talking to lawyers about, “How do we manage things like property rights and end-of-life care so that we will be covered?” and didn’t think much of it, about how important it was to us.
And then we took this trip, and along the way, we kept seeing a lot of same-sex couples with kids, which was something that I had seen on TV, but frankly, had never seen live. And they were everywhere. And we felt like our eyes kind of opened. Like, this is something that we’re not sure we want, but we were sure we wanted the option. And that led to conversations about what it actually means to be a family and what it actually means to be married.
So when we came back, we started talking, “Maybe this is what we should do. This is the piece that’s missing.” We decided to come to Austin to see if it was the right place for us. We landed in Austin mostly because it was close enough to home. It was a liberal spot in Texas, like the little blue dot in Texas. And it is a great place for CPG companies, so that’s how we landed here.
Loren Feldman:
It’s a great place for consumer goods companies, you say?
Hans Schrei:
Yes, definitely. There’s a big community of CPG brands. My theory is that it really happened around Whole Foods, which is headquartered here, and has been forever. So there’s a lot of product development happening, a ton of events happening. And more important than that, there’s a ton of opportunities to get people to try your product. So I think that thing is really helpful. So we landed here. We got an entrepreneur visa, which was—
Loren Feldman:
Before you tell us that, Hans, tell us: What did you do in Guatemala? Did you sell your business? Did you just shut it down?
Hans Schrei:
I sold it to my parents. That other thing in Guatemala still exists.
Loren Feldman:
So is there any relationship between your business here and that business there—other than the fact that your parents own it?
Hans Schrei:
No, not really. No. Like, at first there was some consulting going on, but not anymore. It’s been four years now.
Loren Feldman:
And how tough a decision was that? I certainly understand the motivation. How hard was it for you to leave the business, family members, the country you grew up in?
Hans Schrei:
It was not hard at all. I mean, the hardest part was figuring out the logistics, but we set our minds on that. And we were very, very decided. We never got cold feet or anything of the sort.
I’ll give you the full context, because I think it’s important to say. We were a gay couple in Guatemala. We were both out of the closet, so that was not a concern, and I am very privileged. Coming from Guatemala, we are both educated. We both spoke perfect English. That really helps. We were very privileged that this was even an option for us to have, so I don’t want to minimize—I don’t want to make it seem like I suffered this horrible type of violent oppression that I did not.
But what happens in places like this is, of course, there are people who are actually dealing with violence and whatnot. But for the rest of us, you kind of get sort of a Stockholm Syndrome when you normalize a lot of things that you should not normalize. And I’m not talking only about things that gay people experience. I’m talking about everyday violence. In Guatemala, for instance, we get this compulsion to lock our car doors when we’re at a traffic light. That happens a lot. I have had my phone stolen at gunpoint four times probably in the past 10 years.
So that was part of it, and then there’s the other part. You normalize that. That becomes the default. And that is very harmful, because you spend a lot of your energy there. And the other part was something that we learned how important it was for us, was just being able to say and to be respected as a married couple and as a family, was very important and very powerful. And at first, we didn’t know it, because, again, you normalize it.
The greatest shame about how queer people are made to live is that we are made to be grateful to enjoy the things that the rest of people do for granted. So in our case, we’re like doing this thing to ourselves where we’re grateful that we are not suffering violence—where it’s like, of course no one should be suffering violence. So it was not hard at all. It was not hard to leave. Because once we realized how the grass was greener on the other side, it was very clear that it was the right thing for us.
Loren Feldman:
I think I interrupted you before. You were talking about what you had to do to get a visa to come here as an immigrant. Can you tell us about that?
Hans Schrei:
Yeah, in our case, it was an entrepreneur visa. I have an Austrian passport, so I can opt to that visa, and it was relatively straightforward, actually. I mean, it was just a lot of work and a lot of research that I had to do with: What are the requisites? And all of that. But it was not particularly complicated. The most complicated part of it was housing.
Loren Feldman:
You mentioned that you have an Austrian passport. Would it have been harder for you and Luis to immigrate here if you did not have the Austrian passport?
Hans Schrei:
Yes, almost impossible. The way the U.S. immigration system is set up is very confusing. To start, it’s very confusing, but it does, realistically, put a price on certain nationalities. If you’re European, moving to the U.S is relatively straightforward. If you are not, it’s a way different situation.
I mean, we made the most out of it, but it is the type of thing that really opens your eyes to how privileged you are, by chance. Because I have absolutely nothing to do with this. And it really opens your eyes to the many opportunities that are just randomly assigned to you.
Loren Feldman:
Tell us about starting up the business. What did you do to get the business off the ground in Austin?
Hans Schrei:
Well, the first thing that we did was… Actually, in order to come here, we needed to have our business set up. First, you set up the business, and then you get the visa, which is kind of weird, because then you’re not allowed to work on the business if you don’t have the visa. So it’s very tricky.
So the first thing is, “Okay, we need an actual viable business, and we need to invest some money.” So the first thing that we did was, we went to all the farmers’ markets here to talk to all the people, and at some point, we actually had to fly in with samples. Bringing cookie dough through customs, through the TSA, I think they were very confused.
And so the first thing is like, “Okay, so I have a place to land. I’m gonna be selling at the farmers’ markets.” And you need to prove with data: How is this a viable market? We did farmers’ markets for a whole year, rain or shine. But of course, we needed to actually be a viable business, but it was a fantastic opportunity to talk to a lot of people in a country that we didn’t know. So we learned a lot very fast, and then you get to iterate. So the first week we had one flavor, and people kept asking for snickerdoodle. So the second week, we had snickerdoodles. And that’s how it kept going.
Loren Feldman:
Who does the baking?
Hans Schrei:
Now?
Loren Feldman:
Who did the baking then and who does it now?
Hans Schrei:
Okay, back then, it was Luis and I. Luis would do the dough, and I would do the rest. I would manage the recipes and I’m measuring and all those things. Luis would do the dough, and then I would bake them, and it was only two of us for a long time. And now we have a team, and Luis actually manages it. We have a team of six people who do the baking and the fulfillment. They have actually grown with us.
Loren Feldman:
Did you change the product much, going through that process of selling through the farmers’ market the first year?
Hans Schrei:
Not so much that we changed the product itself. We started with chocolate chip cookies, and we started developing new flavors and new varieties based on the feedback that we got. So it evolved, and all the time—this is normal for everyone in baking—you test. “Let’s try and use better butter.” Or if we change the ratio of flour and fat, and that type of thing. So it’s always evolving. But yeah, even now, we have our product, but I wouldn’t say that it’s fully done. And I don’t think it ever will be.
Loren Feldman:
At what point did you decide that creating safe spaces was something you wanted to focus on?
Hans Schrei:
That was early this year. A lot of things happened, like there was this Florida law, the don’t-say-gay bill about public schools. There was something else happening in Utah. There was our own lived experience. And the last drop was when they made a whole political theater in Guatemala about banning gay marriage, which was already not allowed, so there was absolutely no need to pass a law banning it.
And that really hit home—that we were so comfortable here in Austin, that we had, in a way, forgotten how privileged we are here. And we figured that if the two of us could forget, there were a ton of people who did. And the people who need to be reminded of, “Yeah, of course,” I think there’s a lot to be said for younger generations learning about the history and how their rights that they enjoy were harder before them.
But a lot of it is to remind other people who are allies, “Hey, you are powerful. You can help. There is a fight to be had.” So it started like that, and it started about us. And it was not really named safe spaces at that point. We just wanted to have the conversation. And that’s where we were going, and then a friend of mine introduced us to Jeff Furman. He is one of the minds behind Ben & Jerry’s, and he’s the president of the Ben and Jerry’s Foundation. And he was behind their very peculiar arrangement that Ben & Jerry’s set with Unilever when they were acquired, where Unilever is obligated to continue on the mission of the company. And if they don’t, the foundation has grounds to sue them. So he is the guru of mission-oriented companies. We talked to him, and then he came aboard as an advisor.
And it’s amazing. Talking to this guy, clearly there are so many years of hard work, so many years of insight that he gives you. So he told us things. One, “You were talking about safe spaces and all of this. You need to be aware that you’re gonna be put in an unsafe space.” It was a revelation, actually, but complicated.
But the second part was, “Right now, you’re telling your story. And it’s great, because your story has taken you this far. You keep talking about your experiences, and people do want to hear them. But at some point, as you grow, you’re gonna have to start listening, and not only talk about yourself.” And that led to the conversation about talking of safe spaces—not in the context of only the gay community, who definitely needs them, but in the context of the good that can be done if we all have them. Because we all need them in a different way.
So the safe space that I need is different than the one that you guys need. People at different stages, in different places, at different ages, and different races, need safe spaces, but they come in different ways. And the only way we figure that out is if we listen to them. And that is the first step to building a safe space: to actively listen without judgment.
So that’s when it really clicked, and it was like April of this year. And that is when we had like this “Aha!” moment: “Okay, this is what we’re doing.” So actually, we just had a meeting with a VC like an hour ago. The end goal is this: these conversations. The money side of things or the mission side of things, they both need to coexist and have a healthy relationship with each other. So at that point, all of this really clicked, and it was very clear how to move forward. So we really went all in on that.
Loren Feldman:
Hans, I’ve gotta tell you, you have a very unusual, interesting journey story. And I can tell you, the way I know that is this is by far the longest that Jay and Liz have gone without speaking on a podcast. [Laughter]
Liz Picarazzi:
I have questions! So my question is, when I heard about your business, and I went to your website, I immediately thought: corporate sales. And the reason is because when I worked at American Express, we were always looking for gifts to give employees as well as to clients, in a lot of situations. So there’s just massive opportunity for vendors to sell to corporations like that. So I’m curious what proportion of your business is to other businesses versus to individual consumers?
Hans Schrei:
Actually, right now it’s quite small. I think it was next to zero a year ago, and it’s close to 5 percent now. You’re exactly right. When you come to a company like, “Hey, cookies! Great. They are amazing. Buy cookies because they’re delicious.” They already have 200 different options of delicious cookies. Like, they don’t need a cookie.
And we’re actually making inroads with companies talking about this: “Oh, this is who I want to be perceived as.” And that side of the business is actually growing because of that. Because when you have the clarity of purpose, then it goes beyond whether the cookies are good or bad, which at the end of the day, it’s not an objective measure. It’s very hard in this supersaturated environment to sell them. I cannot go to them and sell them cookies. I need to sell them—
Liz Picarazzi:
The mission.
Hans Schrei:
—this is how you’re gonna be perceived, yeah. “This is what you’re doing.” That also gave us a ton of clarity: the cookies are secondary. So we can do other things. Actually, we are not tied to it. Cookies are easy. And one of the reasons that we do cookies is—sweets, in general—because you know how sweets are ritualized. You have a birthday cake, and that usually comes with a conversation with “thank you” or “I love you” or “you’re important to me.”
So that’s the opportunity. That’s what we’re selling. And at some point, we were really asking ourselves, “What are we doing?” And you get kind of bored, because really? Cookies? Like, it’s more same old, same old. And once it really clicks what you’re doing, then all of a sudden, there’s a whole conversation to have about what is at the end of the day, realistically, a very conventional product.
Jay Goltz:
Can I say something, Loren? Because as usual, you’re perceptive. I’m kind of speechless, because I’m just extremely confused—because I love chocolate chip cookies. And I went to your site, and I saw a beautiful site with beautiful cookies, and that’s enough for me. And now you’re telling me, “Oh no, it’s our story.” I don’t even see your story on the website.
And then you say things like, “There are 200 places to buy cookies.” I don’t think so. Because if you said to me, “Jay, where can you buy really good chocolate chip cookies online?” I can’t think of one company that would come to mind. So the consumer in me, the business person in me, is saying, “Great-looking website. Great-looking cookies. Good to go.” And now you’re telling me, “Oh no, it’s about our story. It’s not about our cookies.”
So I’m like in an alternate reality from what you’re talking about, because I like cookies. And like I said, there wasn’t even anywhere on your site that talked about—at least that I found readily—I didn’t get any of that story. So my consumer part of me is hearing one thing and you’re telling me the exact opposite.
Hans Schrei:
You are, frankly, my ideal customer, so please buy cookies. And it will make my life a lot easier if everyone thought like you. But the reality is that if you went to our website, you’re probably gonna start being served. You’re going to Instagram or Facebook or something, and you’re gonna start getting a ton of ads for cookies now, because now Facebook knows.
Jay Goltz:
That would be assuming that I’m on Facebook, which I’m not. Or that I’m on Instagram, which I’m not. So maybe I’m just aged out of this, but I still like cookies.
Loren Feldman:
You’re gonna learn more about Jay, Hans. [Laughter]
Hans Schrei:
No, that’s great, and that is my ideal customer. Let me put it a different way. The reality is this: in my case, I only brush my teeth with Oral B or Crest, in part because I used to be a brand manager for them many years ago, and I cannot use another toothpaste. It needs to be Crest. I hate it that if it’s 10 p.m. and I am out of toothpaste, I will go to the store and get Crest. That’s me in that particular category. And we all have one. I’m pretty sure you have one brand of something that you will only have this for a reason that is beyond performance. Because I’m pretty sure Colgate or whatever other toothpaste is fine. And the thing is that you need to understand your customer. Think of it as a funnel. There’s people like you who are only interested in cookies, and it’s great, awesome. And they will love the cookies and the messaging. The problem with you and the cookies is that—not you particularly—but the problem with customers who are only after cookies is that it’s very easy for someone else to snatch them from me. I didn’t really get to build a relationship before, because there’s so many options. And if you can’t think of one right now, I’m pretty sure that one will present itself. And this is particularly true in supermarkets.
Jay Goltz:
Let me give you a little insight that maybe you don’t have. Laura, who’s on our show, sent me some chocolate chip cookies in these like pizza boxes from this really hip, cool cookie place. And nowhere in this delivery was there a note saying where they came from. I had no idea where they came from, until she called me two days later and said, “Hey, did you get the cookies I sent?”
My point is, I think you’re giving too much credit to everyone else that’s out there in the world that there are these wonderful cookie companies with beautiful websites that ship on time with lovely—I don’t think you realize that most companies are really mediocre or bad. Here, this cookie company wasn’t even smart enough to put a note in there as to where they came from. So you might be surprised to find out just running a really good company will keep you a lot of good business, because there aren’t that many of them.
Loren Feldman:
As a matter of fact, Hans, if I heard you correctly, you sold $4 million worth of cookies last year without having the mission. Is that correct?
Hans Schrei:
Five. So let me get back to my example about selling cookies, is that someone else can come and say, “Hey, my cookies are even better, and they’re cheaper.” You who are not the most engaged of customers are gonna go to them. And that’s fine. Some of the customers are going to do that. That same thing: toothpaste. I will not buy Colgate under any circumstances where I’m pretty sure that even Luis, my husband, doesn’t really care. And he’ll be fine.
But there is the type of customer that you’re looking for, and that you want to engage, who is going to have a ton of options, and you want them to try yours and to fall in love with you, so that they keep coming back. It’s very hard to convince someone to come with you, and acquiring customers is the most expensive thing that you can imagine, particularly in e-commerce. So it’s very hard to have someone come at you and stay with you over and over again and tell their friends. What we’re doing is giving people the tools to talk about us.
We’re telling people, “These are not chocolate chip cookies. These are opportunities for you to have a conversation with the people you love.” So that means that they will buy them. You will be surprised. Like when you see that they put this label on hair dryers not to put them in the bath, you will be surprised how necessary they are. So if we tell people, “Share them,” and actually we put a little instruction manual that says, “Hey, here’s a dozen cookies. The first is for you. The second is for you to put in your social media. And the rest of them are for you to share.” And if we give them that tool, that goes beyond the cookies. Cookies, there’s a ton of solutions. They can go to the supermarket and get cookies. But here, they have a conversation starter. They have something that they can share with someone else.
So they are not buying cookies. There are customers who are buying cookies. The problem is that I don’t really know who is who. I have no way of knowing who is just buying cookies because they have a craving, and who is really interested in having these conversations. But the point is if I offer them all of this, everyone will take the brand that they want. But I get them to feel a specific way about my brand. Cookies that their grandma made, maybe not.
So that’s the idea. Some are going to be casual customers. Some are going to be very engaged customers, and most of them are going to be in the middle. And they’re gonna say, “Oh, how cute,” and not think about it twice. And that is fine. You need to be very aware of that, and I think a lot of brands make the mistake of thinking that everyone is going to be a brand ambassador. I will say, you’re lucky if 1 percent of your customers are talking about you with their friends. And that’s a reality.
Jay Goltz:
I have to strenuously argue with that point, because I’ve built a pretty big business doing nothing more than giving a great product and great service, and they do send their friends in. And I’m not arguing with you that I think your story is a nice added element that will pick up some extra business and maybe keep some other customers. But I do not buy for one instant that if you don’t have some story to tell where they’ll tell all their friends, that you won’t be successful.
Every successful business I buy from, I buy from because they give good service, a great product every time, and they’re good to use. I’m not arguing that it’s not a good thing what you’re doing, but I don’t think that’s the critical piece to running a successful business. I think delivering on time and having a good product is what’s critical.
Hans Schrei:
I absolutely agree on that. The thing is that, think of it like—you’re in your 60’s, you said, right?
Jay Goltz:
Yeah.
Hans Schrei:
How long have you been going to the same supermarket, for instance? Your brand loyalties, you started them many years ago. Think about toothpaste. What toothpaste do you use?
Jay Goltz:
You know what, I’ve used several over the years. I’ve changed numerous times. I did see a study one time that said getting someone to change the candy bar they buy is extremely difficult. Now that makes sense to me. Because I’m a Snickers guy. I’ve always been a Snickers guy.
Hans Schrei:
There you go. There you go. There you go.
Jay Goltz:
I got it. But I don’t think a branded product like a Snickers bar is the same as… and your website’s beautiful. Before I went on here, I wanted to see what you’re all about. I understand why you’re successful. You’ve got a wonderful website, and I assume your cookies and brownies—let’s not ignore brownies, by the way. Can we not ignore brownies? And the brownies look great. I’m sure they’re good. You’re clearly doing some things right—a lot of things right.
Loren Feldman:
In a very short period of time.
Liz Picarazzi:
So I have a visual to bring up. I want to try to bring in a visual that may help me understand this. And so Jay brought up the pizza box with the cookie inside. Hans, what does your packaging look like? And are you able to get your mission on your packaging in a way that that cookie company in the pizza box wasn’t thinking about it as real estate?
Hans Schrei:
Yeah, we invested a ton in our packaging. It’s a pink, very fancy box. Loren has seen it.
Loren Feldman:
I’ve tried the cookies, too. They are good.
Hans Schrei:
So there’s a lot to be said for the packaging. The thing is that it’s very hard. The people I’m selling to are younger people who are between their 20’s and late 30’s. It’s kind of in a transitional time in their life. And this is where their brand loyalties—
Jay Goltz:
How do you know that? How do you know that? How do you know that?
Hans Schrei:
Because, I mean, those are the people like—
Jay Goltz:
I mean, people order. They put their names, put their charge card. You ship the cookies. How do you know how old they are?
Hans Schrei:
Facebook models that, and Klaviyo—Klaviyo’s an email tool—models that. Facebook can tell me who is clicking on our ads, and they are 65 percent female and over 50 percent between 25 and 44.
Jay Goltz:
Did you consider the fact that some people aren’t on Facebook and that you’re like going into a bar and saying, “Everybody’s drunk in there.” So everybody’s drunk in the world? I mean, you’re going to Facebook, and you’re using them as the sample, but plenty of people aren’t on Facebook.
Hans Schrei:
Oh, sure, but I’m doing an e-commerce business. So, effectively, I can sell to people who are on Facebook. That is the medium that I use to get my customers. So yeah, it’s a different situation than if I were outdoors, that type of thing. But given the constraints I’m working with, there’s some selection bias, of course, because I am doing e-commerce on Facebook. And even the brand is presented in a way that’s probably going to be more appealing to a certain segment of customers. It’s probably more to women than to men because it’s all pink.
Jay Goltz:
Okay, so I just want to be clear: I didn’t know that. You’re saying that most of your new business that you’ve gotten, you got through Facebook. Is that true?
Hans Schrei:
For the most part, yes.
Jay Goltz:
Oh, okay. I didn’t know that. All right, that changes that.
Hans Schrei:
In e-commerce, that’s pretty much the game right now. It’s Facebook or TikTok, which is even younger. But the thing is that, if you’re talking to this segment of people, and you’re getting into all of that, the thing is, think of a Snickers bar. You love Snickers bars, and it’s gonna be very hard for me to change that—probably impossible, because you’ve been eating Snickers bars for 30 years, something like that. And you like them, and you’re not in the market for a new one. But when I’m talking to a 25-year-old girl who is just leaving college and is in something like a transitional state, that’s when she is building her brand loyalties.
And the thing is that when you first fell in love with Snickers bars, there weren’t 100 options. And they were not online, and they were not showing themselves to you on Facebook or Instagram all the time. They were not saying, “Buy, buy, buy, buy, buy,” constantly the way that they are now. So my customer, who is 25 years old, she has 100 different options at her disposal. And let’s assume that they’re all equally delicious. Like, they’re chocolate chip cookies. They’re all just as good. She has hundreds of options, so I need to give them something else. Because otherwise I cannot control. The only other tool I have is price.
You should see my customer service—and I think we do a very good job. The bare minimum is decent service, good follow-through, quality product, timely shipping. They assume that that is what you’re offering. That’s the very least you can do for them, so you need to give them something more. The thing is that this new consumer is very, very demanding. And if you don’t give them this thing to latch onto, they will probably buy these one time. And they’re not gonna find anything particularly interesting about you. And the next time that they want cookies, they may or may not come back to you. Whereas if you give them something to really latch onto, then you’re way more likely to bring them back.
Jay Goltz:
I find it ironic that the owner of the chocolate chip company has commoditized his product and said they all pretty much are the same—when I’m thinking, if it’s a great chocolate chip cookie, why would somebody want to take a chance to not get a great chocolate chip cookie and just stay loyal to this great tasting product? And you’ve made it sound like you’re selling this commodity. Like, if the wind changes, they’ll buy from somebody else. And there’s probably some truth to that. There’s no question, there’s some truth to that. But I think you’ve taken it to an extreme. I think there’s somewhere in the middle. I think a great chocolate cookie speaks for itself. You can use that as a line if you want. I’m gonna give that to you right now. That’s my tagline for the day. [Laughter]
Hans Schrei:
Definitely. The thing is that I am already competing with a ton of different people, and I am an e-commerce company. So they are not tasting the cookie right away. They’re not going to a bakery and eating the cookie. They have to be convinced there’s something here.
Jay Goltz:
Yeah, no, no, no—there’s some stuff I hadn’t thought about. I totally understand where you’re coming from. And I’m not saying you’re wrong. I’m saying you might be a little overboard on it. And maybe there’s still great chocolate chip cookies, great brownies. There’s a certain core that will continue to buy those from you without the other stuff. But I can’t argue with the fact that I didn’t realize that’s where you got all the customers from. So you are in fact talking about an audience that I’m not, you know, used to.
Loren Feldman:
We’re running short on time. There are a couple of things that I want to make sure we hit. One is, Hans, you’ve talked about how you decided that the mission was so important to you guys, which does raise an interesting question. You chose to locate your business in Texas. Has that worked out okay for you? Do you guys feel comfortable in Texas?
Hans Schrei:
Frankly, it’s been great. Austin is different from the rest of Texas. I can tell you, for instance, something that happens a lot 50 miles from here is that it’s very white and very Christian, and it’s probably not as welcoming for people like us. But other than that, Austin has been amazing.
And that is, I think, something that is very important, and triggered a lot of things about the mission. Austin is this bubble, and we were so comfortable—so, so comfortable in this bubble—that we forgot what’s happening. Well, that thing that happened in Uvalde a few weeks ago. It’s very easy to get comfortable. So it has been great to us personally, but we have really made a point of being very aware of how privileged we are, because it is not the reality of a lot of places not far from here.
Loren Feldman:
Hans, I think you said that you met earlier today with a venture capitalist. Can you tell us what that’s about? What are you trying to do?
Hans Schrei:
Yeah, we’re raising a seed round. Our goal is to go into retail. The idea is to get the cookie dough onto the shelves, and then the cookies. So we’re raising a $5 million seed round. We’re all over the place talking to everyone—everyone and everywhere. The idea is that there’s suddenly opportunity not only in e-commerce. Because the thing with e-commerce is that the people who are ordering the $40-a-dozen of cookies are very engaged with the product. If you put it on supermarket shelves, you really put it at the reach of a lot of people, and no one is really innovating in that category. So we think that there’s a big opportunity there. So yep, we’re raising.
Liz Picarazzi:
I’m curious, Hans, how much of your time does the fundraising take?
Hans Schrei:
A lot.
Liz Picarazzi:
That’s part of the reason I don’t do it and I’m asking.
Hans Schrei:
It is like having two jobs, particularly in this climate. The one thing that I learned that I found fascinating—because at first I was, “Okay, we need to raise capital,” and I was doing it kind of transactionally. And down the line, we started having more conversations and really enjoying the conversations.
And it is not a burden. It is a lot of work because you need to be on your toes all the time. And you never know what opportunity is going to present itself. Like, the one that I talked to this morning is a big, big, big, big fund that they are not… we’re too small for them. And they were very clear about that. But it’s someone who really wants to make a relationship with, so when we’re ready, they will be our first call. It’s stressful, because of course you need to raise, but we have learned so much. And we have connected to so many people, even if they have decided not to invest for whatever reason, that it’s a nice part of the job, actually.
Loren Feldman:
Hans, do you need to raise?
Jay Goltz:
God, you read my mind, Loren. That was my question: you used the word “need” to raise.
Hans Schrei:
Yes, and I’ll tell you why. We started the business, like I told you. We had 25,000 cookies ready for South By Southwest, and we started the business. We were $14,000 out, and we grew the business out of nothing—like literally nothing. And we made it work. Like, of course, that big boost at the beginning really helped. And what we learned—and we learned the hard way—was that the bigger your business, the riskier it becomes.
So we got ourselves to a point where we’re doing insane numbers. But we don’t really have the right capital structure for that, because we grew very fast. And that becomes very risky. So you need to have two things: You need to have a proper capital structure for yourself, and the other thing is that you need to open some doors for yourself, so that down the line, if you need to cross them, you will.
Loren Feldman:
What’s the risk you’re referring to in growing fast, Hans? What are the risks you’re concerned about?
Hans Schrei:
If I have a $10,000-a-month business, and I’m short $500, I can put them on a credit card or something. I will figure it out. $500 is easy to figure out. If I have a million-dollar business and I’m short $50,000, it’s a very different conversation that I need to have. So you need to be prepared for that.
And frankly, we were not. We really went through a very tough time. And actually, we’re still like in a very kind of… let’s just say that our wings are slightly clipped right now. We’re being very, very slow and very conscious of how we spend money. But we cannot really grow unless we have capital.
Jay Goltz:
Okay, that is absolutely crazy. To suggest that you need to get more money because you can’t grow makes no sense, because if you have a profitable business, you take the profit and you reinvest it in the business and you can grow it. To suggest that going to a venture capitalist is going to be less risky is just laughable—that you’re going to give your life to these guys and they’re going to take you to some wonderful dinners and tell you, “Nothing is going to change, we’re totally with you.” That is just not how it always works out.
So I challenge that whole concept that this is a less risky thing, to go to venture capital than to just take your profits, reinvest them in your company, and grow at a nice clip. Because that’s what I did. That’s what Liz is doing. That’s what Laura did. That’s what lots of people do. And there are lots of people who went down that other road and got a surprise at the end of the day, which is, “Oh, the venture capital guys are not my best friends.” Liz, are you with me?
Hans Schrei:
I am absolutely aware of that.
Liz Picarazzi:
I haven’t really gone down the path of VCs, for a lot of reasons. But I can’t actually say that I have enough experience to have a strong opinion about it. My perception is that it would suck up all my time. And my time, right now, has to be devoted to growing my business because it’s growing fast. If I had to pull away from that, and do some sort of a road show, that would be miserable.
Hans Schrei:
Well, the thing is that, in our case, we already put ourselves kind of in a risky situation, which is unfortunate. And I had I known what I know now, I would have taken a different path of how to grow the business.
Loren Feldman:
What are you referring to Hans? How have you already put yourself in a risky position?
Hans Schrei:
Growing your business so fast. At our peak, we were doing $700,000 in revenue in a month, which was insane. That required a ton of infrastructure, and that required a ton of investment. So that profit has already been reinvested.
And the other thing that is very important—just to make it super clear, because I don’t think most people appreciate this—I came to the country three years ago, so I don’t have access to credit. An SBA loan, for instance, is not available to me. A lot of tools that are available to you guys, Americans, are not available to me.
Jay Goltz:
Okay, that’s interesting. That’s a valid point. I didn’t consider that. I would still question why, if you’re profitable, if you have a bad month—okay, then you’re less profitable. But I don’t know that you need to go—and you’re doing a decent amount of volume. Not decent, you’re doing a phenomenal amount of volume in a short period of time. I would think that you could capitalize the company by just being profitable for a year or two and socking some money away. If you say, “No, I want to go big or go home,” okay, if that’s your plan…
Hans Schrei:
That’s the plan.
Jay Goltz:
Okay, if you have that need to do that, I can’t argue with that.
Hans Schrei:
Oh, no, no, no, no, of course, that’s the plan. The idea is to go national. Right now, we’re doing e-commerce, and the idea is to go national on supermarkets. So yeah, maybe I should have started there.
Jay Goltz:
Yes, exactly. Okay, fair enough. Okay, if you are wired and you want to go national and grow this gigantic company, you’re correct. You probably need to take in venture capital. But you certainly don’t need to take in venture capital if you don’t want to do that.
Liz Picarazzi:
A good VC is also going to help you with distribution. They’re going to have inroads. So there’s a value in that that might merit taking outside investment. That would be a case for me, like if I found a VC that really could help me with manufacturing, and with supply chain, and with distribution, I would work with them over someone who was doing something with technology. In fact, I already have decided that I wouldn’t work with a VC that focuses only on technology, because I know that they’re not going to understand my business. And that would be a huge problem.
Hans Schrei:
Startup culture, right now, a lot of it is like raising money is the end goal. And I’ve heard very big, big, big, big, big, big businesses say that to me. The goal is to just inject money and inject money and inject money and grow, grow, grow, and then raise $100 million and either go public or sell for a ridiculous amount of money and get out as fast as you can possibly do it.
Loren Feldman:
Of course, there are risks with venture capital. I mean, you give up some control and things can go wrong. I’m curious, Hans, given the entrepreneurial visa that you’re here on, what would happen if the business failed?
Hans Schrei:
I would lose my visa.
Loren Feldman:
And then you’d have to go back to Guatemala?
Jay Goltz:
Well, he could go to Austria. He’s got an Austrian—
Hans Schrei:
Yeah, or I could go to Europe. Probably, we will go to Europe, yes.
Jay Goltz:
Do you both have Austrian passports?
Hans Schrei:
No.
Jay Goltz:
Well, how did he come with you then?
Hans Schrei:
We got married here.
Loren Feldman:
But if the business failed, you would have to go somewhere else.
Hans Schrei:
Yeah, or build a new business.
Jay Goltz:
You know, you keep thinking as an entrepreneur, you’ve got all the risk you could possibly have. I’d never heard of that one. That’s a whole new level of: “And then, if you fail, they kick you out of the country.” I mean, that’s just…
Loren Feldman:
That gives new meaning to the phrase, “Go big, or go home.”
Jay Goltz:
Yeah, right, and figure out where home is.
Hans Schrei:
It’s something that we have really struggled with—and don’t take this the wrong way, but you were not aware of all the limitations we’ve come with, like safe spaces and all of those things. All of a sudden, you start comparing yourself to an American company that started at the same time as you, and they’re doing like 10 times what you’re doing. And you’re like, “What?!” And then you realize, we are in a way at a disadvantage.
Like to the point about VCs being able to bring their network with them, we came here three years ago without knowing anyone, and I think we’ve made it very far. But we haven’t had 20 years of building a network or talking to people or getting our name out there. We had to do it very fast. And we don’t have that advantage.
Jay Goltz:
No, absolutely. Listen, we’re on the same page now. I got it. Good for you. Congratulations. And again, the most important thing, though, is good chocolate chip cookies and brownies. Let’s not lose sight of that. [Laughter]
Loren Feldman:
This has been really fascinating. I’m sorry, I’ve gotta cut this off. There are other questions about you, Hans. I had other questions for Jay and Liz as well. We’re gonna have to do that another week. My thanks to Jay Goltz, Liz Picarazzi, and Hans Schrei. As always, thanks for sharing—and Hans, really great to have you here and really appreciate your telling us what you’ve been through.
