We at one point we were the fastest company in American history to reach about billion dollar valuation We raised just under three and a half billion over our time. At our peak we had about a relative valuation of around 79 billion. I typed in like, "How do you buy an Amazon business?" It wasn't really anything came back on the Google search. We expected to maybe pick up, let's say, 10 to 20 brands over like a three or four year period. And it turned out to be the exact opposite. And I went to Carlos and I was like, "You smell this? That's a smell of gold right there." Towards the end, you guys were doing three, four acquisitions a month, something like that. Did it just get crazy? We had a couple times where that would happen. And then we'd say, "Danny, our president calls me and he's like, "We have a big mistake." We had like a sample exercise that a brand management team was doing. And it accidentally got entered in and our supply chain pressed, "Yes, the button." And we overordered hundreds of millions of dollars a month. You got to be pretty fucking good to make a 450 million dollar mistake. All right, welcome to the operators podcast. We've got a great episode for you today. It is brought to you as always by our great sponsors, Fulfill, NorthBeam, Post-Cripp, Rich Panel, and Sarah's. Let's get after it. Fulfill Adalert, everybody. Fulfill X-Claw just dropped. There is now a chat function in Fulfill where you can get GPT answers to all of your top questions. Do you want to know Q4, forecast? Do you want to know your balance sheet? Do you want to know where customers are shopping across the US? Ask questions in native language and get answers right back to you in Fulfill. Jason's using it right now. Jason, how are you using it? Well, our team is just always dying to get information quicker. We have so much of our business that's run on Fulfill. So instead of having to dig through stuff, dig through spreadsheets, etc., just to be able to have things built on the fly really fast. I'm all about speed of execution and communication. And this is just going to help speed everything up for us. I'm really stoked about it. Sheroon, the CEO of Fulfill, sent me an email and he's like, "Hey, here is your Q4 day-by-day order projections. And here's the best bundles should have on your website. I don't have to do any work. That's pulled straight from Clawed in two questions." And now anyone using Fulfill can look like a genius and get answers immediately. So this is the future. This is where everything's going. You need to have all of your information in one place. Then you can put AI on top of it. We're using Fulfill for that. Fulfill is using Clawed or GROC or ChatGPT. They could plug into any AI tool you want. You can get all of your Fulfill information with simple, native language prompting that you're used to, like a ChatGPT or anything else. We can ask in one sentence, build a heat map of where our customers are in the US by state based on revenue. Show me where customers who brought product A and return product B and what the LTV pattern there. You could break down Fulfill and cost by carrier by region by product for all orders or just orders for better over 150 bucks. Any sort of segmentation you want is available with this because all three data is in Fulfill and you can access it with Clawed with native language. It is what is happening in the future. We are at the point where AI tools are plugging into your data via an ARP-like Fulfill. We're getting a lot of value out of this. Jason's getting a lot of value out of this. Check it out today. Go to Fulfill.io/operators. Thank you for Fulfill for supporting this awesome podcast. John, welcome to the operator's podcast, man. Happy to have you here. Who are you? Maybe an intro for the squad who doesn't know. Yeah, no problem at all. It's a pleasure to be here. I haven't known one of these in a while, but we'll see how it goes. My name is John Hefter. I was one of the founders of Thrasio, which was the first and eventually largest Amazon aggregator on the planet. At one point, we were the fastest company in American history to reach about a billion dollar valuation. Went from four of us to about 1600 employees at the top. It was a crazy whirlwind that all happened within about almost like a two and a half year period. Went from there, I took an exit, a sort of force out leave as is pretty common in the equity space. The company's taken a pretty serious downturn since my exit. It's a lot of reasons for that that we can dive into. From that, I'm an entrepreneur, kind of messed around with doing different businesses after sort of a failed career as a TV producer a couple of years ago. Yeah, I always think myself was like 150 years ago. I could totally see myself like standing out of soapbox and like Atlantic City boardwalk selling stuff. I love the idea of finding a cool product, figuring out why it works and getting it in the right hands. And that's something that's always just fascinating for the psychology of transactional business. All right, dude. You got hustler blood. And here on the operator's podcast, you're announcing it for the first time, Unicorns On Fire, the Thrasio Tell-All Story in book. It's coming out soon, but we're going to be a little preview today. So first, for people who don't know who missed it, what was Thrasio? Yeah, so Thrasio started in one of our co-founders basement in his wine cellar, Carlos Cashman. He had taken an exit from a Facebook ad agency. We're kind of figuring out what should we do next. I used to work with him as a consultant. He was my neighbor. We got along really great. And we had all these e-commerce guys who were doing ads on Facebook. And they were all just like, "Hey, man, I'm kind of crushing on Amazon right now. I don't know why, but it sort of came out of nowhere." So we started like, we were kicking around all kinds of silly ideas. We were going to do a high-end apothecary business that was like retail. We wanted to do like a ski goggle company just buying stuff off of Alibaba. We were just sort of like playing around like, "What's the next thing?" And then we kind of came to conclusions. Like, "Well, what are we doing building when we have the capability to raise some money and buy?" Right? And then what should we buy? And then Josh came to the picture who was one of the other co-founders. It was an amazing financial brain. Just one of those like 150 to 170 IQ types, you know, business background had done a lot of exits themselves. And they said like, "We should do it. We should do a roll-up." Like, "What are we thinking?" And like, to figure out where to do that. And I literally, December maybe 2016, I typed in like, "How do you buy an Amazon business?" It wasn't really anything came back on the Google search. We literally just started reaching out to sellers and just collecting information. We figured out pretty quickly after talking to some of the sellers and talking to some business transactional groups. So like, there really was no market for this. And there was no like real money buying these things. It was all like retired accountants and things of that nature. So like, "Why don't we dive into this?" And we never really, but we expected to maybe pick up, let's say, 10 to 20 brands over like a three or four year period, build a really nice, healthy portfolio. And Carlos and I used to really joke because we're going to have this type of business where we can like, you know, take walks in the woods like three days a week and talk about business. Just a nice, calm lifestyle business. We really started in an industry that had no money in it. We raised just under three and a half billion over our time. And they'd tire space raised closer to, I believe, around 10. And it happened like in a flash. It was such a surreal experience to sort of be like, just watch it happen in front of you, you know? Yeah. So let's go back to that basement. So it's like four buddies hanging out. You Google how to buy FBA businesses and people are like, "What are you talking about? Nobody's doing this." You know, your goal is 10 or 20 brands. Did you buy the first 10 and then you realize like, "Oh, this is a hockey stick?" Or what was the unlock that made you want to go bigger and bigger and bigger? So our first thesis was a total failure because we didn't understand how the Amazon algorithms worked. We're like, let's buy a business that did really well and then just kind of fell off a cliff and then we'll buy it and we'll find a way to fix it. Not realizing that this pie, Amazon's algorithm was basically like, they kind of put you in like a dead zone once you fail for long enough. You'll never get backed up to where it was. So our first one was a milk froth or business and this lady had done really well. She had a couple like PR stunts that worked out for her and she was doing about a million a year and then it was down to like 300,000 years or something like that and that's when we bought it. So that one failed and then we bought a couple of the ones that I'd say were like middling successes but not enough to go and like do a real fundraising story. On that though, this one came over my desk and it was a pet deodorizer company and what I did is I just looked at the reviews and there were 100% organic. There was no fake reviews popped in there. Worst listing I've ever seen. It was just like a picture of the product. It looked like it belonged like a really vape store. You know, just had this horrible label. The reviews that were like this product saved my marriage. Like I love this stuff. Like I am a preacher for this brand without them even knowing it and I was like, all right, well, it's one on Amazon clicked on it. Bottles showed up. I opened it, smelled like a fresh bag of oranges and I went to Carlos and I was like, you smell this? That's a smell of gold right there. Actually, Carlson Jeff didn't want the brand. So I was like, guys, you can kick me out of the company if this thing doesn't work. So it was probably doing about, I'm going to say, if I was to guess two and a half million a year in sales immediately met with a manufacturer.
Scooter rounds as stable as a formula a little bit more Change the bottle from this like brown amber color to a bright orange did a Beautiful brand redo with our great creative person Mallory at the time came I came with a slogan like smells like heaven works like Did a harm really push on On Facebook I got like I did a commercial with Snoop Dogg and a couple other things and I was like really all in on this and in my idea Was like if we if we can push a bunch of outside traffic and create a a world around this like our rankings We'll just shoot to the roof of the day We change over the orange bottle as sales doubled first egg and then it just started going like full full hockey stick Then I did a pre mix. Sorry. It became a concentrate and I was like I'm lazy. I don't I don't it deal like mixing anything So then we made like a 24 ounce like red to use spray that instantly Double the business right away because we were taking up more of the page and before you know I went from this two million dollar your brand is something I want to say by year two or three and we were we were Plus 35 40 million with that brand and and that became the story for the entire industry At that point we're saying like hey, we have these other brands here We're able to buy him for a multiple like two X stabilized them maybe make some minor accruements But every once in a while we hit one of these and you get like a 10 X return And that really was the big handling that started the big fire So John what what year did you buy the deodorizing brand? to to to to I Want to say it was roughly March or so of 2018 I believe okay, and you know just to take us back to that moment in time What was the multiple on a two and a half million dollar business like how much out of pocket you have to pay? To upfront, you know, that was that was high at the time Like we were really looking at we had you know We had earnouts we you know all kinds of creative structures, but when the industry first started there was no competition Right and then what happens is these these sellers get to a place this this guy who developed angry orange bought the formula from his brother-in-law who's a chemist started feeling bottles in this garage He had no ability to run a nor did he want to want a three million dollar business He was just looking for a side hustle to give him an extra 10 grand a month So those are the people that were buying from there like this is too much now I don't I don't know what to do. I don't I don't want to build a team around this So really in the early days Malt our average multiple that was also part of the story right was like roughly two up front capital was cheap It became this really neat Organized kind of story. Yeah, so you could you could buy something for a two X multiple You could put in blood sweat and tears, you know one in ten of them would ten X but five out of ten of them would five X revenue Right or three X revenue something like that you could you could add structure to these businesses and have them scale You know you you're doing this in 2018. This is pre-COVID. There's no competition in the space How many acquisitions do you end up doing before March 2020? I want to say we were we're close to 50 at that point I mean look 50s a lot, but it's not crazy, right? You're talking about three years into the business 50 acquisitions It's like look that's pretty aggressive But if they're all small it's not that unheard of you could probably support it I mean it's 1.4 a month now Over three years and the biggest private equity groups do a deal a month So you're you're out batting them but with way less due diligence Well, you know a way smaller businesses. There's no lawyers in these negotiations, right? We're when you're buying something for 500 grand. It's a lot of it's gonna be I assume handshake to John You mean you you were in the room. What was happening? It really depends. I mean we had You know one of the issues was is like we had Josh one of the greatest financial minds ever met One of the by far one of the best fundraisers ever met you just walk in a room and like He was always kind of disheveled and like his eyebrows were all over the place and yet his old suitcase We're like four diacokes hang out of it, but with an instant, you know, he was brilliant Right and just people just absorb that and and bought into that part of the story So he was kind of creating these like complicated deal structures and I'd be in the room You know before we had the full-amena team and I was just like I was like Josh Hank from Tuscaloosa, Alabama does not understand this I was like he's gonna understand like here's the money you're getting and this is what's happening We need to reform like the structure to make this very digestible for these types of top less sophisticated sellers So a lot of it was just like educating people that a you can sell businesses Be this is sort of how it works and see this is how we're gonna do it and what we kind of promise and we delivered on in the early days was like We're not gonna go crazy with diligence so much of it's already in Amazon We're not gonna give much credit for stuff. It's outside of Amazon because we're in Amazon aggregator But you go with us. We're gonna push so hard that in 30 days We'll have money in your bank account and and that's really what set it off and we did our first Show, you know what Amazon centric show. I was like oh my god This thing's in in like four days. We didn't have a booth. So like I went to a booth guy here at and Austin I was like you have four days. I just want a Black booth with a Amazon yellow sign that says we buy Amazon businesses. That's our whole pitch and and that was it We did a show in Las Vegas and I think we got nine deals from that show alone Because no one else was doing it. Everyone else was doing Amazon support businesses In the last 90 days my brands Pila Loamy have doubled our support capacity without adding a single new hire And that is because we moved to rich panel our Csats started all time high I think we're in the 90s now 50% of our tickets are fully automated Which means the team can basically handle two times the volume without burning out or adding more people and with a trust pilot in Gratian both brands were from a two star to a four star plus actually think four four and a half in like 90 days and The migration was probably the easiest part. I was surprised rich panel handled everything data migration automation set up training We were live in just 14 days. That's insane And the guarantee you'll cut at least 30% of your tickets in the first 60 days or you get your money back not bad So if you want to be ready for Black Friday without scrambling dad extra agents because you know I'm recording this in black friday's around the corner You should just head to rich panel com slash demo tell them Matt from operators or Sean or anybody We all use this thing. That's why we're promoting it Tell them that we sent you and they will take very good care of you. That's it. Let's get back to show What was the investor Like so like you clearly raised a ton of money What was the narrative that they really bought into like the what was the end game? I guess so like that there's an arbitrage thing like it couldn't have just been a private equity roll up at those dollar Yeah, I mean I think there was a real belief that that we could gobble up all of these assets For half of what the multiples would be for like businesses It's better to e-commerce or retail or other places We could build a platform underneath it because it's all running off Amazon Everything sinks up and then we could optimize and grow certain amount of these brands to create Something in the aggregate that's so much more valuable than just the original assets themselves Right, so that that really really was the story is like we're gonna You know we're gonna buy $200 million with a revenue for you know worth it ebita for Million up and then some of the and then we're gonna grow that to 800 million and Wow, what will your investment look like if we if we go out and do all those things and it really was as simple as Story as that but I guess like who's the terminal buyer in that case like is that an IPO like it was that the story It's like we're gonna go public is That that was something we definitely were pushing towards at the right and you know to become a eventual like e-commerce giant that becomes such a bohemus that like we end up actually then using our online Leverage to then go into retail Which we did we brands like anchor orange so that was the ideas that we're gonna we were gonna become this like Giant retail company with an e-commerce background and we were gonna have such a Advantage in size that that buying assets for us would be much easier than anyone starting out Yeah, look at it make it makes it an accent right It's often said that Jeff Bezos has made more millionaires than anybody else because there's whatever a hundred thousand Amazon sellers and we're all millionaires Right, but he's made no billionaires right because it's been so decentralized It's very very hard to be you know a big player on that pond and you guys are making a shot right so March 2020 I would say everything was basically working up until then you guys raised some capital you guys bought 50 brands You had some successes is is that is that when things became like insane or what would actually happened actually get us to We all know today So things were insane almost right away I had from from my ex-father law I had least a small office that cost me $800 a month in our small town But well-to-do town to overmass We grew out of that and went one town over and had an office that could fit like 60 people We weren't even done with the build out when we were done with that from from that point we needed Finance people supply chain new product development tech people and we opened up satellite offices in New York for Finance Houston for operations Salt Lake City for new products PPC and advertising and marketing and sort of back end Amazon stuff went to Romania and Serbia and all these offices were were opened up half of them by by me within about 18 months So it was already. Crazy where we have our like weekly calls for just like oh, we hired this person There'd be like seven new people every week now that started kind of happening After after about a year so when COVID rolled around we already had our new big fancy office and boss And we already had our satellite offices everywhere We already had a pretty massive hiring plan for what we wanted to do the future and our pipeline was filled with hundreds of millions of dollars of Potential businesses to acquire so we were really in a position to To be aggressive. I was one of those people like maybe maybe a little bit too much in retrospect But I sent the first email About COVID right around New Year's To our our executive team saying like I think something real is coming and I know you guys can sound like I'm crazy But there's something that's gonna be extremely disruptive for us like this is gonna be a big deal And it kind of got like brushed off till everything exploded and then we we just didn't know We'd raise all the money so we had a choice right which is just like slow down and wait or see it as a potential advantage and just speed up and keep going You know we made the mistake to I'm not gonna I'm not gonna put like Josh should It's so much amazing things for our business But I think he wanted to get our name out there at some point perhaps to enhance our fundraising efforts and Right around that COVID time remember in 2018 We went to like a prosper like show where we the only aggregator or buyer of Amazon businesses there by the time You know events started opening up post-COVID there were there be 35 people doing all we were doing Competition went really fast and then supplying demand. There's just not enough quality assets to purchase and Multiple started to crawl up from you know to X to people were paying seven for like Chinese vat. Go where garbage Right really it really started create this this environment, but we were already on this train We had capital. We had to deploy we had goals. We felt that we needed to map there really was no choice for us, but to But to keep going and try to keep our advantage as the big bad bullies on the block Right, so like you you guys were pocket committed, right? You you had you had a strategy and you're gonna push it forward So I do want to talk about what went wrong but quickly at its peak. What was revenue? How many acquisitions did you guys do like how how big did the beast get before? It blew up. Yeah, so at our peak we had about a Relative valuation of around seven to nine billion we're doing well over a billion in revenue with just under 200 brands acquired Like I said roughly around 1600 people working for us. Yeah, man 200 acquisitions in you know what four years or something It's like yeah, we'll less than four years. Yeah Yeah, so like I mean I Towards the end you guys were doing three four acquisitions a month something like that that it just get crazy We had a couple we had a couple times or that would happen in a week man. Okay, so I mean a billion in Amazon sales You they put you guys in the top whatever 10 Amazon sellers. It's you anchor apple. Is there anybody else? Right like that's that that was kind of the top across all of these brands billions raised What do you think went wrong on that journey? I mean, there's there's so many things some were like acute Some are really modeled based some are much more subtle You know like we knew that let's put it this way that like If if we made a grayish mistake that the Wall Street Journal would be coming after us So we had to play what we would say is a mostly Clean game and maybe I'll leave some of those other details of what it wasn't in the book But like we really had no choice but to be white hat operators and what we realized is how many Businesses that we purchased remember these sellers are from all over the world you know places like Romania and South Africa and let's just place let's just say some places where Business ethics don't hold the standard that are relatively low standard in America reaches right so We we'd acquire these businesses and they were some of them were just built on you know fake reviews propping things up They were doing attacks themselves and other brands that then were depressing their sales and then we would happen as we would just we would just inherit this mess Right and that and obviously like they want to keep their money so they're pretty cagey about what actually happened it didn't happen We started seeing that we started seeing a lot of Chinese sellers enter Our lead territories one of our most successful brands. It's just a pillow company But we were the number one seller in pillows on Amazon so that one Asin was doing like 37 million a year in sales But we constantly we're getting attacked by really creative stuff too I thought it was kind of brilliant in some ways right like a Here be a Chinese seller who would upvote Like 700 reviews in two days and it'd be a picture of our pillow with like a spider caught in the packaging That was just a fake spider that they put in the bag, you know Doing all these things to when when when COVID broke out like there's and I don't know if you guys know this but there are There's a whole team within Amazon that is basically like a CIA for Amazon, right? They they're aware of all the bad things that happen out there in the world and But what while why they are aware of it is because let's just I'll give you an example You've got a someone with high level access in India working for Amazon for 21,000 a year and a Chinese seller gets gets somehow gets that Indian person and says I'll give you a hundred thousand dollars to mess with this listing for two days. What what's gonna happen? Right, so so we had in like when COVID broke out We had one product that was a selling well in Europe and we got a safety violation filed one hour before the one The Amazon key European offices closed down shut that listing down for 50 days so There's that side of the business is sort of like wild west kind of you know Thing that was happening the third party market place, which is really significant in 2018 That kind of like worked itself out a little bit Amazon got much better dealing all that there was so there was that piece of business All right operators real talk if your dashboards are weak old They're not insights their history you probably heard we talk about cleaning up our data Well, we finally have it dialed and it's because of Sarah's pulse We have a data foundation. We can fully trust pulse connects us to over 200 sources We've got to connect it to so many sources Shopify Amazon TikTok fulfilled net suite every dashboard is Complete accurate and exhaustive my team is in the dashboards all the time no gaps no mismatched numbers no manually assembling spreadsheets we must have killed 12 spreadsheets and Combined them into into one dashboard and our daily growth dashboards are integral to the growth team showing the true Cat by channel by country our executive dashboard ties revenue to contribution margin down to the skew level and more importantly Like we get this fast and These are actual is not estimates and in today's environment every percentage point in margin with tariffs and and Costs of marketing costs going up every percentage point matters, right? And for us, it's all automated so the team could focus on doing doing what they do best Which which is growing the business and so we're also testing something brand new with with Sarah's IQ It's an AI chat layer that lets us just ask which skews drove margin in Amazon For example, Canada last week and what promo impacted repeat purchase rate and it gives the answers quickly backed by clean data Unified data and so here's the part you want to hear a few operators podcast listeners and get our early access to the beta Saras will even co-design an IQ proof of concept tied to the top three KPIs that you want to move It's not a canned demo with your data your metrics your insights This is huge just just to see it like see it alive It's extremely limited only handful of brands will get in as a launch offer if you want dashboards that you can trust and instantly answer Your toughest question talk to Sarah's analytics and yes, this is just for our podcast listeners Sarah's has just been a great advocate for the pod great ally of the pod and they're they're gonna be a lot of AI tools coming out from Microsoft Shopify et cetera, but they can only be good as as good as your underlying data infrastructure That's the thing like having your data Infrastructure set up properly is everything that's why we started with Sarah's and then they keep building more top of it But no matter what you know in the AI world you need to have a data infrastructure that works and I don't think there's any better place to do it than Sarah So you can you can also take an assessment and understand your business is AI readiness with Sarah's at saras analytics dot com So get AI ready the right way get your data in the right place go check out Sarah's analytics The other piece is just like From an accounting nexus from an organizational standpoint It's really hard to be adding new brands every week To find a qualified brand manager who can organize everything to make sure supply chains tied up to make sure Our accounting is put together and we can get numbers out to our investors and and to our taxes properly It becomes an exceptionally common
complex problem. The other thing for me, it's just like products have a life cycle, right? So, you know, we're buying things a lot of times that are on their way up, but maybe they're about to hit their curve. And without ingenuity, which Amazon is built on people sort of, you know, taking something that works, making a little bit better, and doing one thing at a time, well, we had to do, you know, 80 things at a time to keep up. And we had to build that team up from scratch, it's actually the team, the leaders of that team are working on my new business now, and stand that all up in like 120 days from nobody, right? So that's like, you know, making improvements. I'll give you one final example of a fun one. So we bought this number one seller and fruit fly catchers. It's like, it's just like a fan with a UV light and like a sticky pad worked thing actually worked great, but the cousin of the owner of the factory decide he wanted to start selling it. So our factory starts shipping us just broken units, the laid shipments to try to get the cousin up up here. And what are we going to do? Go over to China and fight, fight them in the courts there. So then they had some of the patents in China. So we had to quickly work around those patents, making it proven to the product, and then go and do some work to have a new variation or listing to then save that product that was doing, I would say 6 million a year at the time, was either going to be zero or we're going to save it and do 9 million. And those are the type of games that become became sort of what I would say, just like regular everyday business for us. Yeah, quick aside, Mike Beckham's one of the co-occurlisers podcast, his brother was the creator of the Beckham hotel collection. We know the pillow. Yeah, we are, we are very familiar with the pillow. And I think it's still the crown jewel inside the portfolio. So let's talk about like those, those attacks that happen on Amazon still happen today, right? You know, it's almost a meme at this point flagging something as a pesticide. It's like a meterly goes down. It gets reviewed. Like, you could take a listing down for two weeks if you just like reclassified the back of Amazon as a pesticide. And that's an attack that happens all the time. It just happened to our friend. Do you think Amazon has gotten better or do you think it's like it's just it's a never ending problem? But like, do they just not care? Yeah, or yeah, I would love you. You're close to them. I'm sure they do care, but like, what's happening internally? Well, I would say that I've never been close to them. I've been a person or two away to being close. I actually think they do care. I do believe that they really want real high quality products that people like because they want people to keep on buying off Amazon. But just like everything in life, like, if bribes are possible in India, then they'll always be possible, right? And then just like everything else in life, like when people try to escape prisons, you make an improvement, then there's another way. There's always another way. So I think it's something you'll you'll chase and you'll never quite fully solve. But my belief is that they do want to solve it the best they can. My sort of more controversial belief is that sometimes I think they want to see how things work and they'll let things go so they can really solve it later. Totally. It's like, I mean, same thing with drug dealing. It's like, you know, a cop's don't arrest every person with a bag on the street, like they're trying to figure out how it gets in the country and whatever else. And there's, you know, there's big sting operations. You know, on Amazon caring, but before we get off this point, they also don't want too many large sellers, right? Like, like the more large sellers are the more levers those people have, they love that there's 10,000 people knife fighting every day with zero profits, just trying to squeak out one dollar not to go back to their job. That makes it the most competitive platform for Amazon. And that's always going to be their interest. At least that's the way I see it. They don't want you to have $10 billion in sales in Amazon because then you could pull those products. And that's bad for Amazon. Ever since then, a great job making us a thousand little countries. I mean, they had that problem with Nike and Apple years ago, right? The brave, like those two brands pulled off Amazon. You know, they were threatening. It was all about like brand association. Yeah, totally. John, I get it. Like, and I don't know if you can actually answer this this cleanly, but in your sort of like in hindsight, right? Was the problem with Thrasio? Do you think it was model based? Or do you think it was execution based? Like where? Like our difficulty of execution. So like, is the model fundamentally flawed? And did you just not see it at the beginning? Like, hey, this works at this scale, but maybe it doesn't at this scale? Or maybe it's at this scale and speed? Like what's your gut? You might put those things in just, you know, like after my non-competed expired, I helped another Swedish aggregator. I really just wanted to work in Sweden. So that was like, that was my job. But now like, I really started to see the model problem in the state of business conditions that existed during that time. Right. Like when assets that should be valued at, like if we were able to go on through through time and buy things roughly at a 2x, I think you have a healthy model. If once we get into better business operational savings when it comes to technology and things, and things that nature, I think the model could be successful again. However, when you had a position where we're trying to build our own tech to make this stuff work, you're absorbing sometimes three businesses a week. That creates a just incredibly complicated mess on every single level. You're doing everything manually while again trying to build your own tech to support things. It becomes an exceptionally complicated problem. Even with the Amazon platform that makes things simple, undergirding the entire thing. I think that's really it. And the other thing too, it's just like you talked about a thousand people in a knife fight and a given category. That makes it really hard to grow your business. Right. Like again, you require these assets that aren't some part of their like product life cycle. If you don't get the launching part right and the investment in new products and improvements to your current listings, it makes for a real challenge. And there's a reason why no one's on at scale has really done it successfully yet because all the pieces aren't a place to do that. I think there might be a time like we're obviously well past the gold rush multiple went through the roof. Now they're back on the toilet where technology makes sense. I also think from one of the core fundamental mistakes we went for us with growing too fast, not because we couldn't handle the input because we're making business choices as far as the brands we're acquiring that I probably would have said now to those in a different time. You know, like you're almost giving me like we're selling like the number one selling lemon squeezer. I don't know. Right. There's there's plenty of people in China who who could be happily make 30 sets of unit selling that to undercut us and there'll be five engineers across the world designing a better lemon squeezer. They'll be on they'll be on next year and you just start this like slow to set down. We don't have that a brands that have brand equity. Sean maybe like you know like Ridge has or I can make an argument for a chance. It's really hard to keep your your place top. Right and nobody's spending add dollars to try to sell more lemon squeezers. Like there's no demand is constant and stagnant. Right. Like there's no events happening in the world being like oh I got to go refresh my lemon squeezer. Nobody's nobody's thinking that right. So look I agree that like at some point the model could work. Right. Other people have bought businesses and aggregated them and and you buy them for less and then you sell them for more. That's that's a great business model. That's private equity's entire existence. Yeah. Yeah. And Amazon shouldn't be a special beast where it doesn't work. But we just saw such a rapid influx of capital to buy you know very much bubbly assets. Right. Like e-commerce was so hot in 2021 and by 2022 it was dead. All right operators quick break. 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Every big brand I know, every good brand I know, these are NorthBeam. Mainz, Manscapes, Dollar Shave Club, AG1, Ridge, everyone in my chats. I trust NorthBeam. They're one of the foundational platforms that we use here at HexCloud. And so if you're ready to cut through the noise, stop guessing and actually see which ads are driving your business. Book a demo at NorthBeam.io/demo and tell them the operators sent you. Join the club. I think we talked about why it could work. I would love to hear about like the day it went wrong. Like, I mean, like when did you guys know? It was like, oh, this is not working. Like, was there like a moment in time? Tell us about that Tuesday. I know the exact moment in time. So anyway, again, we're hiring a bunch of people. They're great. I'm doing, like Sean, where you met me. I'm like in Dubai, giving speeches, and I'm bouncing around. And kind of the other guys didn't want to be the industry outward face for the business. And I got a lot of really large business development deals from doing events like that. Right? So I was like, I'll just stay on the road. I'm having a blast. Brandon and I, I'm working with now. My new project, we were in charge of like the PR slash like events people. So I come back. I think I maybe come back from either Europe or maybe it was even Dubai. And our team together said like, hey, we're throwing this big party in Cabo. It's a big business development thing. It's going to be like Thrasio's mark that we do. We throw the best events. And I was like, okay, well, what's what's happening at this event? It's like, oh, we're going to do. There's going to be a yacht going through like the thing in Cabo there. We're going to do Baja truck racing. There's going to be fireworks. We have ice sculptures. And I was like, okay, I was just starting a little, you know, a little nervous there. And I was like, who's going? And they showed me the list. It was it was 40 people. And I was like, but 35 of these people have already done business with us. There's no, there's no new business here. And the other five people are my friends, frankly. You know, we tell them if they wanted to sell their stuff to me. And then I was like, all right, well, how much does this cost? And she said it's it's $480,000 for the park. And I said, well, maybe we should change this a little bit. And she's too late to pause. It's already paid. So I was like, well, that's a, that's a half a million dollar less than on a party that won't bring us any new business at all. But I guess, you know, life goes on. So few weeks later, I had to travel somewhere else again. I go to Cabo, those five people were my friends were kind of like a little bit of a wild child's, you know, they were the wild ones. So actually through a private party for them to get everything out of their system before they had to interact with people. I actually work with them. I was that was my strategy, you know, so I did that strategy actually worked amazingly, which I was shocked at. And then like we had these mansions on the top of the cliff overlooking the point in Cabo and Brandon didn't travel as much as me. He calls me first. I miss his call. Danny, our president calls me and he's like, I got it. We have a big mistake. And I was like, okay. And he said, well, we had a problem with the inputs for our inventory management. We had like a sample exercise that a brand management team was doing and accidentally got entered in and our supply chain press. Yes, the button. We made all these orders and we over ordered hundreds of millions of dollars in product. And then and then he's like, I think I think we might be. And I'm sitting there literally about to go to the bar, hot trucks racing. The big grass firewoods that night, you know, the whole thing's just like, like what it, what a sham. And I started to feel and I was already getting that sort of a foster syndrome, like I don't belong here. This is ridiculous part of my journey by life's falling apart. Like what's happening to me as a person. And then to have this news kind of come in at that, that moment was almost sort of like poetic and in a way. And I like to sort of deflect things with humor. So I told Danny I was like, well, you know what? You got to be pretty good to make a 450 million dollar stake, you know. The only thing I could think of at the time, but it got to the point where I give you an example, like let's say we're we were at top umbrella. Solid like number three or something like that. You know, you some you sell 90% black and there's 2% pink. Well, they were ordering 10,000 black units and 10,000 pink units. Right. That's the sort of stuff that was that was happening because of this sort of like kind of almost innocent administrative error. Right. Right. And the speed at which we were growing, which is like you can't it becomes a monster onto itself. You can't put things in place properly in checks and balances when you're building the airplane as you're flying it. So for me, that was the moment where I knew like we were we were in a bad way. Speed is a big problem when you've got to deal in the world of moving physical things around. I think it's actually one of the things that we get like all business all business categories likes to take this idea of speed from Silicon Valley from tech. But it doesn't actually apply to every other category because when you're dealing in the land of software, you screw up, you just roll out of fix. It's instant. Right. Or worst case like you're massively skilled at infrastructure. It takes 24 hours. When you buy 20,000 too many umbrellas like they they show up, you know, there's no like rollback button. I just think that speed is the lesson here like too many people try to go extremely fast and consumer. And it's hard to stand up systems that have all of the like guard rails in place and processes in place for that level of scale. There's a reason I mean that we say it all the time in the show like there's a reason why all the multi billion dollar brands or consumer companies are old. Yeah, dude. I mean it's it's speed. It's debt and inventory kills everybody. Right. Yeah. So let's so how long did that inventory bug take to surface? Right. Was it like three months? So someone was just like always in one big order. Someone just for cross the whole portfolio. You know, it was I want to say now I'm not a supply chain. So I wasn't there for every detail. I was I believe it was either a like free or post Chinese New Year massive order for like you know, we always had issues stocking out. So we wanted to do stock outs and that was the exercise, but something happened in the mix communication and it went across almost every brand. Right. And then we had other other things that were happening were like, you know, basically you give these brand managers you give them their own portfolio. And you're supposed to look out for the greater good of the company, but at the end of the day your jobs relying on your like vacuum brand. So you want to keep sales up. So you let's say you do a bunch of lightning deals just to keep that rank up and to keep the numbers kind of moving this way. Not realizing that the lightning deals were causing other sellers to buy our vacuums and then relist them to take away the buy box. And then and then our brand manager not aware of this would then buy that vacuum back and then resell it. Right. Like there's just things like that like because you can you're talking about like there was four of us sitting in an office that's about the size of them sitting here right now. And then two and a half years later there's 600 people across 10 offices across the world. And there's 200 new companies that you didn't have before and now you have like things you're wrong. You know. Okay. So we explained why it was a good model. We explained kind of what went wrong. I would love to hear. I got maybe three points left like the future of Amazon FBA and what Thrasio is doing now. So like maybe maybe maybe what what is Thrasio look like in just current form is still going around. I believe it has some portfolio brands like are you involved at all or you just walked away completely. No, I I knew that things were changing. This was actually before the inventory this app. When I shut when I show up to the executive retreat and I'm the only person left in a t-shirt. I was like, oh boy, things are things are changing around here. PEs, big hands started to reach in. And then we get one of those sort of like you know nightmare consultant groups to come in to try to fix things with zero e-commerce experience. You know, and so I'm out. So this is all speculative to me. I don't know. No, no, no, I really spent a lot of time caring about it. It's sort of the you know, hey, it's it's a it's a distant memory that that left me with a lot of great lessons and honestly changed my life to as well for the better. But.
I really think they don't know exactly what to do over there. And that's the reason why, that partially reason why they've gone through bankruptcy a few times. I think the issue is, is that like they didn't know how to reduce the staff and still have things functionally run. They stepped away from the idea of this product lifestyle thing, a product life cycle thing I keep I go back to, where you need new and better stuff in order to continue to grow. Unless you have a chlorox bleach that everyone's just buying and that that don't be steady and they'll do what it's going to do, right? And I think they've really struggled with all those pieces. I think I'm sure there's been some amazingly talented people that have come in out of there over the years to try to fix things, but I think it's a massively complicated problem. So what are they going to do in the future? I don't know. I would imagine that there's a set of assets, probably anchor orange being one of them, they're going to find a way to try to keep those pieces and we'll see what happens to rest the portfolio. Yeah, look, and that's, and that's, it'll be a very healthy exercise, right? They're going to bleed all of the fat off, sell it for pennies on the dollar, try to restructure the debt, go through bankruptcy a bunch of times and have, you know, instead of having 200 brands going back to having 20 amazing brands, right? That actually get to 500 million in revenue, right? And that's, that's an awesome portfolio. Do you, do you blame the debt at all as being part of the problem? Because I mean, it was, you know, you raised 3 billion, I heard half of it was debt. I mean, yeah, that's, that's a big challenge to overcome. Yeah, no, certainly, I mean, the speed at which we had to execute everything and the pressure we were putting ourselves based on what we raised, became a real, a real problem for us without a doubt. And there's so many details in there. I don't have time to get into all of them on this podcast, but there are so many reasons why that, that became a real, that just got challenged for us. I think it came down to though at the end of the day, just sort of like, we're trying to keep up speed. So we're acquiring assets and even our diligence is great. Our decision-making process started to fail. And we purchased things. We shouldn't have purchased that put further pressure on us. Then you have all these other mistakes and market conditions and crazy Amazon stuff that I talked about, all of it sort of happened at the one time and you get to where we ended up. Operators, Black Friday, Cyber Mondays coming up, is your SMS list ready? If not, get on post-script. 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Make sure you don't click on Amateur. This BFCM. Use Post-script. Tell them Sean Sendt you. Tell them the operator sent you. Post-script will audit your SMS program for free and show you how to scale fast before Black Friday Cyber Monday hits. When we talk about lists growth, that's what you have to use before, during and after Black Friday, you want serious gains, you want Post-script. Thank you for supporting the podcast. Thank you for being here. You're back in the world of brand building. You have a new product we're sure we're going to talk about. But do you believe in the future of like FBA, like the future of Amazon as a platform? Or do you think like if you're working on a brand right now, is it not part of your strategy? You know Amazon better than anybody else on Earth. Are you leaning in or are you leaning out? So for this particular product, we don't feel that Amazon is going to be a core level for us. Will we eventually be on there properly? Do I think there's a future in FBA? Absolutely. Yeah. I mean, you know, there last time I checked, this was a couple years ago, yeah, depending how you ask, there's 330 to 350 million people-ish, something like that in America. There was 118 million prime subscribers, one in three Americans, have a full Amazon. It's, you know, when you think about that, more if you take out the kids. Yes, right? Well, you just look at what part of this, like guys of culture that we had with this particular function, there always be spots there. Now, will it be a lot like, you know, I don't know if you remember this, but like you're running ads on Facebook back in 2012, man, your cacks are great and everything's like, and then things just start to squeeze, squeeze, squeeze, squeeze, squeeze. So do I think it's getting tougher? Yes. Do I still think there'll be a world in which you can make money on FBA also, yes, right? So I don't think it's nothing's going to be like the glamorous open road of early Amazon. We're like, hey, there's no duct tape on Amazon. I guess I'll start selling it and you go to five million a year. Like those days, obviously, are way long gone. But is there an opportunity to be successful on there? Absolutely. We know one place, too, where I found that I've helped out some agencies, too, just to some consultant. This is a lot of retailers who should be good at Amazon that are not, right? Like that's the thing that really surprises me is that they're, they're miss, this lever because they're just used to selling in it into GNC or wherever their main partner is. And I don't realize they can move millions of units on there. So I think that's the best opportunity that as far as, you know, quick, easy business. But if you're not one of those, like you better have something that's an improvement upon something else, something that's coming out of different angle, something that maybe has the future for brand equity going forward. So you know, I wouldn't like, I wouldn't go on Amazon and try to compete selling meal to the warps to chickens, right? Like, but I would go into a space where maybe I had a formula that made a cleaning product better or a deodorizer better or a laundry product or even food. I still think there's room in places like that where you can do really well. So if you've advised for, you know, most listeners of this show are doing seven to nine figures a year in revenue. They probably have some Amazon exposure. But you've seen, you've done 200 deals. You've probably seen 2,000 businesses. You've deployed billions in capital across all of these. What's like the top tier advice, biggest mistakes, things to avoid, one, one mind to save these people millions of dollars. What would you tell them? Is, is their goal to eventually have an exit? Because I have a very clear piece of advice. They're right. Let's hear it. If you're trying to sell, what's the piece of advice? But for me, it's like the thing that sellers would always get confused in their mind is their belief in what their asset is. And as a buyer, all I'm looking at is the stability of the asset I'm acquiring. And it's virtually known future growth potential. That's it, right? So I don't want to necessarily see that this person's on 19 different channels and at 15% of the revenue comes from eight of those channels. That creates complexity, confusion, stuff I don't want. I want to see a clear path of like of steady growth. And I need to know what the votes are. You need to be able to tell me in a minute the story as to why this thing is going to be successful going forward. And what my competitive advantage is on any level, whether that's manufacturing, whether that's formulation or that's branding. And I'm going to quickly and easily understand if like you had a couple pop shots with like PR campaigns or successful ads that ran, that no longer ran. Like I'm looking towards the future and the future only and the past only matters for what I might pay you. So having the most simple story that's easy to understand and leaving something on the table for the next buyer to go out and grow. That's something that's always really important too, right? It's like, oh, I have the ability to start this channel or to launch this next product. I haven't done it yet, but I could and that could be valuable to you. And maybe that launch would work or it wouldn't work, but that might be exciting enough for someone else to pay up for it. But it's just like having a confident and simple story that's backed up on paper. Those are the ones that go for twice the amount of ones that are just kind of a mess of stuff for there's no organized future for the brand. That makes it equal. He's just that's to you guys. Yeah, you you want steady, you want simplicity and you want some meat on the bone. You want some for the next guy to come to the table. All right, before we get to the plug section, Matt, any any final questions? No, you know, I mean, it's a fascinating story. I appreciate you just sharing everything. That's great. Dude, okay. So I would love to buy the book, pre-order the book, register the book. Hopefully you get like a gum road page for pre-orders done. Tell us more about what you're working on right now, man. Yeah, so I got, you know, one of the great things about Thrasios, it exposed me to some exceptionally bright people both in and outside of my business. And so I when I was done, like honestly, it was a lot. And one of the things.
Things are all of our executives had with this crazy hangover. That's really hard to define. We're almost like hunch drunk. Some of us still are. Two years afterwards where there's nothing gives you the dopamine hit of what we were doing before. Nothing stimulates your desire to improve. You're just left this malaise of kind of like jello. It's the way I would describe it. Even if I was at my new business now, someone's like, "Oh, we made $5 million last week. Look, okay, it's weird. It's a really hard thing to define. That nothing changes your levels anymore because you were in this sort of explosive play. It exploded so big that now it's almost like a dramatic stress disorder. But one thing I want to do is I go, "All right, well, if that's not going to give me stimulation, then what is?" And working with the people I love, who I know are smarter than me, is going to do the trick for me. So I gathered some of the smartest people in product development. They were out of the Utah office. I flew out there for about I think about 10 days over a two week period. And we just sat like I did in the thrasier days and said, "What could we do? What do we want to do?" And then what we figured out was that we want to do something with hardware and we want to do something in the Christian space. So what we've developed as a product is, in essence, a very relatively complex hardware device that feeds into an application, that then has all of these agents that do all of these amazing things to help bring people closer to Christianity and also enhance their experience if they are someone who's really close to faith. We think we're going to revolutionize an entire space by adding a level of intimacy, by adding an ease of use, things that were really manual before will now become automatic. And we really think also of potentially curing loneliness for elderly people. So we've started this company. We're almost done with the app, the hardware is designed. We closed our first round of funding. Really exciting. We got an NFL Hall of Famer to be the first person to our next round. We're still starting that. If anyone's vaguely interested, they could reach out to me directly at
[email protected] and we can have a conversation. But we're really excited potentially for what this sort of like hardware to app technology with AI can do because it's actually applicable to a lot of other things. We just felt that the Christian space was the right place to start and maybe a good place for me to make up for some past errors. Just in case. So yeah, that's what I'm working on now. And it really is great when you have people that you're working with that you love as people you trust and you just know they're brilliant. It really does like change things and this project which I have a real belief in. And by the way, if it ever really takes off like I'm out, I'm not going to go and deal with all that again. I'll be this first phase and let it fly away without me. You know, I don't want to do that again. Right? Like I want I want to do things that are that are good for other people in the world and I want to work with people that I love. And that's one thing this Thrasio experience has taught me is just to reshift the framework of what what I define as being successful. Beautiful brother. Okay. So we have Christian AI hardware coming from John his book Unicorn on Fire, which is about the Thrasio story. You're any commerce. You know when you want to read it, I'm going to read it. I'm going to preorder the book. It'd be really sick of our audience pre-ordered a thousand books. Thousands of people listen to right now. I would love for you guys to preorder this. John, we appreciate you coming here. Anything else you want to say? No, this was what a great check guys. I really appreciate you having me on and it was fun telling that story again around the campfire after. Yeah, look and you have more stories to tell. So as soon as the AI Christian hardware thing launches, you'll come back on to plug it. Matt, anything else you want to say? No, I can't wait to see it. That was great. John, appreciate it, man. Keep rocking in the free world. Do do do do. Do. All right. Thanks for making it all over to the end of this episode wherever you are in the world. It is awesome to have you here. If you do not already subscribe to this show, that is my one ask is please go to whatever platform you are watching or listening to this on YouTube. It could be Spotify Apple. I don't care. Just go hit the subscribe button. Please pump our egos up. It helps. And before we go, one more thank you to the sponsors, fulfill post script, Northbeam, Saras, and Rich panel. Awesome guys running these companies. We all use them. These are our vendors. That's the only reason they're sponsors of the show. So thanks again to those people.
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