Scrub Daddy: Aaron Krause. How a Failed Experiment Became a Billion-Dollar Sponge

(soft music) I said, "Hey, I got this new product." And you know, all some sponge and I showed it to him. And he said, "Yeah, you know, it's not gonna sell." And I said, "Oh, no, you're wrong." It's a bright yellow smiley face in this neon box. Like, there's no way it's not gonna sell. And he said, "All right." So he went to the shelf and he just moved some sponges over and put it on the shelf and said, "Yeah, we'll see." You know how many people bought it? How many? Nobody. (upbeat music) Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built. I'm Guy Ross and I'm the show today and I'm the town inventor who made products to clean cars wound up making a sponge to clean dishes and grew it into a massive brand. Scrub Daddy. Some of the best known products in the world didn't start out as great ideas. They were actually meant to do something different. Take bubble wrap, for example. It was supposed to be wallpaper. Yes, textured wallpaper. Posted notes were the result of a failed attempt to create a super strong glue. The adhesive was actually too weak. Terrible for permanence, but amazing for sticking something up short term. Even Viagra was invented to treat chest pain, but it had a side effect that, well, you know the rest of the story. The point is, sometimes the problem isn't the invention. It's the market. And today's story is about a guy who did not set out to reinvent the kitchen sponge. He wasn't even a consumer products entrepreneur. Aaron Krauss was an auto-detailer running a small business that made buffing pads for car washes and auto body shops. In the early 2000s, Aaron was looking for a scrubbing tool to clean his own hands after fixing greasy machinery. He found it in a foam material that he came across from a German manufacturer. The foam material worked great, and Aaron tried selling it to mechanics, but no one wanted it. So he shelved the idea, literally put these sponges in a box and threw them in the back of his shop. But a few years later, he was cleaning stuff around the house and he happened to pick up those old foam sponges. And he noticed something strange. When you ran them under warm water, they got soft, but under cold water, they got firm. And it was kind of magic. And what Aaron realized at that moment is that he didn't have a better handscrubber, he had a better kitchen sponge. But the sponge market was dominated by a few huge players and trying to compete with those brands, especially for a small-time entrepreneur. Well, that's a fool's errand. So he took a somewhat unusual approach. Aaron hocked his sponges on TV, first on QVC, and then he pitched Shark Tank. And that appearance would catapult Aaron's scrub daddy brand into the mainstream. Today, scrub daddy generates hundreds of millions of dollars a year in sales. And as you'll hear in this conversation, Aaron Kraus is not a shrinking violet. He's relentless. He negotiates hard. He fights for his product even when he doesn't hold all the cards. But we'll get there. Aaron Kraus grew up in the 1970s and 80s in the suburb of Philadelphia. His family cared a lot about academics. His parents were both doctors, and he had two high-achieving sisters. But for Aaron, school was never really his thing. I was a B.C. and everyone's in a while, an A student. And my dad used to always do the same thing when I got my report card. Son, is that the best you could do? And my answer was, yeah, because I'm on the soccer team, or I'm on the basketball team, too. And I have a girlfriend. And things that my other siblings really were interested in, I had so many other interests and was all over the place. And so I said, yeah, that's the best I could do. And he accepted it. I mean, given that your parents were both doctors, right? And they were sort of encouraging you to go into academia. I imagine-- I mean, again, you grew up in the '80s. And I remind people, it's different time. The whole culture of entrepreneurship wasn't what it is today, right? Absolutely. And being an entrepreneur, especially, I think, for my parents, was a very risky thing. And my parents really were very conservative people. I grew up in an area. As you know, the main line, a lot of people did have money. And my parents, as two doctors, it's not like I grew up poor. But my dad was a stickler from making me work for every single thing that I got. And up to the time I was 13, I used to get presents and a big party, my birthday party. And at 13, I didn't have a party. And I was asking, where's my party and where's my presents? And my dad said, well, your present from now on is you get to buy your own sneakers. I was like, what are you talking about? And I didn't understand how I was going to do that. And so he started suggesting chores and jobs around the house. And I started earning my own money. He was basically saying, you want something? You've got to work for it. And then you're going to have to buy it. I'm just not going to get a cash for everything. Yeah. So one of the things that I started doing-- because my dad set up all these jobs around the house. And one of the jobs that I could get the most money for was washing cars. And I can make $10 washing his car. And I end up going around the neighborhood and actually washing everyone's car. And I turn-- Isn't high school. Yeah, this isn't high school. And I actually turned it into a business. And I loved it. And I was creating coupons. And I used my Macintosh to start using a business program to track my customers. And so when I eventually-- and it was 100% expectation you're going to college, I was going for business. Right. And I guess you ended up at Syracuse for college where you did take business courses. But you actually, I think, major in psychology. Yes. But while you were there, what happened to the car washing business? And was that on hold for a few years? Actually, no. Just the opposite. So when I graduated high school, I did think that was the end of my car washing career. And I actually sold the car washing business to one of my friends who was in 11th grade so that he could have a business. And then I went off to college. And when I came home, my mom, who was pediatrician, she got me a job working for one of her patients' parents who owns the largest manufacturer's bio-stair cases in the country at the time. And I knew the owner or the company. So I went there in a suit and tie, because I have an internship this summer with the owner of the company. And I showed up. And I remember I walked in and I said, I'm here to meet Rich. And she went and she brought some guy up, covered in suit, wearing those big leather gloves. And he was wearing a welding helmet. And I was like, I'm here to see Rich. And he said, I'm Rich. Go home and change into clothes you never want to see again. And the next thing you know, I was on an assembly line welding staircases. And it was 120 degrees in this factory. It was the worst experience I'd ever had. I'm going to say in life. One day, after about a week and a half, Rich came over to me and said, Aaron, how do you like it? And I flipped up my helmet. And I said, oh my god, Rich, I never expected this. This is really, really hard. And in fact, the only thing I like is the way the welding torts, it smells like cinnamon. And he goes, oh, don't breathe in. It's highly toxic. And I literally took the helmet off. And I said, this isn't for me. And I quit. And I went back to see my friend and see what he was doing. He wasn't running the car washing business. And so I just picked it up right where I was. And I started washing the cars again. And tell me a little-- I mean, was it just you and bucket and sponges and soaps and armor all and a bunch of things? Like, was that the business? You know, at my graduation, my grandma, my aunt, my parents, they all came up for graduation. And we were at the dinner table. And my dad said, so son, I just spent $100,000 on your education. And you have a degree in psychology. What are you going to do with your life? And I said, well, I am going to get a minor in marketing. And I'm going to start my own business. And he said, OK, well, what kind of business do you think you'll start? And I said, well, I've been washing cars all of high school and throughout college. I think I'm going to make it into a real business. So my mom is at the table. She's crying. And my grandma says, oh my god, just disown him. He's going to be a car washer. And my dad said, son, you have until the end of the summer to make it into a real business. Because I was running it out of my parents' garage. And he said, you have to the end of the summer to make it a real business and move it out of the house. And however much money you can save in a bank account and show it to me, I'll match it at a loan at two points higher than the bank, because you're a bad credit risk. A loan to do what? To start the business. Because I was going to need-- I was going to need seed money. I had to rent a location. I had to put down payments. I had to-- Oh, you wanted to start a car washing business, not like going door to door and washing on their property. You wanted like a location, a building where people would bring their cars in. - Yeah, I wanted a detailed shop, a real professional detailed shop where we would pick up and deliver. So if you remember Domino's Pizza back in the 80s, they had this incredible campaign. It was, they would 30 minutes or less. They would deliver your pizza, or I think it was free. - Free, yeah. - Or it's free. So I was gonna create the Domino's Pizza of Detail. It was free, pick up and delivery, and we get your car done in three hours or less, or there's a discount. And I was gonna franchise that. That was my whole business plan. And I saved up the $8,000 in a bank account at the end of the summer, showed it to my dad, and he loaned me $8,000. I think it was at 9% interest at the time. And that was enough money to get a lease on a very small garage in Ardmore, Pennsylvania. And I started detailing cars from my previous clients, and then I started getting dealerships. - Right, who'd come in? - And how did you, I mean, clearly you must have liked detailing cars. Like there was something about it that you actually enjoyed. Like the work of cleaning a car and getting it really to look nice. I mean, you must have enjoyed that work. - I loved it, to be honest. It's very hard work, very groovy, but it's very, very satisfying. You know, you start with a car that's in a filthy condition that looks like it's never gonna shine again, and you restore it to glory. And then you bring it back to the client, and they are in shock. So it's very satisfying work. But I also enjoyed the business side of that. Like growing it, I enjoyed having a computer. I enjoyed creating all the systems and the processes. And like, at the time, you know, computers were pretty new, and these business programs were coming out, and you could do really unique things, like you do someone's car. And then you could set like a reminder for three months to call that person back and say, it's time to get your car waxed again. And so I could come in in the morning and have a list of people that I knew I could call today. - So, all right, you get the money to get the brick and mortar location, and I imagine you have to start hiring people. So who were your first hires, just anybody you could find? - You know, the first hire was a business partner. It was kind of lonely doing the cars by myself, and was one particular day. I happened to be dropping a car off next to a friend that I knew growing up in the neighborhood. We went to overnight camp together, we had mutual friends together, and I was dropping this car right next to his house. And so I dropped the car off, and I went and knocked on his door, and it was probably about 11.30 in the morning. And he answered the door, and he was still like in pajamas. It looked like he just rolled out of bed. And I was like, oh my God, what are you doing? He's like, you just ruined my best Nintendo score. And I'm like, are you kidding me? You know what I'm doing all day? And he's like, oh, dude, in '92, we were in a recession. Pretty serious recession. And he said, yeah, I put a lot of applications out, no one's hiring. I said, you got to come and see what I do for the day. And if you like it, I'm looking for a business partner, 50/50. And that was my first, I don't want to say employee, but it was my first person in the business that we were working together. And from there, we started hiring local people to start washing the cars as we grew and grew. All right, so you've got this business going. And I mean, it must have been profitable pretty quickly, right, because you're overhead, and you've got your people. And probably the rent wasn't that high on the place. And a detail, even probably in 1992, was at least a hundred bucks, right? - It wasn't that profitable. And the reason why, there was a couple reasons why, I hadn't learned all my lessons in business yet. And so I wanted to get big and I wanted to do volume. And so I tried to keep my prices as low as possible. And because my prices were low as possible, I couldn't hire the best talent. So the people that I had doing the cars weren't really skilled laborers. And they wouldn't do a great job or would take them too long to do a car. And every car is different. Every shape of every car is different. One car's got a total mess in the back, 'cause they had a baby. And the other car is a brand new Mercedes. And so it was so variable that you had no idea how, like what your profit was gonna be at the end of the day or the week. - All right, so you were not really making a whole lot of money in this business, but you had a business. You were there, you had a place. And I should mention, you were living with your parents. I mean, nothing, no shame in that. But like, that's right, you were saving money on rent. - I was saving money on rent and on laundry and everything. And I lived in my parents on my shame to say, "Yes, this is so embarrassing." I lived at home till I was 29. But it really gave me the opportunity to spend all my focus on growing the business and not worrying about where I was living or where I was getting food. And so I owe my parents a huge debt of gratitude for doing that. - I guess while you were running this business, you kind of stumbled on a problem, which was from what I understand, I'd love to hear the story. You're buffing a car and it's damaging the vehicle. Like the buffing pad that you're using was not a good one. And it kind of sparked this idea, maybe I imagine, to find a new buffing pad initially, but eventually you would come up with your own. What's the story? - It's really interesting. So cars had been polished. The paint's been polished by, started out with like, lambs wool. And then eventually people started using wool yarns and making like this hairy wool pad. And that's been the standard forever. And when I started detailing cars, that's what it was. You had this hairy wool pad. And you would attach it to a buffing machine and it would spin at 2,000 RPM. And the problem with these pads are, it's like a carpet, right? And when it gets caked up with chemicals and it wears down, it doesn't become a buffing pad. It becomes a grinding wheel. And if you're not an absolute expert, it's very easy to burn the paint off the car and then you just bought someone a 2,000 dollar paint job. And in around 92, 93, people started experimenting with polyester urethane foam. That's kind of like the same padding that's in like your seat cushions and everyone's felt it, you know? And it was like a sponge and it would give. And so it was much more forgiving. I started experimenting with this and instantly I was like, oh my god, this is the future of buffing pads. But the problem was, there was no technology in them. So they were just taking a piece of foam and die cutting a cylindrical shape. So it was flat on the sides, flat on the bottom, flat on the top. Well, I'm doing this car and I'm trying to get underneath this mirror, but the pad doesn't feather like a wool pad. And I end up hitting the backing plate against the mirror and there's a big grinding sound and I jump and I break the mirror off the car. And it was a Mercedes. I think the mirror cost the $1,000. And I was just absolutely sick. I was like, I can't believe. And I blamed the pad. I didn't blame myself. I'm like, that is the wrong shape. Why is no one making these foam pads in the shape of the wool pad? It should have edges. And so I have this idea for this buffing pad that should have edges to it. And I started asking around for it. Does anyone have this kind of buffing pad? And nobody had it. And so I said, oh my god, forget I mentioned it. And I went to the local library and I started reading about how do you patent something. And then I looked up patents on other buffing pads. And then I copied the format that they did. And I actually wrote my own patent and sent it in. And about two months later, I got back a letter that wasn't even in English. I didn't know the language it was written in. It didn't say you got a patent. It didn't say you didn't get a patent. I had no idea what it said. You just couldn't understand. It was like all those legal language that you could understand. It's legal mumbo jumbo, which is patent law. And I have a family friend who was a patent attorney. And I just went and called a mess and said, hey, can you take a look at this? I got this back. And every page that he flipped, his face got redder and redder. And he got angry and angry. And then he threw it down the table and said, let me ask you a question there. If you had a toothache, would you take a drill and start drilling your own tooth? And I was like, no. He was like, what makes you think you can write a patent? He's like, here's my recommendation. We file with the USPTO and we beg them to rescind your application and pretend they never saw it. And then I will write you a patent application. And I was like, OK. And we did that. And he got me my first patent. Got it. OK. So you're working on a patent for this new design, basically, to buff a car. And I guess around this time, you decide to focus on this and not the car washing and detailing business. Well, we did both. Remember, I had a business partner. And he ran the car washing business. I didn't completely leave the company. But the only way to make this happen was there was no internet. I opened up what we called the yellow pages. And I started looking up foam. Where do I buy foam? And who cuts foam? And this is where we find out why no one's done it. So I'm going fabricator to fabricator. And I'm getting left out of people's offices. And I remember I'm a 23-year-old kid. I don't know-- people are laughing. You don't know what you're doing. And they're like, that shape can't be made. And eventually, I found this one guy. And he said, listen, you're going to need to build a piece of robotic machinery in order to make this happen. So I need like $100,000 upfront. And then I'll try to make a piece of equipment to make this thing. Because what you're trying to do is you're trying to cut this flexible foam pad into a circle with. beveled edges that meet at a perfect point in space. And there's no equipment in the world that can make this. So give me $100,000 now. If I make the machine and it works, it's another 100,000. And that's before we talk about how much each pad is going to cost you to make. And you've got, what kind of capital do you have to work with? None. I'm using money from the company. We're on a shoestring budget. I already told you the car wash business is not making a lot of money. I had already borrowed another 10,000 from my dad for the patent. And there was no money to do this. And I literally was at the verge of giving up. And then one day, I remembered this crazy guy that owns a spiral staircase manufacturing company. That he worked for. That I worked for. I think he's an intern after your freshman year of college. Yep. And I said, Rich, I have this crazy idea. I want to make this buffing pad. I showed it to him. He said, you know what? Come here every day after work when the shop shuts down. Around five o'clock. And I'll work with you on it. And we spent probably two months together working on this. And he did it. He welded together a bunch of hand cranking machinery. And with two cheap, I mean, $100 drill presses and a $200 bandsaw, we created the first edge buffing pad. And all my employees are in awe. They're like, dude, this is the best buffing pad we have ever used. And I knew right away we had something real unique. And so I put some ads in some local trade magazines, not local national trade magazines. It was called National Carwashing and Detailing Magazine. And I put a full page ad showing the edge buffing pad. So we started out selling direct on through this ad we put into the magazine. But very quickly, some of the distributors started calling us. And there's a local company in Philadelphia. That's a manufacturer of car washing and detailing chemicals called RDEX. And I knew them really well, because they brought me all my car washing chemicals. And so I asked to have a meeting with the owner. And I showed him our buffing pad. And he gave me a check for $10,000 on the spot and said, give me as many pads I can get for $10,000. And that was the first time I realized, oh my god, where this is going to be big. We're not just selling to individual shops now. I'm selling to one of the manufacturers of car washing and detailing chemicals. And if this works, he's going to start selling this and distributing it to all of his distributors. And that's what happened. It took off immediately from there. And in three months, we were selling them all over the country. And so we knew right away, this is the scalable business, not the car washing business. How much was the pad to the pad cost? The pad cost to make $1 something and we were selling them for $3 or $4. So with this product, did you start to think, OK, this is really going to be our business? Or did you start to think we're going to start making more things like this for the auto washing and detailing industry? No. The only thing I could think of was that I couldn't keep washing cars and doing this at the same time. And we needed to focus solely on this. And then we needed to focus on how to produce this more efficiently. And so we went to an automation company that makes robots. And they built me this robot that would cut a pad in 11 seconds with no one involved. Wow. So now you're really focusing on this new product. This-- what were you calling it again? So it was called the Edge Buffing Pads. Edge Buffing Pads. And the company name was called Dedication to Detail, which by the way, my dad gave me that name. And then we bought this automated equipment. And then we needed to move into a serious warehouse. And so we rented our first 3,000 square foot real manufacturing site. So all right. So let's talk. So now you've got-- you're out of the car wash and detail business. And now you're on the Buffing Pad manufacturing business. Give me a sense of how much you guys are doing in sales a year, like over a million, 2 million, or less. Yeah. We started, I'd say, by 98, we were doing over a million, a million and a half. But I could see the writing on the wall. This was going to become multi-million dollars. We were going to be selling these. There's tens of millions of pads sold every year. And it's not something that you would use, or many of the listeners may use. It's something that's used in every car wash, detail, body shop. It's also used to polish marble, airplanes, boats, statues. It's a huge business. All right. So you're doing pretty well selling Buffing pads. And then I guess at one point-- this is around 2006-- you come up with an idea for a totally-- would become a totally different type of product, which is not even for cars, but for cleaning your hands. So how did that happen? So I used to build all these machinery, all these new equipment. And I was the only one who knew how to fix them. Right. And I'd come back in the office. My hands were filthy dirty. And I used to have this white keyboard that I would type on. And I remember looking down one day and seeing it was covered in certain grease. And I was like, gee, it's looking my hands. I need a better way to clean my hands. And I started out using different kinds of soaps, like lava or gochelle. Oh, yeah, lava. Does lava soap still exist, right? I think it must still exist. I remember those ads in the '80s and '90s. It was always like car mechanics or something in those commercials, like using the lava soap. Always car mechanics, right? Because our hands are filthy dirty. And I'm like a mechanic, because my heads are always under these machines and getting filthy. And I couldn't get them clean. And I couldn't use this soap anymore. I wanted to use my soap that smelled good and bubbled up and phoned. So I started experimenting with different materials. And then one day, I just saw the wall of foam that we make our buffing pads out of. And I was like, I wonder if our rough foam could scrub my hands. And I tried it, and it didn't work. But it worked a little bit. The problem was I was using buffing pad foam, right? It's too soft. It's for rubbing on a car and not scratching it. I want something that's really going to scrub my hands. Well, I know every company in the world makes foam. So I send out a request to everybody. Send me the roughest, toughest foam that you have. And this company in Germany sends me this rock hard yellow foam. So I cut like a regular rectangular shape. And I start scrubbing my hands with it. And it's hard to hold. So I cut a circle. And that was really easy to hold on to. And then I want to get my fingers clean. Because it's hard to go around your fingers with this big thing. So I cut a hole. And then I could stick my finger into that hole and just spin it. And it would scrub your whole finger all the way around. And I scrub my hands with it with regular soap. And it comes completely clean. By the way, I'm only using cold water. Because in the back of the factories, a lot of times you don't have a hot water heater. So you're just using cold water out of the-- Really fun in the winter, right? Really fun. Yeah. So anyway, it works great. It's cleaning my fingers beautifully. And then I want to get underneath my fingernails. So I cut some ridges on the top of it. So it would fit underneath my fingernails. But it was hard to hold it. So I cut two holes. And I could put my two fingers in. And then the sponge stayed on my hand. And I could just power through my fingers. So you're doing this thing with this piece of foam. And what, right away, like, OK, this is it. This is great. This is actually what I've been looking for. Well, it needed to be a little bit stiffer. And the poor size needed to be a little bit wider. And it needed to be a little denser. So I contacted the company. I said, can you make this? Can you do that? And they said, sure, sure. And they sent me prototypes. And I made some scrubbers. And they were the best thing I'd ever used. And I love them. And I use them every day. And then the light went on. What am I doing? I'm in the body shop industry. I'm selling to car washes and body shops and mechanic shops and detail shops. These guys all have dirty hands. We should make this a product. Yeah. So we need a name. And we're sitting in the office. And I'm talking to one of my office managers. And he's looking at it. And it looks like a two eyes and some hair. Looks like a radical skateboard guy maybe. And he looks a little bit like the go daddy symbol. Like the go daddy symbol with a spiky hair. And he's like, we should call it scrub daddy. And I said, oh my god. That is the best name ever. God, what was your reaction right away? Right away. That's the best name ever. And you're thinking of this as a hand scrubber. It's only for scrubbing your hands. That's it. So really for the mechanics and auto detailers, like it's again, it's for a very specific industry that you're thinking. Well, I'm in that industry, right? It's what I know. I'm not even thinking outside of it. I'm not thinking consumers, right? No, and these are all my customers already. So, and that was it. We started trying to sell it and market it and no one wanted it. How much were you trying to sell it one of these sponges for? So that's the problem. It's a really, we call it a highly engineered polymer. And it was made in Germany. So at the ship it across the ocean and then we had to cut it and shape it. And it was four and a half dollars. And it's like four half dollars for a brush scrubber. I think they cleaned my head too. My guys can use lava soap. Not only lava soap, but these guys, you're talking to the wrong market. Like they don't care about dirty hands. They would rather go home with dirty hands and spend four dollars on a sponge. And so it died. It died right away. No one wanted it. I had made 150 samples. And I'm a bit of a pack rat. I always. save things I'm working on and I think, oh, I'll come to this, you know, one day later. So I, and I spend money on these. So I can't throw them out with good content. So I put them in a box. I labeled it scrap and I put it in the, in the back of the factory. So how long did you try and sell these? So did you spend like months on this? Three years, a year. A year. Wow. And you put it aside. Put it aside. Yeah. It died. When we come back in just a moment, why Aaron eventually gives the scrubbers another chance and why he furiously hangs up the phone on the company that wants to buy him. Stay with us. I'm Guy Ross and you're listening to How I Built This. Hey, welcome back to How I Built This. I'm Guy Ross. So it's the mid 2000s and Aaron has shelved his idea for a handscraper. But he's still designing lots of other things for the car industry, including something that will become a hit product. We had created the first double-sided buffing pad with a quick connect disconnect automatic centering reversible adapter. It was like smooth as butter. And I thought this was game changing and it was industry changing. And one of our customers who was a big chemical manufacturer in the detailing business, they saw the technology and they wanted the exclusivity for this system. They wanted to exclusively license it or not to buy it out just to exclusively. So they basically they liked it and they said, all right, we'll do a deal with you but you can't sell it to anybody else. We're going to be your only customer. Which is not, it could be great but it could also be not great. It was not great. It was, I was foolish and I signed a worldwide exclusivity for this technology for very, very low minimum quantities. And you did that because. Well, I was desperate to be honest at that point, I dumped a huge amount of money into this project and we needed to get sales out of it. I mean, I'd put the company in a little bit of a financial stress point. So how long was the deal that you signed with them? It was in perpetuity as long as they met their minimum requirements. And that was, that became a real major issue for us. Okay, and I guess we should explain why this became a major issue for you because something else was going on, right, which is that 3M, which is this massive manufacturing company, they make everything post notes to the Scotch tape and so much other stuff, they also wanted to license some of your products, right? I mean, they sold buffing pads too and I guess your pads were eating into their market chair. Yes. And they came down and I toured them around my factory and they see this machine that I built, this fully automated machine that makes buffing pads and I watched the 3M engineers eyes like blow out of his head and he was like, where did you buy that? And I said, I didn't, I built it. He was like, you're kidding me. And I was like, no, I built it. He's like, could you build another one? I'm like, yeah, of course. And from that point, the discussions about them wanting to license our technology or use our buffing pad technology somehow turned into, we want to buy the company. We want to buy dedication to detail. But there's a problem because the license to your hero product is, somebody else has it in perpetuity. Correct. It's a huge problem. So it must have been agonizing when 3M was like, we're interested in acquiring you and then you had to tell them, well, this is a situation and I guess what their response was, ooh, that's tricky. Yeah, ooh, yeah. They said that's tricky. Yeah, we can. That changes the equation here. Yeah, they said we, we're not going to be able to, to probably move forward. So I, I'm pretty devastated because I know this is, this is the future of the company and it needs to be sold to, to 3M. But I, I'll say this, I didn't have a deal with 3M. I had nothing. They expressed an interest and I saw the interest and I needed to be able to have the ability to do that. But I also needed to keep running my business as if it would never happen. And I start looking through the contract. There's got to be some way out of this contract. No. So I said, listen guys, we need to renegotiate this contract because it's really egregious. Like you have the worldwide exclusivity on a product. You have this in perpetuity, you know, and for, for minimums that are not even 1% of the market share. Like none of this is fair. And in that negotiation, I just need to find a way to make sure there's a clause that if someone wants to buy me, there's a way out. And the way out, I let them negotiate themselves. I said, like what happens in the case that a company buys me? And they said, we want this amount of money paid to us. And we want 12 months supply at a locked in price. And then if that happens and you get bought out, we'll let you down. All right. So you manage to get out of this exclusive contract, which finally, I guess allows you to start talking with 3M about an acquisition. And I think you negotiated with them for like a year, right? But from what I understand, the back and forth was pretty heated, right? Like it did not go smoothly. No. 3M and I had a very contentious negotiation and due diligence. The major sticking point with 3M was the price. Like they, you know, I distinctly remember this. They have this thing called the zip code conversation. And it's when you get to the point with 3M that they're going to buy your business, that they throw out a number. And you see if you're in the same zip code. And if you're not the same zip code, the conversation's over. And I told them from the gecko, guys, I know our sales aren't anything huge, but I'm not selling the company on our sales or our EBITDA. I'm selling the company based on a technology that's going to change the entire industry, that I own the patents for the next 15 years. But they're formula, and I'm sure any acquisition is clear. It's EBITDA, look at, you know, multiple of revenue or, you know, or EBITDA, and they're looking at your business and they're saying, okay, here's a multiple of that. Yeah. So they told them if you do that, the conversation is over and I'll hang up on you. And the day that we had our zip code meeting, they called me up and I had forbidden them to talk about EBITDA. It had to be about the value proposition of what I was bringing them. And I get on with these finance guys and the guy goes, so Aaron, based on EBITDA, we're going to, and I hung up, I hung up. And they, and they called back and said we got disconnected. I said, no, we didn't. And the conversation's over. I said, goodbye. And the business guy called me up and said, Aaron, I don't understand what happened. I said, I told you, do not come with that number. I'm not interested. If you're going to based on EBITDA, there's nothing to talk about because, you know, our business is just getting off the ground. I'd rather keep going and I'll take all of your market share and then we can talk about a multiple of them. So he said, Aaron, what if we doubled the number? And I said, not even close. He said, triple the number. I said, you're getting closer. He said, triple the number and we'll buy some of your accessories. We'll make a contract to buy accessories from you as well. And I said, okay, now we have a conversation. We started getting into that, like, the depths of, like, what that number is going to be. And they were like, Aaron, you need to justify. You know, we have a board, we're shareholders, we're a public company. You need to justify literally every, like, asset you have. And so I have to go through a list of everything. The desks, the computers, the patents, right? Every piece of equipment. And I have a patent on this thing called scrub daddy. I got a patent for the next, you know, 15 years for this hand scrubber. And I'm going through a list of all of these things that I have patents on. I have a patent on a brush that has an ergonomic shape that helps you clean the buffing pads that I invented called the edge conditioner brush. And I got a patent, I patent it in apron that has Velcro cord holders. So when you're buffing the car, the cord doesn't fall and get wound up in the machine that's spinning at 2,000 RPM. And how many patents did you have more than 15? I have 17 or 8 at that time. Okay. And you have to justify all the assets you have. Because you've got machinery that you've created and you've got this buffing pad. And then the hard assets, like, office equipment, right? You've got to justify to them so they can go to their board and say, hey, here's what he has. And here's why the company is worth this kind of money. And the patents were like the most important, right? Because you get a patent for, you know, set period of time. You own the exclusive rights that you have a monopoly and you can make your killing in that period of time. And so I'm like, well, I have a patent on this brush, you know, for the next 15 years. And they're like, yeah, not interested in that brush. You can just minus that off of the deal. Oh, you thought that brush was worth a million dollars, Aaron? Minus one million dollars. Oh, this apron, really cool idea. By the way, not interested. Minus a million dollars. What's this thing scrub daddy for cleaning hands? What are your sales at zero? Yeah, minus that off. They went through and carved out five items and said, not interested in any of them. And they went through this list and literally showed me the math and said, Okay, so we're taking these out and here's the number you said you'd sell the company for and we're taking those items out of the deal Those are valuable and here and you agreed on that price What was I gonna say? I said oh, I guess you're right. I guess we have a deal and we'll sell the company I know that I know the numbers undisclosed, right? But are we talking about Somewhere between five and twenty million dollars. Yes, okay. All right. We're talking it. It's double digit millions Okay, so they said we don't need this we don't need that. This is really what we want and and among the things They did not need was this scrub daddy correct and they're carbon that out of the deal and did you care? I mean but at this point You weren't like ha ha lead carved it out. You were just thinking no, I thought I was kind of trash too like nobody wanted it sitting at a box collecting best like yeah, of course They're not gonna buy that and I think at one point they were like you know We're not paying you for it if you want to leave it in the deal, you know, sure we'll take it and I was like no If you're not buying it, we're taking out a deal. I'll start a separate company You know I'll make an accessories business and I'll sell my accessories to someone else right So you piece to get their deal is acceptable and you and your partner finally you both get some cash out of this deal so This is the craziest thing I signed the papers the money transfers I literally go from not just paycheck to paycheck because some you know weeks I didn't get a paycheck To a multi-millionaire like immediately and it's the most shocking I spent all weekend opening up my bank account and just looking to make sure it was real looking at those zeros Yeah, just to make sure it was real and We had a great we had a great time that weekend You know we went out did a bunch of great dinners and exciting And you had two kids of by this point. Yeah, I had two little kids and I think they were three years old or Because this is you are 40 you're almost 40 at this point, right? Yeah, yeah, and On Monday morning I come into the office and I get a call from the lead M and A guy that we've been you know doing the whole deal with at 3M At 3M and he says oh my god, you are the luckiest guy I ever met and I said why because I sold my company to 3M And he goes no because I'm reading a memo from the CEO of 3M and it says shut down every acquisition the world's coming to an end And that was September 1st 2008 financial crisis and the you know the entire markets just began to collapse and You know we were completely insulated because we had sold the company And I had a contract with 3M to to keep working with them as a consultant as a consultant and when you're acquired by a company with a prestige of 3M It's life altering and I was so proud to work with that company and go to headquarters and and then I learned a lot about How corporations actually function like big corporations and I can't tell you how valuable that is to me now That I'm running a much larger organization It sounds like you I mean it sounds like you really took this job and you know and good faith and really like if I'm re-between the lines You kind of felt like I really want them to know that they made a good decision I'm glad you said that because I have a lot of passion around like that's my reputation And I I felt like you know they bought this business and they did pay a huge multiple I mean a Very very double digit multiple for this for this business and I was like I'm going to prove to them that they got not just what they bought But every dime of it and and I also had a consulting contract and And I guess part of the agreement right part of the way you could make this deal work was they allowed you to Do your own side work like you are a consultant for them, but you could start another business if you wanted and I guess They had already agreed that they would buy products from this new business, right exactly so you hit the nail in the head I they knew I was starting a new business because they were already a customer of it and so I was running the same factory for them and under the same roof I was running a totally separate company They called innovative accessory products and it was probably the most incredible deal Ever because I don't have any issues anymore like all I had to do was run the business I didn't do the marketing I didn't do the sales when the machine broke it was their machine I called them up and said your machine broke. It's not my machine anymore and it's gonna cost you know This is how much the new motor is but I had to go and fix the machine make sure that the place is operating and I had to Transfer all the knowledge to them in year one and year two and I had several like requirements that we we had to achieve in order to get paid out our full earn out and Some of them were that we had to hit a certain sales number You know and combined like of my new products we had to sell this amount or I didn't get paid out millions of dollars and That's where I that's where I learned the frustrations of working for a multi-billion dollar conglomerate You know, it's it's mired down in red tape and politics and It was extremely frustrating for someone as entrepreneurial and ADHD as me and so I There was parts of it that I loved and then there was parts of it that were like extremely frustrating for me Okay, so you've got this going and you're you know working for 3M, but you've got the side business And 3M was your main one of your prior biggest customer really for that side business So they were our biggest customer side business not our only customer but our biggest and You know interestingly enough one of the products that wasn't selling was the sponge called a scrub day That was sitting in the back that no one had wanted but we were selling the aprons and we were selling the the conditioning brushes But the scrub daddy were not selling no no one no one wanted it But it was on your mind clearly because you brought it back out again I guess not to sell but but just to kind of use right tell me tell me what happened because for what I said this happens around 2011 where you kind of Take these scrub daddies that you'd made in like 2007 out of the box and you start to play with them again So it's exactly right like they're sitting in the box Collecting dust every once in a while I probably grabbed one over the years to clean my own hands But they last a long time So I wasn't you know pulling a lot of them maybe one or two a year in 2011 my beautiful wife was nagging me to clean the lawn furniture because it was gonna be spring soon and You know the lawn furniture sits out there and gets all like moldy and gets allergy on and stuff like that So I started out using a traditional sponge, you know, it's a yellow stinky sponge and it's got that green scour on the back I know the sponge well and it's and it scratches things really easily and I'm scrubbing this furniture And it's taking the paint off and she's you know out there watching and she's like you're you scratching the paint What are you doing? I was like oh shoot? I can't use this What am I gonna use to scrub the stuff off and I remembered this box of rock hard scrubbing things at the office and I thought you know I'll bring a couple of those home. Yeah, and and so I brought you know two or three of them home And I made a bucket of hot soapy water because it was 50 degrees out and I didn't feel like working in cold You know water yeah, and I had never really Experimented with hot and cold temperatures with this sponge It was always in the back of the factory scrubbing my hands with cold water. So I dumped it into this bucket of hot soapy water And it went completely soft It literally squished down like a regular sponge and I took it out and squeezed it a bunch of times and I was like well It's what I have let me try it I started scrubbing with it and it started cleaning and and it wasn't it was pretty good But it was 50 degrees out and so the longer I had it out the harder it got It started to crystallize in my hand and the cold air was making it rigid and firm again correct The cold air was changing the the sponge into a harder Texture sponge and the harder it got the better it scrubbed and Then when I you know took it with all this dirt and muck in it I would put that back into the warm water and it would go completely soft and I'd squeeze it and everything would rinse out of it I did all the lawn furniture and and held it up and looked at it and it looked like I hadn't used it It was brand spanking new so that night I go to do the dishes and I'm scrubbing you know around the kitchen with the regular sponge and I see this thing sitting there and then I remembered that Texture change thing and I thought hmm. I wonder you know Does that work in the sink and so I made it warm and I started you know scrubbing some stuff and then I made it cold When I made it cold it scrubbed all the burnt spaghetti sauce off the plate in two seconds And now I'm going into my engineering inventing mode and what I'm noticing now is that everything is round pots, pans, plates, coffee pots, muffin tins, casserole dishes, they're all round Why are we using a rectangular sponge with edges? Because this is getting all the way to the sides of all these things and it's a perfect shape So you're you're cleaning the dishes right you've already cleaned the furniture I mean I would be thinking at this point. I should revisit this thing this thing is actually This is interesting. I mean is that what you're saying? thinking that night. - I'm enjoying washing the dishes and seeing it rinse clean. And I look at it and I'm like, oh my God, if it had a smile face on it, I could clean the silverware on both sides. And I grab a steak knife and I cut a smile in it and I stick the spaghetti spoon in the mouth and I squeeze it and pull. And both sides come clean at the same time. And when I tell you this, I honestly heard the angels start to sing. I like heard like, oh, I was like, oh my God, we missed it. This has nothing to do with cleaning your dirty hands in a body shop. This is the greatest kitchen scrubbing tool in the world. I just need to market this differently. And that's when scrubbed a 2.0 was born. - Okay, you go back to your office, which is you've got your business with your partner and you've got the 3M buffing business. - Yep. - Did you, I mean, were there still people, presumably there are people working there who remembered when you tried to sell this in 2008. - Everybody. - To the 2008. And did you say, hey, guys, do you remember this thing? I mean, tell me what you did. Well, I don't remember. I told you like, if you go back in the history, I'm constantly inventing new crazy ideas and concepts. So people are always like, "Aren't you kidding me?" And this is crazy idea. You come up with another one. And then my poor partner, we'd finally make money. I'd be like, wait, I got a better idea if we do it this way and then we got to reinvest all the money again and then there's no money. So yeah, I knew it was going to happen. And I went to my business partner and he said, "I don't like it. "I think we wasted a lot of time in money "before and 3M didn't want it." And I'm not interested. - Yeah. - And I said, well, look, we got to move forward with it. It's a great product, great idea. And I know it's going to be successful. And he was adamant that we're not going to do anything with it. And I kind of felt his pain because for 18 years, I had made him spend every dime that we ever made in profit, plowing it back into something. - Yeah. - And he could see the writing on the wall here. Here we go again, Aaron's going to make us do this. And I was like, no, look, we each put in like 75, 100 gram. And we're going to start this whole new thing again. We need advertising, marketing, branding, packaging. And we're going to blow this thing up. And he was adamant that he was not going to do it. And it's really sad story because we had our first real blowout fight ever. We had 18 years, we had never had a fight. We had always gotten to discussions and they could get, hey, I want to do it this way, but ultimately it always resolved. We got into it. We got into a yelling match. - So what happened? Did he eventually agree that you should pursue this or? - Well, I had the right to make the final decisions on everything as the CEO of the company. And I pulled out the shareholder agreement and I said, here's the deal. You're a 50% shareholder and I'm a 50% shareholder, but I have the right to make the decision on this and I'm telling you what we're going to do. And he was very unhappy with that and he opted to leave the company. So I had to buy him out of innovative accessory products and I had to make a go of scrub that in my own. - And did that end your relationship? - I guess you could say it did. We had a really great talk. The day that I gave him the check and he departed the company. I did say to him and I have the exact words, and I'll never forget it. We smoked these cigars that we had bought years ago. And in Hong Kong, we got these Cuban cigars and we thought one day we're gonna smoke these. And so I said, well, I guess this is the time we're gonna smoke the cigars. And I said, I gotta ask you, we did so much great stuff together and we grew this whole business and you know me. Like I'm never gonna stop until this thing becomes something and he says, yeah, I do. I know you. And for 18 years, you plowed every dime we ever made into the company and we finally did it and I have money and a nest egg. And I wanna go and do things on my own. I wanna invest in other businesses now. And I don't wanna start a whole company over from scratch. And I said, okay, I respect that. And with that, we shook hands, we hugged. And he went on his way and I, he never really looked back and we didn't really keep in touch much after that, to be honest. - All right, so now you've got this conviction in this thing and in this product. And you're really, for the first time, you're gonna go into consumer products. So I guess the first, I've got a bunch of questions about this. I mean, the first question I have is, you had patented a design, right? You basically patented the design of this sponge. But the underlying material was not yours. You were gonna have to depend on this German company to give you the material. So in order to protect your product, did you sign an exclusive deal with them? Like what did you do to make sure that somebody else couldn't just get this material and just cut it in a different shape? - Exactly. I negotiate with the company and get an exclusivity on the material they can't sell it to anyone else but me. And it turns out for some very specific reasons, no one else can make it. It's literally locked into this one particular facility in Germany. It's kind of like bread. You ever eat bread at a specific bakery? It's always different than the next bakery. And certain bakeries, they make a special bread and it's like it comes down to their processes and their ovens and their temperatures. But it's very specifically at that facility makes that bread. And that's how I can liken it. This company had some technologies that this wasn't gonna be easily copied and now I own the exclusivity. - Basically, so the deal was they would send out the raw material and you would cut them into shapes in the US. So it actually started in my own facility. Like I cut foam for buffing pads. I had all the equipment. And so they would send us the material and we would cut out scrub dyes one at a time by hand. And we created, I spent, you know, $150,000 on packaging and logos and I created this beautiful product in a bright orange box called Scrub Daddy and I started calling all of the retailers. - And let's just pause for a minute. You, 'cause your relationships were with people in the automotive industry, detailing and body shops. Like you didn't have, I imagine you didn't have relationships with like the Walmart, the targets or, you know, croggers of the world, right? - Zero. Not only that I had, not a, not a context. I had no experience in this market. I mean, I was in the OEM industrial professional world. You know, and my thought was I called Walmart. How far do you think you get when you call the reception if you're a Walmart? - Right. I mean, this is 2011, right? This is early days of direct consumer, right? This is really when it's starting to, just starting to, you know, become eventually would become, did you, I know you sold them on a website but did you think, all right, this is the way we should do it. Just let's just try to sell it online. - Sure, we made a website, but there was no virology at that point yet, you know, there was not TikTok or Instagram and maybe Facebook was just getting going and we made a website. I would tell my friends, you know, go and buy a scrub day, but it wasn't, nothing was happening. - You needed to get into a store. - I needed to get into a store. - Okay, there was, so you've got this product. Where did you get, like, who gave you a chance to put this in the shop? - So after I contacted everyone from Walmart to Target, to the Loads, and Home Depot, and Kroger, and couldn't get past the receptionist, I went to a friend of mine whose family owns five shop rights. It's a local, it's a small chain, maybe 250 grocery stores in the Philadelphia region. And I went to him, I said, hey, I got this new product and you know, it's this awesome sponge, and I showed it to him and he said, yeah, you know, it's not gonna sell. And I said, oh no, you're wrong. It's a bright yellow smiley face in this neon box. And he said, all right, so he went to the shelf and he just moved some sponges over and put it on the shelf and said, you know, we'll see. So, you know, give me the price, and I told him it would be $3.99, and he asked me what, you know, he can buy it for it. I had to give it to him for, you know, less than half. And so, you know, he can make money. And we put on the shelf, and I walked that aisle for 10 hours a day waiting for a customer to buy it. You know how many people bought it? - How many? - Nobody. - Everyone would walk down the aisle. It wouldn't even turn. Their hand would go out and grab the old Scotch bright sponge that their grandma has been using, and just keep going. And I went to my friend and I said, wow, you're right. I mean, no one's even looking at it. He said, no one's coming to the store to look for the latest in sponge technology. They're coming here for their eggs, their milk, their cheese, and maybe a sponge, and they're getting out of here. He was like, the only way you're gonna get interest is if you set up a little display and do like live demos in the store. And I'll give you some space. You wanna try that? And I said, yeah. So I built this little booth with hot and cold water and a couple pans and a mug, and I wouldn't let you walk by me. I mean, if you were walking, I mean, man, man, I gotta show you this. You're not gonna believe this. And I would do a demo. And every person that saw the demo bought one or two. And then after a couple of weeks, people would come back and tell me, I have no idea. never had a sponge that I love so much in my life. And my friend came to me and said, "Aren, I'm used to selling like two, three sponges a day. You're selling a hundred. You need to go to every one of my stores, all five of them, and sell sponges." But I couldn't do that 'cause I was running another business. - Right, and you couldn't constantly demo. And even if you're demoing in a one-shot, right? I mean, you know, it's not enough to, to be a scalable right now. - Not scalable. And then I did the math and I couldn't even pay someone $10 an hour because I'm not making the $4, you know, $399 price. I'm selling to him for like a dollar or something, you know? They're making all the profit. And I was like, oh, this is crazy. I can't even pay someone to do this. What am I gonna do? And it was frustrating and I was, but I was really busy. I was making buffing pets for three of him every day. I was running a factory that runs 24 hours a day. So I mean, I was occupied, but I was really sad 'cause I felt this had a lot of potential. And then one day, and you remember, this is 2011, I'm in the middle of another recession. And if you remember 11, we're teetering on what they think might be depression. And there's all these stories that are coming out in the newspaper and the local paper is called the Philadelphia Inquire here. They have like a million and a half followers. And they're writing these articles about how bad the economy is and how many people are losing their jobs and that China's taking our jobs and we might go into a depression. And I instantly am like, they need to write a positive story. So I call up and I got through an editor and I said, hey, I'm a business in the Philadelphia area. I'm an entrepreneur and inventor. I'm creating more jobs in the Philadelphia area and I have this new product called Scrub Daddy that's gonna be the greatest kitchen sponge. And they said, oh, that sounds interesting. They came down, it was supposed to be on an hour interview and I wouldn't let them go. So they spent the entire day with me and they wrote an article on the front page of the business section on the Sunday Inquire that hits a 1.5 million people. And it's my big smiley face holding the sponges and it says he's the daddy of the Scrub Daddy. And the phone started ringing off the hook and I said, here we go, it's about to start. - When we come back in just a moment, the phones may be ringing off the hook but sales are still pretty limited in local. And Aaron has to figure out how to get Scrub Daddy's in front of a bigger audience. Stay with us, I'm Guy Ross in your listening to how I built this. (phone ringing) Hey, welcome back to How I Built This, I'm Guy Ross. So it's 2011 and Aaron is finally starting to sell some Scrub Daddy's because of the story that ran in the Philadelphia Inquire and pretty soon after he gets a phone call. - The guy calls and says, hey, I saw the article and I love this idea, have you ever thought of selling this on QBC? And I said, like, home shopping network? Like, no one's gonna buy sponges on that. And he said, oh no, you'd be surprised. You could sell millions of sponges on that. And I was like, so do you work for QVC? He said, no, I'm a broker. I said, well, how's that work? He said, I can get you into QVC and then I get a cut of everyone you sell. And I said, well, isn't QVC down the street from me? He's like, yeah, I said, well, why would I just go there and try to get in myself? And he said, sure, go ahead and do that. Here's my number and when you can't get in, give me a call. So I went to QVC, I got booted out the door in 10 seconds. They told me go online and fill out a form. Request, yeah. I filled out the form. I was rejected within hours. It said, this doesn't meet any of our marketing criteria and wouldn't sell on TV, it best luck to you. So I called the guy back and I said, well, I can't get in. Why do you think you can get me in? And he said, because they say no to everything, because everyone wants to sell on QVC. So they rely on a network of brokers and we waste our time and our reputation to bring a product to a buyer that we know could sell on TV. And I think this could sell on TV. So I said, okay, we'll give it a shot. - So you get this opportunity to be on QVC. From what I read, this is normal. It took you some time to warm up. But like many products are going QVC, it did pretty well. Like it reached a national audience and it was probably huge. - It was huge. - Right, for Scrab Daddy. Do you, can you estimate like how much you sold as a result of your QVC appearances? - Well, to be honest, on the first show I failed. I was like a deer in the headlights. And so I didn't know what to do. The cameras were all, you know, turning on and off and the host can see I'm nervous. So she took the sponge out of my hand and tried to start doing demos herself, which she couldn't do. I got through no demos and I think they had brought in 20,000 sponges maybe and we only sold 40% which is a fail. And when you fail on QVC, you don't get a second chance. It's air time they gave you and they just kick you off. And my broker was livid and was like, you didn't sell enough, they're kicking you off air and I was devastated. I thought that was the end. And I got really lucky. The broker called me up after I failed and said, I've never seen this in all my years at QVC. He said, I just got a call from the buyer and the producer and they loved your energy and the product and they wished that you had more time to talk. They're gonna give you another show. And so I got a chance to sell the other 60%. And every time I went on, they would reorder like 30 to 40% more and give me another show. By the fourth show, I loved it and I was addicted to it. I mean, there's a high because they're talking in your ear and the producers can tell you, oh my God, great demo errand. The huge spike in the phone sales, you just got a thousand people on the phone and like, it builds you up and you finish the show and you sell out of all your inventory and you're on cloud nine. You know, and then the sales are incredible and then QVC reorders and by the fourth show, I'm directing the show. I'm like telling the camera man which angle to come in and how to show the product right. - Wow, okay, so this was like, and I think a lot of people see QVC and they assume of that's it, you're set, you know, but that's actually not really the case. And I think that even with that success, you had a tough time getting scrub daddy into re, you still couldn't get it into stores. - Yeah, at that point, none of the retailers still would call me back and the only place we were selling was at QVC and in five shopwrites. But if so could you theoretically just have kept doing it on QVC and even if you didn't get the stores? - 100%. - Was that not in, I mean, would that have been enough to create a sustainable business? - It would have been a spike and then a saturation point and then the minute that you had a bad show, you would have been kicked off. - Yeah, you needed to get into stores. - 100%. - All right, so this is where, and a lot of people know this part of the story or may be familiar with, this is where Shark Tank comes in because I guess you are a fan of Shark Tank at this point and you start to think, well, if I'm gonna get more exposure, maybe I should try to get on Shark Tank, is that what you started to think? - I think it was the QVC that did it. I started having television experience and being really comfortable in live TV. I would have never thought to apply for a show on television before but now I'm not watching Shark Tank like a regular viewer. I'm watching it like, oh my God, look at that camera angle. Can you imagine I could do a demo in foot of seven to 10 million people? Like, it's gonna be the best show ever and I'm bragging to my wife that I should have been a TV star and I turned to my wife, I said, I could go on this show and kill the sharks and I took my phone out and started searching, how do you go on Shark Tank? And I found a website and I just filled out an application and the best thing was I told them, here is a link to my last QVC show, you can go watch how I do on TV. - Mm. And they, obviously they responded and they invited you to film an episode of Shark Tank. From what I understand, your hope was that you would do a deal with Mark Cuban because he was the guy that you thought could really help you make this into a nationally known product. - Well, I thought we had a lot of synergies. We're both entrepreneurs and he's like the billionaire of the show and when I looked at the show, it was Barbara real estate and David was fashion and Kevin was nasty and a hersivic was technology and Mark is like sports and entrepreneur and everybody knows him. He's a celebrity. I'm like, I'm going for Cuban. - So you pitch, he's not even interested in this product. - It was a very shocking experience. I went in extremely confident into Shark Tank except for I didn't know Lori was going to be the show and the producer told me that an hour before the show that they had sub-barbered out for someone new and this person gets products on the QVC and I'm already on QVC. - You don't need her for that. - Yeah. - Well, I don't need her for that. I went in and I did what I thought was a flawless pitch and hersivic starts out and tells me he doesn't see the retail value and he's out And I was like, are you kidding me? This is gonna be a huge retouch. like, you know what, he's in tech, he doesn't understand. But then Mark started telling me that, you know, I was just a one-product company. I'm like, you don't understand. I'm an inventor. I'm actually said to Mark Cuban, you don't understand who you're dealing with. And he said, "Look, you may be the scrub daddy, but I'm not a scrub pimp, so I'm out." And the only comeback I could think of to that was that hurts Mark. I really wanted to work with you really bad. - Yeah. - And with Lori, it became really obvious that we were like kindred spirits, not only is she on QVC, but she's a product presenter like me, and she has a hundred patents. And it instantly made sense for me, but she actually called me out and said she thought that my pitch was a fraud. She said, "I just watched your pitch different than everyone else did, and you used two different sponges and two different weights to show the texture change. I think one of the sponges is hard and one of them is soft, or one of the weights is heavy and the other one's light." And I was like, "No, it's 100% real." And she said, "Fine, let me come down off the set." And she came down, standing right next to me, and she starts dipping into the hot and cold water and all the sharks are screaming, "Lorries, it work, is it work?" And she's like, "Face to face with me?" And she goes, "Oh my God, it's magic." And I'm looking at her, I'm like, "Oh my God, you might be my shark." And I can't wait for that to air on the episode, but they cut it from the entire episode. - Because they want to make it more dramatic, probably. - Yup, yup, they knew that they knew we were gonna do a deal. - So you end up doing a deal. Well, you, you, you're, I think you'd offered like $100,000 for 10%. - Yeah. - And we, people listening to the show know that, the deals that are brokered on the show that we see are not actually the deals that get finalized, 'cause there's a lot of negotiation and loyaring and papering and oftentimes it doesn't resemble what you agree to on TV, but Laurie Griner, clear, I mean, it makes total sense, 'cause she, this is what she did. She sold things and made things and invented things and sold them on QVC. She's interested and she wants to do a deal with you. - Absolutely. And, and you're 100% right. The, the deals just like every deal, like you negotiate for a house and then you, you know, make a deal and then you go do an inspection and the deal's changed. So I think, you know, Shark Tank is very real like that. When 3M came to buy my business, then they made an offer that whole deal changed by the time we got through due diligence. So it's totally accurate. - That episode, I think you filmed it in early in, in 2012 and it aired in like October of 2012 and what did it, when it aired, tell me what it did to your sales. - Oh my God, we did a million dollars the night the show aired. - Wow. - It was the most transformative thing that could have ever happened to the company. And I already heard the stories, the scare stories that you air on Shark Tank and your website blows up and so you better have inventory and you better have backup servers and we had all of it. I had IT people sitting there watching and when the traffic got too heavy on one site, they flipped it to the next one and I had the inventory ready made in our factory waiting for the show. And the bedbath and beyond person that wouldn't talk to us before called us and Walmart called us and Lori was really gracious and you know, she joined a bunch of the calls and brought star power and they were like blown away and instantly took the product in. And then she would have other experiences like with other entrepreneurs that she had and she'd be like, oh, call the target buyer, I know that person and she'd give me the number and I could just call them and take it from there. And then things just blew up and she turned into like monster celebrity and she invested in all these companies and she was like, Aaron, you good, you know what you're doing? I'm like, Lori, I got this. And we're now like more like good friends than she doesn't like get involved day to day with the business, she doesn't need to. - Yeah, it makes sense. All right, so it sounds like at by this point, right? Scrub Daddy is really starting to take off. But meantime, I mean, you are still working for 3M. You've still got a pretty big job there making the buffing pads and you're running the separate accessories business. So how were you doing all of the stuff and scrub Daddy at the same time? - Yeah, so you know, by 2014, I was out of horse power. I couldn't run the 3M thing at the same time. I was running scrub Daddy and I had to make a choice. And scrub Daddy was exploding and it was much more lucrative and I can control my own destiny. And that was really big for me. And I told 3M, I won't be renewing my contract and I'm moving on. And you know, by that time, we really started to understand the retail landscape and we understood you can't be a one product company. You need to create a brand block. And so even on the show, if you watch the show, again, we were talking about Mark Cuban. Mark Cuban says to me, well, you're just a one product company, right? I'm like, not for long. We got scrub Mommy. We got scrub Baby for doing Baby Bottles. I got a holder. So I was already thinking this way. And then we came out with scrub Mommy. - All based around the same foam material. - Yes. So scrub Mommy is a double sided foam. So instead of just being the hard scrubbing texture chaining sponge, we put a really soft, absorbing sponge on the other side that wasn't cellulose, that didn't smell, didn't stink. So it was still a unique material. And to this day, scrub Mommy outsells scrub daddy by about 10% in every retailer. - And I'm wondering when you, even when you get them into stores, right? How are you able to, like by 2014 or 15, like how are you able to get people to still know what it was? Because Shark Tank is, there's not a dense, right? But if you hadn't seen Shark Tank and you weren't familiar with that episode, and you just passed by the scrub daddies on the shelves of Kroger in 2015, how did you get people to know what it did? Like, didn't you have a similar problem that you didn't, you know, in the shop rights in 2012? - So, you know, Shark Tank is the gift that keeps on giving. They don't just air once, they have reruns. And then because of our success in 2013, like a few months later, they did our first follow up episode where we got into bed, bath, and beyond. And that gave us another boost. And then the next year, we had a huge bunch of sales and they gave me another follow up episode. I've been on Shark Tank almost 15 times. And almost every year, they do some follow up. And then CNBC picked up all the reruns and started airing them all the time. And so I end up, you know, in episodes all the time on that. And so throughout all that time, we're constantly out there. And then people start uploading clips of me from Shark Tank onto social media. And that gets a life of its own. And then we start going, hold on, this social media thing, we should be involved in that. And so by like 17, 18, we start posting on Instagram, TikTok, Facebook, and it explodes. - Yeah. - I mean, we have almost five million followers on TikTok now, almost a million on Instagram. And some of our videos get 20 million views. And the videos that you also, like one of your strategies, I guess there's like these clean influencers, what are they called? - Clean talk or yeah. - Clean talk, yeah. Like there's this whole, I'm an antique talk, but there's a whole world of people who just, like clean stuff, right? Like influencers who make sense, there's influencers or everything. And you got into some of these people pretty early. - Yeah, so the influencer marketing, I'm gonna credit my best friend, who's my chief strategy officer here at Scrub Day. He found two or three of these influencers who have become mega, mega influencers in the cleaning space. And you know, what happens in COVID, people start going crazy about cleaning. And they're watching these videos like religiously and these influencers take us to the next level. - And so basically it was like a combination of the Shark Tankery runs. And then you start to invest in social media and that and so year over year over year, you're just growing every year. I also started to do a lot of podcasts, a lot of interviews and I also got myself onto like every major publication. Lori got me onto the view, Fortune magazine did an article. The Wall Street Journal did an article and put our sponges on top of a whole bunch of Scotchbright sponges and said 3M fights off upstart. And so all of this, you know, free media, all of it. And I consider social media, even though we paid some influencers, it's still very, very inexpensive and it gets you a broad broadcast to everybody. - I'm curious. I mean, did you, I know that you sold your previous business to a part of 3M that was not in household cleaning supplies or consumer products, but did 3M at any point come and say, oh, we blew that one or, hey, should we, could you wanna talk again or anything like that? So in 2014, when I resigned, I said my gobyes and they said, Erin, the home products division would like to talk to you. And I said, about what? And they said, oh, I'm sure you know about what? And I went and met with them and they were all loving scrub daddy. And it looked like that was going to lead to another acquisition. And I was more than happy to entertain that. I felt like 3M was my friends, like family. And unfortunately, one day the lead M&A person called me and said, we have to stop all of our discussions. The VP of the home products division who loves you and loves your product and sees the vision, they got promoted to another part of 3M which happens all the time. and they brought in someone new who has no experience in the home product care and their first directive was shut down every acquisition until I understand the business and they stopped talking to us and gave back all our diligence information and that was it. - Wow. I know that on a few occasions, you've been public that you were like ready to sell and I think even in 2020, you told the Philadelphia business journal that you were ready to sell and tell me about that. I mean, has the right offer just not come around? I mean, because it sounds like maybe you would still sell today if the right offer came around. - Everyone has to be, that's one of your strategies, right? If you're not planning an exit strategy, I don't know what you're doing in business. There has to be some succession plan. I won't be here forever. I don't foresee my children running scrub that. It's far too complicated and sophisticated a business and my daughter wants to be an education and my son is a social media influencer and hockey player. So this isn't for them. So what are we gonna do with it? So yeah, I'm always open to sell. It's just a matter of the price and to date, we haven't gotten the right offer. Although we know that we've been valued in multi-billion and selling this to like XYZ private equity firm doesn't tick it for me. And I have no interest in that. This needs to go to the right home at some point and that needs to be one of the largest companies in the world in the CPG space. That needs to be a proctor and gamble, a unilever, a chlorox, a hankle, a 3M. It could be any of those or I'm left with the last piece which is we just go public. - Right. How do you protect against copycats? - Huh, that happens every single day. So the first thing is I told you our material is exclusive and really only one company in the world knows how to make it and can make it. So every day there's a Chinese knockoff and it's a piece of junk. So a lot of people will try to copy us. You can't get the smiley face, right? 'Cause I have the patent on it. But they'll make some other shape. When you copy our trade dress, which is our packaging designs or our color schemes, I will actively pursue you and defend vigorously. And so one way we've protected is we maintain our exclusivity and we only sell the top products in the world and we keep to the fact that Scrub Daddy, if you want to cheap $1 sponge, I'm not your company. Now we also started seeing, this is recent last year, we started seeing counterfeits. And I mean real actual counterfeits. - That looked like just like it. - Dude, it was my name on the box. It said Scrub Daddy, Scrub Mommy, it had my address, had my patent numbers on it. They literally made a Scrub Daddy box, but they put cheap Chinese sponges inside of it. And they were passing it off all over Amazon as if it was ours. We hired a private investigator, we found the company in China, we sent a guy with a camera in on his lapel, he filmed the whole thing, we went to the Chinese government and said, this is fraud, someone's copying our brand. And they agreed and we raided the facility and took all of their inventory. And so we think that sets a good precedent, some people start to see that we protect our brand and we'll continue to do that anywhere that it's possible. - You have like, I think over what, about 250 employees or 300 employees now? - Well, we have almost 500 worldwide. - 500, wow. - Aaron, you are, I mean, you've been at this for a long time, right? What do you, I mean, how long do you want to keep running it? I mean, is it something that you could do for 10, 20 more years? Do you want to, if you did sell it, would you start another business? Like, what are your sort of ambitions at this point? - So as long as I find it still fun and entertaining and interesting, which I am, I'm still developing new products all the time, getting new patents, we just got our eighth patent on a toilet scrubbing system that's coming out this year. So as long as I can keep doing that and I'm enjoying it, I can keep doing it until the right suitor comes along. And if it's not that, I would consider going public and at that point, I would step down. I don't want to run a public company. It's far too much red tape for me. And as far as, you know, starting other businesses, I've already done it. I'm in the middle of a brand new startup, making this really unique hockey stick called Toe V, T-O-V-I. It's a revolutionary hockey stick that we have NHL approval for. And I love the sport of ice hockey. I've always loved it. I've always played it. And I love to change that sport forever. And so I've already started what will be my next business should I ever exit scrubbed at. But until this becomes like too stressful and until my wife tells me that she's tired of sitting home by herself all out of nights, I can keep doing this. - When you think about everything that's happened to you and selling to 3M before the financial crisis and even selling to them. And then them not taking this product as part of the deal, like them allow you, you got to keep it. They didn't care about this sponge, described to anything. And then where you are now, how much of that this where you are now, do you attribute to the work you put in and how much do you think had to do with getting lucky? - So I think it's a definition of luck, right? And I think luck would be someone just coming to my door and dropping off a boatload of cash. Like that's luck. So I mean, I attribute more than 90% is hard work. And then there's just like great fortunes. Like you're just fortunate because you work that hard to put yourself into a position where you might get lucky. You know, in 2020, I saw the writing on the wall and I got scared, said everyone home and said, well, I'm working for home, we'll shut the factory down for however long. And then I got letters from Walmart and Target and Loes that said you're considered a essential product in the home cleaning business and you're not to shut down. In fact, we're increasing our orders 30%. Like we were the unintended beneficiary of like a pandemic where cleaning becomes paramount. But is that luck? Well, no, I created a cleaning product and I put a lot of time, money and effort into making this brand. And because of that, I was in the position that one day there happened to be a pandemic and cleaning became essential. - Yeah, I mean, it's, you know, you were determined to make this work like you knew it was gonna work. But still like, I mean, it, on first glance, like the response was, this is ridiculous. There's a smiley face sponge like what? It doesn't make sense. - That's what Kevin Eulerius said on Shark Tank. He said, you're kidding me. A sponge with a smiley face could I, that cost two cents to make it in China. And I was like, you're missing the whole thing. Every single person in the world uses some kind of sponge or cleaning tool. And so the market share is so big that even if I didn't get the whole market, this was still a monstrous opportunity. Like, I knew this was gonna be something huge and I would have put all my effort into it, which I did. - That's Aaron Krauss, founder and CEO of Scrub Daddy. By the way, it's actually one of the most successful Shark Tank companies ever, which has led to some regrets from the sharks who did not do a deal with Aaron. - I'm very close with Damon John and he's always making fun of the fact that he didn't get the deal. And he was on the Drew Barrymore show and she's like, you ever miss, you know, ever regret something? He's like, that's stupid sponge. And like, I know he's kidding 'cause he used the Scrub Daddy and he loves my barbecue brush that we talk all the time. And all the sharks on my 50th did a video. It gave me a happy birthday, so it's pretty cool. - Hey, thanks so much for listening to the show this week. Please make sure to click the follow button on your podcast app so you never miss a new episode of the show. And as always, it's totally free. And if you're interested in insights, ideas, and lessons from some of the world's greatest entrepreneurs, sign up for my newsletter at gyros.com or on Substag. This episode was researched and produced by Chris Messini with music composed by Rampti Narablui. It was edited by Niva Grant. Our audio engineers were Patrick Murray and Jimmy Keeley. Our production staff also includes Alex Chung, Nora Gill, Casey Herman, Sam Paulson, Katherine Cipher, Carrie Thompson, Ramel Wood, John Isabella, and Elaine Coates. I'm Guy Ross and you've been listening to How I Built This.