Successful Raise, Fast Growth, Mental Health Issues

Introduction:

This week, Hans Schrei tells Shawn Busse why this has been a difficult year at Wunderkeks—despite many outward signs of success. It has to do with buying into the need to raise money and shoot the moon. It has to do with accepting the accolades that come with entrepreneurial achievement and then questioning your own self-worth when those accolades stop coming. It’s what Hans calls, “the miracle worker complex.” Hans and Shawn also discuss what it means to rely upon a sales platform like Amazon. Do you own the customer or does Amazon? And Shawn explains the biggest takeaway from his most recent Vistage meeting.

— Loren Feldman

Guests:

Hans Schrei is co-founder of Wunderkeks.

Shawn Busse is CEO of Kinesis.

Producer:

Jess Thoubboron is founder of Blank Word Productions.

Full Episode Transcript:

Loren Feldman:
Welcome, Shawn and Hans. It’s great to have you both here. First of all, Shawn, how are you feeling?

Shawn Busse:
I’m doing okay, like, three quarters speed here. I just got a COVID diagnosis the other day, so kind of struggling through that.

Loren Feldman:
You’re trying to work through it?

Shawn Busse:
Yeah, I’m trying this Paxlovid, which is supposed to help with symptoms, and it does seem to be working. So I’m really thankful for that.

Loren Feldman:
All right, well, if you can’t get through this, we will understand. If you don’t mind my asking, do you know how you got it?

Shawn Busse:
Oh, yeah. It was a Vistage meeting. It was pretty much a super-spreader event, too. Basically, one guy said, “Hey, I just got confirmed that I was positive.”

Loren Feldman:
While you were in the meeting?

Shawn Busse:
No, no, no. Right after the meeting. And then the emails start rolling in: “Oh, yeah. I just got diagnosed. I just got a positive”

Loren Feldman:
You’re not the only one.

Shawn Busse:
Yeah, I think there were probably 10 or 12 of us. And I think so far, there have been four or five positives. It just shows you how infectious it is, because the person who brought it to the meeting as a special guest, a gift, he wasn’t really even near me that much during the meeting. It’s a pretty big space. It’s an older building, though. So I just don’t know how good the ventilation was in there. But yeah, so it wasn’t like we were side by side the whole time or anything.

Loren Feldman:
Hans, have you had COVID?

Hans Schrei:
Yes, I had COVID earlier this year. It was no big deal. It was kind of frustrating though. We spent two years avoiding it, and then like, “Oh, now.” But it was like a cold, I guess.

Loren Feldman:
And were you able to work through it?

Hans Schrei:
No. It was like a bad cold.

Loren Feldman:
Gotcha. Well, here’s where I want to start today. The last time the two of you were on, about a month ago, we were talking about how outside capital can be a ticking time bomb for a business. Hans, anything new with you?

Hans Schrei:
We got a little bit of funding. Not our whole round, but a good start.

Loren Feldman:
Congratulations.

Hans Schrei:
Thank you. Thank you.

Loren Feldman:
I saw your tweet on Twitter. Tell us: What can you share about your funding?

Hans Schrei:
Not much. It’s not as exciting. It’s just a part of it—a small part. Again, it’s great to get started, and we are confident that we’re going to raise the rest. So it allows us to get started. We’re still doing the fundraising. I guess it gives confidence. It will give confidence to our investors who say, “Oh, okay, okay, they have a good start. They have some funding already. They are executing.” So we’re in a happy place.

Loren Feldman:
Can you tell us, what kind of entity did you get the funding from?

Hans Schrei:
An investor, like an angel investor.

Loren Feldman:
An angel investor?

Hans Schrei:
Yeah, yeah. We’re not taking VC money just yet, because of the time bomb that we were talking about.

Loren Feldman:
So Hans, how does this change things for you? What does this investment mean, in terms of where you’re going in the short-term?

Hans Schrei:
We’re staying the course. One of the things that we decided was we’re gonna play the long game. I read something on Twitter that I found to be brilliant: “Growth for growth’s sake is the logic of cancer.” And that really hit me. Like, I’m gonna put it on my wall, actually, because we’re staying the course. The mistake that we have made before was, “Oh, there’s this opportunity for growth.” And yeah, awesome, it’s great that there’s an opportunity for growth. The question is: Is this a qualified opportunity for growth for us? And a lot of them are not.

We were comfortable, independent, getting the things done. But this puts us over the line where we get to say, “We’ve worked very hard this year to put ourselves in a place where we have a lot of options, where we can say no to whoever we need to say no to.” We actually said no to $3 million last year, and it was the best thing we ever did for ourselves. So now we have the opportunity to say, “We’re gonna wait for this opportunity.” We’re gonna pursue this one first, or we’re gonna go at our own pace, because our company does not depend on the whims, if you will, of vendors, of customers, or institutional customers.

So I think we’re on a good path where we have the liberty to just keep working, to just keep growing, but to go at our pace. And it’s been a really rough year, in all regards. But it’s definitely paid off, in what we can do now with it. It’s just: Build what we want to build, as opposed to responding to whatever market demand there is. I don’t know if that makes sense.

Loren Feldman:
It does. Hans, in that tweet, I was referring to, you noted that your funding had finally come through. But you also said, “instead of letting me sleep soundly, it’s giving me an anxiety attack.” What were you referring to with that?

Hans Schrei:
You know, the first thing that I did was pay off all of our credit cards. And then I’m like, “Okay, perfect,” because one of the things that I keep talking about and getting back to is, just the fact that you’re a founder, that you get to be a founder—regardless of your success level—puts you in the 1 percent of privileged people. That is just the way it is. We get to not have bosses. We get to choose not to have bosses. We get to say, “Oh, I’m gonna start working at 11 this morning, because I have a doctor’s appointment, and I’m gonna work late. And I’m gonna work this Sunday, but I want to take Friday afternoon off.” We’re absolutely privileged, and what I’m seeing is that that comes with a lot of pressure and with a lot of expectations that you set up for yourself.

And also, if you involve someone else—at first, of course you want the validation, both of your company and of you as a person. And the validation is great, and it feels awesome. So you say, “Okay, now it’s not that I’m raising my salary, but now I don’t have to worry about where my rent is coming next month.” So good. That’s amazing. But then it’s like, I don’t really get to screw this up. Like, I really need to get it together to really execute properly—actually, no, to really execute excellently.

So it’s a lot of questioning yourself. I know that I have a plan. I know I have a very clear plan. But it’s like a lot of: Am I asking the right questions? Am I planning the right things? So I guess it never goes away. That little bit of self-doubt never goes away. So it’s, “Oh, okay. Now, I don’t have an excuse to fail.” I had it before when I didn’t have funding. Like, “Oh, the funding didn’t come through.”

Loren Feldman:
Well, you still have an excuse. I mean, lots of funded companies fail.

Hans Schrei:
Yeah, but no one wants to be there. If the funding never came through, then, “Oh, well, we never could make the funding work.” If the funding came through, that is another problem.

Loren Feldman:
I think what I hear you saying is, it’s one thing to put your own money at risk. It changes the dynamic a little bit when you’re putting somebody else’s money at risk. Is that part of it?

Hans Schrei:
Yeah, absolutely. It is a different feeling. The way we set this up, it is a very freeing thing. It is not someone breathing down our backs, someone expecting that we have unicorn status. So it’s a good place.

Shawn Busse:
One of the things you bring up, Hans, that I think is really important for owner-operators to think about is: What do they want out of life? When I was in the early stages of rebuilding Kinesis, I really bought into the growth train. Like, “How do I grow this thing? How do I grow it fast?” And we were 30-40 percent every year, year over year, winning these awards. And I never really stopped to ask, “Why?” And I think there’s just sort of a default to, “If you’re not growing, you’re dying.” There are those kinds of tropes out there, and that the winners are growing—not only growing, but they’re growing fast. And all the press and media celebrates that.

And what’s really funny is, you can have companies that are growing really, really fast but actually aren’t making money. You can have companies that are growing really, really fast, where the owners are miserable. I mean, just totally miserable. And then you have these companies that are just, like, “Slow and steady wins the race,” and they’re happy. And the thing about a well run small business is it throws off a lot of capital, if it’s run well.

Now again, you’ve got to have a well-run business that’s working well, but it’s just a really awesome way to prosper and really kind of move forward your financial returns. And I think that what you touched on, Hans, is that the investment community has this idea that that’s not enough—that, actually, you’ve got to be crazy, in terms of the returns: Facebook-level crazy, in its early days. So I think it’s a really cool thing that you’re kind of asking some of those questions.

Hans Schrei:
Yep, thank you. Well, I absolutely agree with you. And actually, we had this conversation this week with the principal of a VC fund, that I’m not gonna publicly tell you who it is. But I can tell you that every single founder I can think of in the CPG space would like to have the meeting that we had—every single one of them. And it was very illuminating, because this was a person, a very experienced person in a position of power, a very interesting position of power. And basically what she said, “You don’t want VC. You don’t need VC. You build. I think you’re missing the forest for the trees here.”

Because we told her everything that we were doing. And we were not pitching her. We were not pitching her, because we have come to this conclusion ourselves. Like, it is not the time for that. And also, there will be a time for that if and when we decide, “Okay, it is a time for us to exit to really grow, to hire a CEO that really gets to grow the company, to find a private banker to sell it,” whatever it is we decide. But the whole conversation—that was her expression, actually: “You make a deal with the devil. You get to grow. You have the media. You have all the fun things. You get a picture of the shelf with your products.” Oh my God, we’re in Target. We’re in Walmart. We’re at Costco. And that is a lot of fun. And this is the thing that we suffer from.

The problem with founders, I think, is that a lot of us—I don’t know if it’s your case—but in my case, a lot of it was, “Oh my God, my boss sucks. I can do better. I can do better than this person,” and then you go out, and there’s no one to tell you that you’re doing it better, other than the media and investors and all those things. So what this conversation was all about is, like, “What you need is to really build and to get yourself in a position where everybody wants you because of what you’re building. Then you get to choose, if you want.”

Her point was: “Dealing with retail is gonna accelerate your growth, but it’s gonna make your creation slower, by necessity. You need to choose: Which one is it going to be? Your brand is great.” And her point—I don’t agree 100 percent with what she said, but she had a great point—What else can we create and then scale, versus if we just scale because we have to? So we’re actually, where we are is, we’re getting off the Ferris wheel for a little bit. And again, this year has been rough.

Loren Feldman:
Rough in what way, Hans? What are you referring to?

Hans Schrei:
Okay, the story of Wunderkeks: We went from nothing to $5 million in the span of 18 months. It was insane. So we didn’t have the financing structure for that. We didn’t have the capital for that. And the problem is that whenever the business slows down and you don’t have capital to support that, then you’re in trouble. So that will happen.

Loren Feldman:
In trouble, because you don’t have the money to create cookies?

Shawn Busse:
Enough cash flow.

Hans Schrei:
You don’t have the cash flow, yeah, for a lot of things.

Shawn Busse:
You don’t have money to pay your people. I mean, it’s bad. That kind of growth will destroy a company. It’s brutal.

Hans Schrei:
It almost destroyed us. And this is the funny part. The media loves to hear that we made $5 million last year. They don’t know that it almost broke us. I mean, it is what it is.

Loren Feldman:
How did you break out of that, Hans? Is it by getting an investor? Or had you already solved that problem?

Hans Schrei:
We solved it by not burning any more money that we didn’t have. We do have debt, and we’re dealing with that. It sucks to have debt, but we have it, and we’re paying it off, as slow as possible. But we had to slow down, and we made the choice: We are slowing down. Because this is the other thing: The solution is not to grow faster. I think that’s the approach a lot of people have. “Oh my God, we need to burn more money.” You dig a hole, and then you’re gonna dig deeper. This is super common. Like, we’ve seen it happen.

Shawn Busse:
It’s so common!

Hans Schrei:
Did you guys see that WeWork show?

Loren Feldman:
Oh, yeah.

Hans Schrei:
That is the extreme. But that’s exactly what it is. So we really slowed down. We stopped spending money on ads. We made a bet: “Okay, we’re gonna be able to make this work on corporate sales and retention for a few months.” And that’s what we’ve been doing. And then Luis and I just spent a lot of time just talking to people—to all kinds of people—and asking, “Hey, who should I talk to who can help me figure this out?” And the way we approached this conversation sounded like, “I would love to understand your approach on what you’re doing here.” And then you let people talk, and you tell them your story and see the whole mission of the company. The whole building safe spaces came out of that.

One of the things that we know now is to say no. There’s a bunch of opportunities to say no —for instance, we were talking about the Costco thing. And one of the considerations we’re having, it’s like, “Maybe Costco is not the right vehicle for us right now.” Which is not to say I’m gonna stop having the conversation and stop exploring it. But the exploration is a part of it. You get very excited. “Oh my God, Costco called us. Yes. Wow, this is amazing.” And it’s awesome. It is great. It feels very good. But then, no matter how good the opportunity is, you need to really weigh it and say, “Okay, yeah, it has all of these good things but also all of these bad ones.” And you need to understand them, which is another mistake I see a lot. It’s like, it has a couple cons, and of course it does. The list of pros and cons is not to talk yourself out of doing things. It’s to make yourself be aware of the pitfalls.

Shawn Busse:
It seems like a lot of these scenarios you’re describing, Hans, honestly, if your mission truly is building safe spaces, it seems like they’re in opposition to your mission. Taking VC money, it is going to create an environment that does not feel safe, right? It feels like chaos—independent of race, gender, and ethnicity, any of those kind of pieces, or sexual orientation. I’m just talking about safety, like psychological safety.

When you get on that train of VC money, you’re on that fast growth. It’s kind of fun, in an adrenaline high kind of way. But at the same time, it is not a safe space. It’s actually a very unstable space. And so I’m sort of curious if you’ve thought about that, in terms of what you say your mission is, versus the behaviors that you were engaged in?

Hans Schrei:
I see what you’re saying. But maybe we need to understand safe spaces—more about a place where I get to have my own choice, as opposed to a safe and comfortable space. That’s because they’re two different things. And you know how they do this thing about the circle that’s your comfort zone? And you need to be out of your comfort zone, but not so far out that you’re in panic mode. So I guess it’s all about: Where do you want to be? And in my case, I don’t want to be in panic mode again. I really don’t want to do it. So I’m being very mindful of where my limits are.

This year, I had a very, very big problem—mental health problem—that I am still dealing with. And it’s been a big learning experience to say, “I’m not going to push myself after this.” But on the other hand, I would be bored to death in a desk job. So to your point about VC, absolutely. You don’t want to put yourself in that position where they are pushing you in directions that you’re not comfortable with. You need to put yourself—and maybe this is very naive of me—but I think that if you build a really strong company and investors come, then you get to dictate the terms.

It’s all about: Where do you want to be? I feel more comfortable at the edge. But I understand why someone—and the safe space is this—I no longer judge someone. I would say to myself, and it was very immature of me, of course—“All of my friends who have these cushy jobs, and they make a bunch of money, and they have a really nice car, and they don’t have to worry about next month’s rent. They are so mediocre, so comfortable.” I don’t think like that anymore. I think they made a choice. And it’s their choice and the safe space is in making that choice for yourself.

Loren Feldman:
Hans, you don’t have to answer this question if you don’t want to, but you referred to having a mental health problem this year. And I appreciate your acknowledging that. It’s something that we’ve talked about on this podcast before, and it’s just a really healthy thing for people to acknowledge that. And I think it helps a lot of other people to know that others are going through it. If you’re comfortable answering, was the way you dealt with your mental health problem what you referred to before, in terms of just slowing the business down and braking, or—

Hans Schrei:
Oh, no.

Loren Feldman:
Or were there other aspects of it that you feel comfortable talking about?

Hans Schrei:
Oh, yeah, of course. This is what happens, and this is a problem that I have, and this is part of the safe spaces as well. And I love talking about this. Frankly, we can do a whole podcast episode about mental health, if you want. But this is the thing: When you, founder, get yourself in a hyper-successful situation—your company grew 50X last year—then you get this miracle worker complex, which is slightly narcissistic. You get to this point where you think you work miracles, which is awesome when they’re actually happening, when the company is growing amazingly well. You look like a miracle worker. People regard you as the miracle worker. And then you start seeing yourself as a miracle worker.

And what happens when things slow down, and it turns out that you were not a miracle worker? There were a bunch of factors involved, but you, being so narcissistic, didn’t realize. That’s when the whole thing comes crashing down. Because you’re putting your self-worth in your ability to make miracles happen. And now they don’t happen, and then where is your self-worth? So to me, there was that, layered on top of what I would say, looking back and from what I’ve learned, the problem has been there for a long time. But there was never such a big crisis that had it manifest. But I have depressive tendencies, so I’ve been going to therapy for a long time. I’ve been going to therapy for most of my adult life—which is something that I also recommend to everyone—before you have a reason to go to therapy, I mean.

But then it became a full-on depression. And there was a time, earlier this year—actually, I remember Christmas of last year—where Luis had to call my therapist on Christmas Day, because I couldn’t get off the floor. I was crying. It was horrible. It was horrible. And so we made the choice, “Okay, we’ve tried with therapy for a long time, so we’re gonna get medication, and we’re gonna get help.” We went to this thing called the Imaging Clinic where they do imaging of your brain. And they say, “Oh, this is a problem. This does this. And you see this little spot in your brain? That is what’s not connecting. So we need this and this and this type of medication to help it work.” And it worked amazingly.

But part of it, and the mistake that I think a lot of people do is—and my therapist is to thank for this, it was definitely not me—she was very clear that medication is going to help you stay in a healthy, comfortable level so you don’t break down and cry. But you still have to do the work. And you still have to do the work to get yourself out of this idea that you’re only worth something if you make miracles. So that’s what we’ve been doing. I plan to stay a little bit longer on medication, and therapy is an absolute necessity to me. I mean, I wouldn’t give my therapy away, regardless of how much I feel better, and I feel amazing. I mean, of course there are still days where it is rough, but the same way that it is for anyone. But yeah, it is very, very dangerous to put yourself in a position where you and your business see yourself as one.

Shawn Busse:
Yeah, I’d say that’s probably one of the top three pitfalls of business ownership. They’re all kind of interrelated, too: imposter syndrome, correlating your self worth with the business’s success. I mean, it’s so hard, and nobody tells you about this stuff. Nobody tells you it’s coming. And then you’re in it, and you feel like you’re worthless.

Loren Feldman:
And it kind of never goes away. I mean, I’ve talked to a lot of business owners who experienced this when they sell their business, and suddenly, they don’t know how to introduce themselves. They go to a cocktail party, and, “What do you do?” And they don’t know what to say. They thought they were a business owner, and now they’re not.

Hans Schrei:
That’s interesting. So it’s a form of emptiness syndrome. Actually one thing I make a point of saying this to people—say, potential investors—if it’s a problem that I am actively dealing with my mental health, they are not the right investor for me.

Loren Feldman:
Wow. Have you had investors respond that way?

Hans Schrei:
No, of course not. Not in public, not to my face, not to my face. But I’m pretty sure some have thought it, and good for them. They are in for a surprise, because we all at some point go through a low point.

Loren Feldman:
All right. Let’s take a quick break to hear from our sponsor, and then I’m going to come back and ask Hans about another one of his tweets. We’ll be right back.

[Message from our sponsor, Work Better Now]

Loren Feldman:
And we’re back. So Hans, I’m gonna make you really careful about what you tweet in the future. Anything you say can be used against you. You tweeted—I think after the tweet about your funding—that you need to build a team of seven within the next three months, and, “It’s frankly the most overwhelming professional challenge I’ve ever dealt with.” So I’m curious, why do you need to build a team of seven in the next three months? And why is it feeling overwhelming?

Hans Schrei:
Maybe the overwhelm came from doing silly things. I do have a plan to build a team of seven. I do need to hire a couple people, because we have a lot on our hands right now. Maybe it’s six months for the seven. My ideal situation—and this is a thing that I tend to do, and I think a lot of entrepreneurs do, and the successful ones are the ones who break out of this—in my idea: “Oh, my God, January 1, 2023 is the first day of school. And everyone, my new team, is gonna come with their little backpacks and their pencils, and we’re gonna get to work.” That is not how it works. I wish it were. It would be great for me.

So I’m gonna have my whole team, and they are going to be listening to what I say. But I’m not their teacher. And they are not my pupils. So it’s a longer timeframe. It is more about when we find the right person for each role. So it is challenging, because it is giving a little piece of what you’re doing away and giving up control, which I am not great at. I have had to learn. And I’m pretty sure I still have to learn a lot about that. But it is giving away decisions that you wish you could make, but I just cannot anymore. I cannot try to grow a company into a billion-dollar company and be complaining about whether this pink is the right—

Loren Feldman:
Hans, was that billion, with a B, that you just said?

Hans Schrei:
Oh, yeah, yeah.

Loren Feldman:
To my mind, that conflicts a bit with the comments you’d been making previously about your capital?

Hans Schrei:
No, no, no, let me just be super clear about this. We do have a vision for Wunderkeks. The thing is that we don’t have a six-month timeframe to achieve it, nor a one-year timeframe to achieve it. So where we are is: We’re in no rush. At some point, we will be ready for this.

It’s like a plane. The plane doesn’t depart from the gate. It needs to position itself. So this is probably a good analogy: The plane is being filled with passengers, then we’re going to move it, and we’re going to taxi. And then we’re going to set up on the runway, and then we’re going to fly. If you try to fly from the gate, you will collapse. So that’s probably where we are. So instead of, “Oh my God, we’re going to be in 7,000 supermarkets in 2023,” no, we’re going to position ourselves so that when the time is right, and we’re ready, then we get to push the button and say, “Okay, we’re ready to go.”

Loren Feldman:
Will you think you’re a failure if you end up with a $100 million company?

Hans Schrei:
No, no, not at all. I don’t know if I should say this, but I say a lot on Twitter, I guess. So, where we are is this. Luis and I, we’re tired, I guess you can say. It’s been a rough few years. So right now we feel like, when there’s this relief, we got the funding, we just collapsed with relief. Like, “Okay, great, now we get to work.” And so what we’re saying is that we’re committing to ourselves, to each other, that we’re gonna give Wunderkeks three more years.

Loren Feldman:
Three years to do what?

Hans Schrei:
Three more years to run the company and grow it. At the end of each year, we’re gonna decide: “Do we have enough? Or do we want to keep going?” So instead of looking for an exit in 2025, we’re gonna keep growing it, and then we’ll decide. And we’ll decide based on a lot of things because you never know. I don’t think it’s super healthy, I mean, there’s a bunch of entrepreneurs who are like 25 years old, and that’s awesome, but we’re not there anymore.

We had a little bit of a health scare a couple of weeks ago, and that made us think a lot. And the idea is, “Okay, we’re in this boat for the next three years, and we’re gonna keep figuring out, ‘do we still want to do this?’” Because I think that if we give it 10 years, we can have a billion-dollar company. I’m sure of that. What I’m not sure of is if I have the 10 years in me. And that is absolutely fine to say, “I don’t have it in me anymore. I’m going to exit, or I’m going to keep it as it is.” And that is perfectly fine. That is something that we have had to learn.

Loren Feldman:
Shawn, any thoughts?

Shawn Busse:
I’m just reminded of a conversation I had with somebody right after the recession, and he ran a company that did some type of software development. And I remember sitting at lunch with him and his marketing person, and he talked about how he was going to become a billion-dollar company. And I was sort of like, “Huh…” I mean, I didn’t say anything, because I thought it was just crazy. And I was looking at their website today. And they’re like, 40 people. I’m pretty sure that’s not a billion dollars. I bet he’s making a lot of money. I bet he’s doing great. Forty people is such a great number. You kind of know everybody. You’re probably making really good profitability.

And no disrespect to you at all, Hans. If you want to get to a billion dollars, that’s great. I just remember when I was like, “Okay, we’re gonna get to a million dollars.” I remember saying that and how important that was for us. And I think it was really important at the time, because at a million dollars, you can do a lot of things that you can’t do at $500,000. And then I was like, “Okay, we’re gonna get to $2 million.” And we did that. And then we could do other things that we couldn’t do. I just wonder if we’ve not inflated everything.

I like what you said earlier, Hans, about how you don’t want stasis. You don’t want to be in a place where you’re just kind of not stretching yourself, but you also don’t want to be in panic. It’s like the zone of growth: The space where you’re like stretched but not to a place where you’re really, really in a place of bad instability. I like that idea a lot. I think it’d be cool if more owners thought like that, like, “How do we stretch ourselves? How do we get to that next level?” As opposed to, like, the software guy was talking about, this just totally unrealistic idea.

Hans Schrei:
Yeah. Let me show the same thing from another side. The way I see it, Wunderkeks is a company that we’ve built that has the potential to be a billion-dollar company. I am sure of that. Whether I want to take it all the way there is another question, and it’s an open-ended question. So I say, “Can Wunderkeks be a billion-dollar company? Sure. Give it 10 years and a bunch of money.” But I’m not sure I want to get there is what I’m saying. I’m not sure I want to do this. This is the thing that a lot of entrepreneurs don’t think of. I’m not sure I want to pay the price to be a billion-dollar company.

Loren Feldman:
All right, we are running short on time. I would like to hit one more topic before we go today. And that actually comes out of a story that we highlighted in the Morning Report recently about selling goods on Amazon. And it talks about one company in particular, a company called Peak Design that makes backpacks. They did a video that blew up and went viral about their dispute with Amazon, which grew out of Amazon just knocking off the product that their customer was selling on their marketplace.

They created a cheaper version of it. They kind of took part of the name. They took some of the features—kind of an amazing thing to do to someone who’s your customer. And obviously, Amazon has all the data. They knew exactly who was buying it, what was working. I’m curious, have either of you had any experience selling on Amazon, either directly or through a client in your case, Shawn?

Hans Schrei:
Minimal.

Shawn Busse:
You know, I’m mostly in the B2B space. So I don’t have a lot of clients where that’s a really relevant channel. But I do have some friends who are in the consumer product space, and who have sold on Amazon and other channels. And I really appreciate you highlighting that story. Because for me, what I thought about was, “Who owns the customer? Do you own your customer? Or are you renting them?”

And I think a vast majority of early-stage companies make the mistake of getting some traction by renting customers. And what I mean by that is, they’ll build a Facebook campaign ad. And they’ll get a bunch of new business through it. Or they manage to kind of figure something out with Google, and they get a bunch of new business. But they’re really renting those customers. They’re really capitalizing most often on the customer having a need or looking for something.

Loren Feldman:
But because they feel they have no choice, right? That’s where the customers are.

Shawn Busse:
Yeah, true. Well, before Facebook, people went out and got customers. Businesses started before. And before Google, you got customers. There are other ways. But because it’s so dominant, and in some ways, it can be so easy, that if you build your house on this one pillar of a customer base, it’s super, super, super risky.

And I think Peak is a good example of having a superior product and actually a pretty loyal fan base. So I wouldn’t say they fell victim to totally renting customers. But I think it’s a really good reminder to always be aware of: Are you owning the customer relationship? Do you have a relationship with them? Or are you just simply renting them? I know you have some experience with this, Hans.

Hans Schrei:
I absolutely, absolutely agree with you, and I will add something else to that. Amazon doesn’t look at their vendors as customers. They look at their customers as customers. So you need to be very careful. The same thing that happens with social media: You’re not the customer of Facebook. You’re the product. The customers are the brands who are advertising there. So you need to have those relationships very clearly. And I think a lot of things in business get better when you have a very clear understanding of what the relationship is between the parties.

Shawn Busse:
Yeah, I have a friend. He has a company called Grovemade. They make accessories for your desk. So think about a mouse pad or laptop stand or a monitor stand, really beautiful stuff. And they grew… oh my gosh, they grew like 500 percent in 10 months because of the pandemic. Everybody went home and decided they needed something for their desk. So Ken’s company, Grovemade, what they had done before they saw that growth, they went and understood their customer really well. I mean, even to the point of Ken, who’s the founder, he drove all around the country road-tripping and met with customers—like physically met with them.

And what’s really cool about that, is he discovered all these things about what makes a really good customer, and how do you build that and nurture that relationship for the long-term? He could have gone the other way, right? He could have bought Facebook ads. He could have bought Instagram ads, all that stuff. But he hasn’t done that. It’s largely been slowly building a loyal customer base, and then more recently, using things like influencers. And that’s a little risky, right? Because the influencer, again, you are borrowing their customers. But it isn’t his only play. And I think there’s a really good lesson from Ken on his process of getting to know the customer really well and like having a relationship with them, as opposed to borrowing them through advertising.

Loren Feldman:
Hans, I think initially you said that you did have some minimal experience with Amazon specifically. Did you try it and not like it?

Hans Schrei:
No, no, no, it was just that our product—it’s very hard to sell on Amazon, unless you’re using Amazon Fulfillment, for a bunch of reasons. And in our case, it didn’t really make sense. What we are doing is, our product is on Amazon, but we didn’t really put any effort behind it. So if someone looks for it, it’s going to be there and they can buy it there.

Loren Feldman:
That’s important, because so many people search for products there.

Hans Schrei:
Yeah, exactly. But the margin is less. There’s a bunch of price things, so it’s not worth it. For our current product, it sort of doesn’t really make sense. So we just have it on autopilot.

Shawn Busse:
Yeah, I think that’s a much more sustainable approach than building the entire channel on Amazon. But there are people who do that and have been successful. I won’t dismiss that. It’s a totally valid strategy. But I think Peak Design was such a good example. And I think what Hans is saying is: You are not the customer when you sell on Amazon. You are definitely not the customer. You are a datapoint that they’re gathering. And, and at some point, they may decide that, “Oh, this is a great product. We’re now going to make it, and we’re going to undercut you.” So it’s a good lesson.

Loren Feldman:
All right, we’re gonna have to leave it there. My thanks to Sean Busse and Hans Schrei and to our sponsor, Work Better Now. Thank you so much for sharing.