Please enjoy this transcript of my conversation with Justin Mares, serial entrepreneur and Founder of Kettle & Fire, Perfect Keto, and Surely Wine. Transcripts for other episodes can be found here.
Learn how Justin Mares identifies trends and builds direct-to-consumer businesses (and brands) to own them. Including all of the hard lessons that Justin has learned along the way, from why he’s learned to bring on a head of finance early, why consumer business are “cashflow businesses”, to how he competes with generic brands. And so much more.
“The Iron Law of Ecommerce across everything I’ve ever started is that I start out thinking I’m selling to people like me and it always turns out that it’s 45-year old women that are buying the product.” — Justin Mares
Transcript – #144 Kettle & Fire, Perfect Keto, and Surely Wine: Spotting Trends and Building D2C Brands to Own Them | Justin Mares, Serial Entrepreneur
Daniel Scrivner (00:00):
Hello and welcome to another episode of Outlier Founders by Outlier Academy, where we decode what iconic founders and entrepreneurs have mastered, from how they built their companies to the frameworks and strategies they used and the lessons they learned along the way.
I'm Daniel Scrivner. On the show today, I'm joined by Justin Mares. Justin is the founder of a number of companies, including bone broth maker Kettle & Fire, America's number one keto brand, Perfect Keto, and the non-alcoholic wine brand, Surely Wines. Each of these companies alone does tens of millions of dollars in revenue each year. On top of that, Justin is also a venture partner at Long Journey Ventures.
In this episode, we decode how he's built and scaled multiple companies to tens of millions of dollars in revenue, including Kettle & Fire, Perfect Keto, and Surely Wines, including the framework he's used for all of his businesses, from how he picks trends to how he creates products and brands to own that trend and how he scales them, as well as everything he's learned from the highs and lows of his journey, from why consumer brands or cash management businesses, to how he creates categories and brands, to why he believes in hiring a financial leader within his companies as early as possible.
You can find a searchable transcript of this episode, as well as our episode guide with ways to dive deeper at outlieracademy.com/144. That's outlieracademy.com/144. Please enjoy my conversation with Justin Mares.
Justin, thank you so much for joining me on Outlier Academy as part of our Outlier Founder series. I really appreciate the time. Thanks for coming on.
Justin Mares (01:25):
Absolutely. Thanks for having me on.
Daniel Scrivner (01:27):
So I am so excited about this. When I asked you if you would come on, I had my fingers crossed because, one, I'm a big fan of Kettle & Fire. It's been cool to see the number of companies you've started and just the progression. So we're going to cover a ton of ground here from talking about Kettle & Fire, Perfect Keto, Surely. I want to get into your approach to building these companies, what you've learned. We have a ton of ground to cover.
Where I want to start is for a quick sketch of your background, because I think the lead in here, you've got a newsletter called The Next. I'm just going to read something from it for a second.
In the lead in, it says, "In the last four years, I've founded three health brands, Kettle & Fire, Perfect Keto, Surely, which each do tens of millions in revenue. I've raised 20 million to build Kettle & Fire, gotten into 10,000-plus retail stores, bootstrapped Perfect Keto, launched 80-plus SKUs," super impressive list, "and have a small portfolio of Shopify apps that I run on the side." That's just in the last four years. So take us back earlier on and connect the dots and help give us a sense of your journey.
Justin Mares (02:29):
Yeah. So thanks so much for having me, first off. So where should I start, [inaudible 00:02:36]?
Daniel Scrivner (02:37):
I mean, well, wherever you think is an interesting moment in time. I don't know if there's anything formative in your youth. I know in college, you experimented with Paleo that probably led to some of this. So wherever makes sense.
Justin Mares (02:47):
Yeah, so I think that a lot of this stuff probably started where I grew up in DC, and then after I graduated high school in 2008, my family moved to rural Pennsylvania. So to a really, really tiny town outside of Philadelphia. It's not great. I didn't really enjoy living there. I didn't know anyone. I knew literally no one for a hundred miles or whatever.
And so, my first summer, my first two summers after college, I would come home and I would know literally no one. And so, my summer after my freshman year, I basically came back and I didn't know anyone. I was working as a janitor at LA Fitness. I was also working construction, doing pool plastering. I was just pretty miserable, honestly.
And so, it was around that time that I first came across The 4-Hour Workweek, which was a very formative book for me, I would say. That was the first thing that I read where I was like, "Entrepreneurship is a thing?" I could just try and build my own company. I could make money on my own volition. As someone who at that point in my life had been fired from 13 jobs, literally every job I had and would later-
Daniel Scrivner (04:02):
Wow. It's impressive.
Justin Mares (04:04):
Yeah, I know. I later would get fired from LA Fitness and the pool plastering job. So I'd been fired from everything. I was like, "Huh, maybe this is an answer to my seeming inability to really get excited and dive in and do stuff that I don't like for people that I don't really respect."
And so, that's when I started working on my first company. I started my first company called ... It was called Roommate Fit. When I was in college, I had a bad freshman year roommate. Just thought that because I was a college student, there were a bunch of other college students who were also unhappy with their roommates. There must be something that you could do, like building an eHarmony for roommates. It would be an amazing idea. It was a horrible, horrible idea for many reasons.
But basically that got me started in this entrepreneurship world. As I got more and more into it, even though that business didn't work at all, we made $1,000 in revenue over the lifetime of the business. Then the one university that hired us for $1,000, I lost the check that they'd sent us. And so, they had to charge a $15 reissue fee. So the company's official revenue is like $985 over its lifetime.
But, yeah, I mean that got me started on this broader journey of figuring out how to be an entrepreneur, how to build companies, how to do all this kind of stuff, which has been very rewarding in general.
Daniel Scrivner (05:29):
Yeah. We're going to talk about the companies that you've been building over the last four years. But I understand, at least if I'm getting it right, it's foggy from doing the research, but I think you started a company that got acquired. And so, maybe one way of asking the question would be talk a little bit about the first time you had a company you founded or were a part of and it was successful, maybe what you learned from that experience.
Justin Mares (05:49):
Yeah, yeah, totally. So after starting Roommate Fit, I went out to San Francisco. I was working with another startup that was in the Pittsburgh area where I went to school. When I was in SF, I met a guy that was just starting to do a roll up in 2012 I guess this was, where he was buying different software businesses, SaaS businesses in 2012, rolling them up, and building a portfolio of these things.
And so, he was 36, 37. He'd been successful. He started multiple companies that had done exceptionally well. He was basically like, "Hey, do you want to come work with me and help build this company?"
And so, I moved out to Las Vegas to build a Las Vegas office for what we were doing and was traveling back and forth to San Francisco. We acquired basically four software apps. We grew them. I think we a little bit over doubled them in a 12-ish-month period. Then at the end of that, we sold the portfolio to Rackspace, which was then a publicly traded hosting company based in San Antonio.
And so, that was my first acquisition where I'd gotten involved with this guy, worked super hard, super closely with him, and we had taken something from ... Granted, it had a revenue base. We were acquiring companies, not building from scratch. But that was really my first win. It led to me moving to San Francisco as part of the acquisition. I made some money from that sale. It was really a tremendous outcome.
Daniel Scrivner (07:21):
For you, did that give you confidence that, okay, this was achievable? I'm just thinking, here you are, you've been fired from all these jobs. You've tried something that was successful, but not successful. You have something that's now successful. What does that change? I mean, for you, was it validation that you're on the right track? Was it like I can do this? What was changing mentally?
Justin Mares (07:39):
I wish that I had felt more of that. I wish that I had allowed myself to be like, "Good job." But, instead, I took the opposite of you and I was like, "Oh, I could never have done that by myself," "Oh, I didn't do this. It wasn't really my win. We were buying businesses, not optimizing them. The market's good. Jonathan is a genius," all of which are true. But I don't think that I let myself feel like I had earned that win in any way.
I certainly was not the main person that pushed those companies forward. So I think that was true to an extent. But I think I also could have felt a little bit better about the role that I played as opposed to I just wrote it to zero and I was like I'm not going to feel good about myself until I have a win, until I've started something myself.
Daniel Scrivner (08:27):
Totally. I mean that's not necessarily a bad thing. Maybe it gives you a positive chip in your shoulder, back to a degree of like, okay, now let me go do this on my own.
I want to talk a little bit about the companies that you've started. What I wanted to ask was, when I look at all the companies you have today, they all make sense, meaning they're all health and nutrition and wellness focused. They all focus on very specific markets and use cases. They're all really well-branded. Where did this all initially start and what was the origin story of ... If I'm getting it right, I think Kettle & Fire was the first one. What was the origin story of the genesis of that first company?
Justin Mares (09:02):
So when I started Kettle & Fire, it was 2015. I was doing consulting. I was poking around for my big tech company that I wanted to start. I was in San Francisco and was like that's just what I thought I should be doing.
And so, I spent a lot of time thinking about different ideas, and one of the things that just kept coming up, as I was getting into performance optimization and nutrition and health and just following my intellectual curiosity in that space, I came across a lot of the people at my CrossFit gym, were talking about how they were using bone broth for recovery to heal their joints, gut dysfunction, skin health, all these sorts of things.
Around the same time, my brother, who I ended up starting the business with, he was based in the Philly area. He had torn pretty much everything you could tear in your knee playing soccer. He was in high school. He had gotten surgery and was bedridden for eight weeks. He was basically like, "Hey." He was like, "What can I do to help with recovery and how can I heal faster after surgery?"
I recommended he look into bone broth. There were no good quality options in the Philly region. I was myself looking for bone broth because I was traveling. I didn't love cooking then and was terrible at it. And so, I was looking for bone broth in San Francisco and there was also no good, high-quality versions.
And so, that's when the idea coalesced and we were like, "Oh, I bet there's a demand," or, "I bet that you could start a high-quality bone broth company. We can start selling it online." "Nick," my brother, "we can start this together. You don't have to go to college. We can start this business because you want to be an entrepreneur anyway. I can use this as a way to fund my life practically as I figure out my big tech thing."
And so, we decided to start what became Kettle & Fire. We launched it in August of 2015. Just with no expectations beyond a lifestyle business, I honestly thought it would do maybe 10 to 15K a month in a really good scenario. It just took off on us.
Daniel Scrivner (11:09):
When did you start feeling like you were having success with it? I mean it sounds like, anecdotally, you're getting this sense that there are a lot of people that are interested in it. It's this emerging trend. You talked about, I think, in our other interview being good at spotting these trends and being early to them. All of that's great, but there's so many businesses that you then start that don't materialize or get big. What was the first moment where you and/or your brother were like, "Okay, there's something here. This is actually working."
Justin Mares (11:36):
Yeah, I mean, honestly, the first moment was on month one we launched. Pretty much as soon as we launched, we thought we had something. We had underwritten it as I thought it would do five to 10K a month. In our first month, we did 20. Our next month, we did 40. Our next month, we did 60 grand or something like that. It just kept growing.
We launched in August of 2015, and before the year was over, we'd done almost 300,000 in revenue. And so, for us, we were just like, whoa, this is way beyond what we thought this would be. This is with ... We had a horrible brand. It wasn't called Kettle & Fire at the time. It was called Bone Broths Co. We were only selling online. It was $12 a box. We didn't really know how to make a good product. We only had one SKU. It was just on almost every dimension, it was really badly done, and it was still working. And so, we were like, "Damn, this is compelling."
Daniel Scrivner (12:39):
What do you credit that to? What I'm asking there is, so there are so many things working against it. If you had to try to play scientist and try to point to one or two things that really move the needle for you, do you have a sense of what those were?
Justin Mares (12:52):
Yeah, I think it was mostly timing, honestly. I think that our timing was spot on, where we were just at the moment where people were starting to talk about bone broth. It was a product they wanted in their lives and they were willing to pay for it. At least some smallish community of people that are into Paleo and Whole30 and health and all this are willing to pay for it.
At that point, when we launched, it was like we were literally the only game in town. If you wanted to buy bone broth, it was like you somehow knew about us because there were no other companies that were doing this thing.
And so, I think it was almost entirely timing and we were the right company with the right product in a market that was growing, and that was it. I think that that was almost everything is we could have ... And, honestly, the reason I say that is I think we did a ...
There were definitely things that we could've done better. I just mentioned brand sect, cost was expensive, all this sort of stuff. We saw companies that were executing way worse than we were, that were launching bone broth in 2015, 2016, that were doing really well. They were doing single-digit millions in sales and ...
They were doing single digit millions in sales and they had no idea, I mean, mean no idea what they were doing. And so I think it was just mostly a market thing at that time
Daniel Scrivner (14:13):
I mean, so one of the questions I want to ask, it's a little, I guess, difficult to talk about. So you end up launching this company, it was called Bone Broths Co. which of course it was, like a generic.
Justin Mares (14:22):
Yeah, terrible name.
Daniel Scrivner (14:22):
Not super awesome name but it's good enough to be able to launch it. You've clearly evolved it massively since then. Not only have you had askew expansion, I would say your site does a very good job of marketing it and what the benefits of bone broth are in a very simple way. The branding is great. Talk a little bit about the process of taking it from this super rough thing that was working despite itself and polishing that over time. And I guess what I'd be curious is what have you two intentionally focused on that's really moved the needle and then walk us through some of that. I think it'd be interesting to talk a little bit about the branding and naming and updating that and what that looked like.
Justin Mares (14:57):
Yeah, I mean, so as soon as we thought that we had something, we were like, "Oh boy, we really have to raise our game from a product standpoint, from a brand standpoint, from a marketing standpoint," all of it. And so hired a branding agency. They were like, "We're going to come up with a great name for you." Nick and I ended up coming up with the name. We were sitting in a hot tub. We were joking about what are the core things that you need to make bone broth and what would you have in an ancestral environment? And for us it was a kettle and a flame, a fire. And so we were like, "Oh, that's a cool name. Sounds sweet. We should maybe look at using that." And that's what we went with.
Daniel Scrivner (15:39):
Can you share some of the names that you did not go with?
Justin Mares (15:41):
Yeah, so they wanted to go us to go with Stock Smith was one of the names, which is not horrible, but not amazing. It was like Harper 82 Harper, which was the address of the first butcher shop in San Francisco, something like that. Grainger, which would've been horrendous, no way.
Daniel Scrivner (16:02):
I mean, this is very branding agency work. It's fascinating.
Justin Mares (16:04):
Yeah, a hundred percent. Yeah. And so we were fine with the branding agency. They did come up with the logo, which is amazing and we still use an iteration of that logo today. But yeah, I mean it was basically we had to put a lot of thought into what is the vibe, the brand, the messaging, the look and feel that we want to convey. And in those days, our first Kettle & Fire brand was black and orange and red. I thought it was selling to CrossFitters who want to drink bone broth. And the iron law of e-commerce across everything I've ever started is I started a thing thinking I'm selling the people like me and it's always 45 year old women that are buying the product.
Daniel Scrivner (16:49):
That's always the end consumer. I just love this.
Justin Mares (16:50):
Yeah, exactly. And so we basically had to, over the years, have had to revamp and soften our branding, our logo, our all that sort of stuff to make it more appealing to the average person.
Daniel Scrivner (17:03):
I mean it's a really interesting point and I want to talk about that just for a second because I think part of what I'm trying to think of when coming up with these questions is what other direct to consumer health focus founders might want to know. And that is very, very, very common. Starting out thinking here's the audience. You're tailoring the aesthetic perfectly that way. So clearly you know learn that your customer is very different than who you imagined. It's probably not a 20 year old CrossFitter male. It ends up being, to your point, a 45 year old woman.
But I want to ask a more subtle question because the cynical take I've heard on what you guys have done with the brand is, "Oh, we need to make it more appealing for women," as if women have entirely different aesthetic tastes than men do at the end of the day. And I think another lens you could use is just you're opening up the aperture and so that more people can relate to it. Is that how you guys have thought about it? Is there a philosophy with which you've changed the aesthetic to try to make it more relatable?
Justin Mares (17:57):
I basically think that our original aesthetic was very black orange, super traditional.
Daniel Scrivner (18:10):
Home Depot or something.
Justin Mares (18:11):
Yeah, I mean basically, a caveman Home Depot or some vibe like that. We basically just wanted to make it a little bit softer, a little less appealing, a little less caveman Paleo I would say. Where the first iteration was very kettle, fire, broth, bone, blood, all this sort of stuff. It was a weird vibe. And not a weird vibe, it worked at the time. But-
Daniel Scrivner (18:32):
Yeah, just specific.
Justin Mares (18:33):
Yeah, specific. And now as we've broadened as more people have understood the health benefits of bone broth and the like, we've increased the number of people that we think our brand talks to. Now we have multiple different colors. We have much softer color palette. We have a friendlier, more approachable font. We have a total packaging refresh, a lot of these things that we've done. And I'm really proud of the work that our branding team and marketing team has done with the brand and around the brand today, where I think it's both strong but friendly and approachable but also has good health connotations and vibes and the like. It's something I'm very proud of.
Daniel Scrivner (19:10):
Yeah, they've done a great job, so a huge plus one to that. One of the questions I want to ask was around distribution and how some of the decisions you made there. And I don't know if this is still the case, one of the newsletters I read you were talking about, I mean I don't know if this was for Kettle and Fire specifically, but you were looking initially at selling on Amazon and then you see all these crazy requirements that they had, which I didn't know about, of all these hyper-specific things you need to do perfectly in order to sell on the platform, and basically getting to the conclusion of, "Yeah, we're not going to do that." It's going to lean into direct to consumer. So talk about, I guess, how much of your business is direct to consumer versus stores? Have you changed your approach to selling on Amazon? How do you guys think about distribution?
Justin Mares (19:48):
Yeah, so when we started, we were a hundred percent direct to consumer. So you could only buy from KettleandFire.com and BoneBrothsCo.com. And so when we started, that was all of our business. As we moved on in our second year in business, we got into 50 Whole Foods. We were still ignoring Amazon at this point. But we got into 50 Whole Foods, so 90% of our business was direct to consumer. Our third year we got into all the Whole Foods. And so it's like, okay, we're now 70% online today. Today our online business is about 20% of our overall mix and we're mostly a whole wholesale brand. And I think that with the concentration, we have a focus on Amazon too.
I think that that's the way that brands, especially brands like ours that are selling at subs $10 price points and are shipping something that is boxy and heavy. We're shipping liquid at relatively low price points. And as freight costs and ad costs and all sorts of things have gone up, I just think that's structurally a hard business to win in. And when people are buying broth or stock or whatever, generally they're just going to their local grocery store to buy that thing. It's a repeat thing. You're almost always like, "Oh crap, I'm out of broth or stock. I'm going to go to the store and get some." Very rarely are you in the mindset of, "I'm going to make the best soup four days from now, and so I need to go online and order Kettle and Fire right now."
Daniel Scrivner (21:19):
No, I've never done that.
Justin Mares (21:20):
Yeah, right. So we knew from very early on that just based on the number of cancellations of subscriptions we got where people would say, " I have too much bone broth." "I never remember to buy this when I need it." "I can't wait a week for shipping." All this sort of stuff. We were like, okay, this is going to move much better when we can get into retail, and our early retail numbers once we got into Whole Foods, were exceptionally strong. So that was also a really good indicator that retail is where the future of the company lay and where we should be investing most of our resources. And so we've basically been prioritizing retail for better, for worse, but I think it's better.
Daniel Scrivner (22:02):
That makes sense.
Justin Mares (22:04):
Since very early, I don't know, 2016, 2017.
Daniel Scrivner (22:10):
I want to ask one more question and then we'll go one more question just to round Kettle and Fire. And then I want to try to loop in Perfect Keto and talk a little bit distribution there because the products are slightly different. But one of the things I want to ask is, so you launch Kettle and Fire in what, 2015, I get? Is that the right year?
Justin Mares (22:26):
Yep, late 2015.
Daniel Scrivner (22:28):
Okay, you launched it in 2015. Clearly even, not that I am like a bone broth aficionado, but I've noticed obviously that uptick in sales and people talking about it and people using it. Now you're at the point here we are seven years later where I know Whole Foods has a generic bone broth and I'm sure there are other competitors you compete with. And so it's an interesting example of you guys being basically the original brand in the category all the way through then scaling, and now you have competition from generic brands at the grocery store and other competitors. Has that factored into what you guys have done strategically? Do you look at that as just a reality of having something that's become more popular or just any thoughts around that?
Justin Mares (23:11):
Yeah, I think it's just a reality. It's like we've seen some success, we've seen some wins, and the category has gotten a lot bigger than when I started looking at it. And so I think that success attracts other companies. There are other companies that think that they are doing something better than us or different than us, or they see an opportunity financially, whatever it is. And I think it's unavoidable. I do feel like we have built some brand moats, some product moats, some distribution moats. We've spent a lot of our time not sitting fat and happy on money that we're making, but reinvesting into the business, making a better product, making a better packaging, getting better distribution. And I'm really proud of that and I think that it puts us in a good competitive position.
But I do think there's a lot of companies that, especially in our space, where it's like once you launch something that takes off maybe a kombucha or something is a good example, 10 years ago there was one kombucha brand. It was GT's Kombucha. They did almost half a billion in revenue, something like that, super profitable. They didn't really change anything. And now there's like 50 kombucha brands and there's more launching all the time and it just erodes margin and erode profits. It's just like a tough spot to be in, I would say, but also inevitable.
Daniel Scrivner (24:27):
No, it's inevitable. It's also, I think an amazing point because I can't tell you even as a venture investor, the number of companies I've seen that had early success. And one of the things you learned, this goes back to a point that we talked about earlier around venture investing, and it's a full contact sport. You never know what's going to happen. And one of the things I've seen now multiple, multiple, multiple times is companies who early in their life have spiked really hard and are enormously successful, but can't thread that needle and improve the product and be able to keep up and maintain the leadership position in the marketplace. And a lot of it, I think, honestly traces back to what you said, which is just my sense of it is they're not pushing themselves enough. They don't maintain that energy and that spirit from day one and they just are fat and happy. Is that your take? Do you have a different point of view around why that happens so often?
Justin Mares (25:13):
Yeah, I think that's part of it. I also think that, man, just business stuff is hard. It's hard to get a business off the ground. It's hard to get a business that's sustainable. Then it's hard to get a business that's profitable and growing and the bigger you get, the more competitive everything gets. And it's just like at every dimension or at every stage stuff is just really hard. I think that that's the other piece. Not everyone is just sitting fat and happy. I just think it's man, it is a challenge to fight off competition every single day, to stay ahead of the trends every single day, to try and focus on profitability.
And I think especially in our world, the branded consumer products world, the last seven years have also been especially hard because I think that there's been a slew of companies that have been extremely well-funded that are horrendous businesses, just structurally broken businesses, that are driving up advertising costs or taking shelf space or doing stuff that makes it hard for you as another competitor that wants to run a good business to compete. If had you're Four Sigmatic, or one of these businesses that Laird Superfood competes with, for example, I don't know if you know them, they are a public company so you can reference this.
Daniel Scrivner (26:34):
As funny as that is, they are a public company.
Justin Mares (26:38):
I know. I know. And last year, I think they did something like they did $18, $20 million in revenue, something like that, and lost $32 million in. That's like...
Daniel Scrivner (26:49):
It came public as a spec, which explains a lot, but yes, it's true.
Justin Mares (26:52):
Yeah, yeah, completely. Yeah, it was not a big process. But I mean it's like how do you compete with that as a brand that wants to build a good business when another brand is lighting $32 million on fire to make $20 million in revenue? That's very hard to stay alive in an environment where your competitors are able to do stuff like that.
Daniel Scrivner (27:13):
Yeah. I want to ask a question. I know you do venture investing, some angel investing, even just that point is so fascinating because here you are. I know you've raised venture capital for Kettle and Fire, but my sense is culturally you've run it as it's a profitable business. You want this to be profitable and growing, so you want it to be sustainable. So in many ways you're raising venture capital to expand it, but you have a very classical playbook, which I think is the right thing to do. That said, I imagine from your position seeing some of this, you probably have a love hate relationship with venture capital because one of the flaws of venture capital is it gives, to your point, there are so many examples. A great example recently has been this 24-hour or 20-minute delivery of groceries in New York is I think a fascinating example of just hundreds of millions of dollars lit on fire for companies that are not going to be around anymore because it was never a sustainable business. And yet-
Could be around anymore because it was never a sustainable business, and yet venture capital funded it. Do you have a love-hate relationship with venture capital or is that just a flaw, it's in the model, it is what it is?
Justin Mares (28:12):
Yeah. I mean, look, I don't actually think it's a flaw in the model. I think it's a beautiful thing in some ways that people can allocate risk capital and trying to build amazing, cool things, that if they worked, there's a huge payoff. I think that there should probably, on the overall sphere of how we allocate money as an economy, we should probably put more money into likely to fail, but if it works, boy will that be transformative for society type projects. And I think venture capital does a really good job of that.
That said though, I think that the problem or a problem in venture is that people use venture capital to describe venture investing in small companies across sectors, which I think is kind of crazy. When it comes to consumer, people will say venture capital invests in... when it comes to consumer products like Kettle & Fire, Perfect Keto, and the like. We saw companies the last six years that were raising at the same valuations in a seed or pre-seed stage, A.K.A, they don't have any traction stage as tech companies.
And yet if you're a tech company, your market size for many different types of tech companies is almost like two, three, four orders of magnitude more than a consumer brand. And yet if you're starting out at the same playing field, it makes no sense that a pre-seed, no traction... I don't know, a raisin brand competitor is raising at a $10 million valuation, when that is likely to require a lot more capital, be structurally a worse business than a 90%+ profit technology business. And an amazing exit for almost any brand in consumer is... south of $300 million. There are not that many exits you can look over the last decade that have gone for more than $300 million.
And so I think that tech is different. You get an Uber, an Airbnb, a DoorDash every single cycle in tech. Every year, multiple multi-billion dollar companies go public that are in the technology space. I think that the venture math pencils out when it comes to technology, I think that in consumer, people have to be much more disciplined and much more valuation sensitive. And I think that for the last seven years, they really haven't been. And I think that that has made it harder... it's made it to invest in consumer brands for me personally, but I think it's made it harder as a operator of a consumer brand too, where you have had investors that haven't agreed with everything that I just said, and so they're throwing money at money-losing brands that don't have any plan to be sustainable, and structurally are not able to either be sustainable at their current cost structure, or may not even be able to survive at all outside of investor dollars.
Daniel Scrivner (31:05):
Yeah, so well said. That's definitely going to be a clip that we will extract, because I think in a couple of minutes, you've made an incredibly compelling point. Just the one thing I was going to add on to that is one of the thoughts I've always had is, somewhat similarly, I've met with hundreds and hundreds of founders now. And over time you start to really get a sense for just the number of founders that are looking to raise venture capital, that honestly are not running a venture scale business. And you can start to identify that mismatch. But I feel like that's one of the... I don't know. Once you spot that, you see it everywhere.
And I think what I mean by that is exactly what you're saying, like, yes, you can raise venture capital, or you can raise money from other people and you can call it venture capital, but if you don't have a venture scale business, one, you shouldn't be signing up because you actually can't generate the return profile. It's not going to be fun for you. It's not going to be fun for your investors. But also just to... yeah, I think to your point, it's getting way too loose with the term as opposed to trying to be precise with it, more prescriptive about what it is.
Justin Mares (32:04):
Yeah, completely. I mean I think that it sucks when a startup raises venture, and they're not a venture scale company. It sucks for the investor who doesn't have a way to get their money out or loses it. It sucks for the founder who -
Daniel Scrivner (32:21):
It sucks most for the founder. They're just going to disappoint everybody constantly.
Justin Mares (32:25):
Totally. And in a best-case scenario, you're running a company that your investors want a return, but you're unable to sell to generate the return they want. And it's profitable, and so it's like what do you do? Do you just run this thing for 5, 10, 15, 20 years? What do you actually do? It's kind of tough. And I think that probably, there's going to be a lot of founders over the next five years that find themselves in this position where they have to decide, do I step away from a profitable business where I raise venture? Do I try and sell it even at a discount, because I want to do something else? Do I keep running this indefinitely to try and get my investors a payback?
Daniel Scrivner (33:01):
Yeah. Do I tell them I'm going to now pay them in dividends and it's not going to be a sale or a liquidity event or whatever it is, because that's not going to happen? Yeah, I think there does need to be more innovation in terms of how companies can reach a final state after raising venture. I want to ask a totally different question and then I want to talk about the origin of Perfect Keto and Surely. So you talked about all the things that have gone well for the most part. You've brought up quite a few things that you haven't necessarily with Kettle & Fire. But for the most part it seems like it's done enormously well. On the flip side, what have been the biggest low lights, misses and mistakes? What have been the painful lessons that you feel like you've learned?
Justin Mares (33:40):
For Kettle & Fire?
Daniel Scrivner (33:42):
Justin Mares (33:42):
We've had a lot. I mean we've had a lot on the hiring side. Notably there was a long period of time, multiple years, two and a half years, probably three years, where I didn't think that a finance team was important. And so we didn't have a finance team, we didn't do any cash projections, we didn't know our numbers really that well. We didn't have billing, collections, we didn't have anything. And so when I finally had an advisor knock some sense into me, he had a bookkeeping team that he knew well dig into our books. And I was like, fine, whatever. We can do this. I don't think this is necessary. I think this is stupid.
And we get on the phone call and he's like, "So you realize that you have $800,000 that different customers owe you that they've just not paid you and you've sent them product?" And we were a tiny company at that point. And I was like, "I didn't." I had no idea. Collections are a thing' I haven't been thinking about that at all. And at various points in not appreciating finance meant that we didn't have... all of consumers specifically is a cash flow management business, and we didn't have our handle on that. And so that almost killed the company probably twice. And that was entirely due to me massively undervaluing the finance function in a way that was so unbelievably stupid. So that was a big one.
Another big one was just, it's been beaten into my head multiple times to hire domain experts. We were building our own production line at one point shortly after we raised money, and we had not really a domain expert, but someone who said that they knew what they were talking about, who was managing that build out. And basically as we dug in, it turned out he wasn't. And we ended up burning an extra almost $2 million that we didn't have to burn, just because the line wasn't ready in time. We made investments thinking it would be, we had to hire a second engineering group to fix the first one's. It was just this mess. And so that was a really big learning lesson for me, is trust but verify, and also make sure that you're trusting someone when it comes to a... this is a super important task that we cannot get wrong, and that requires a lot of domain expertise, hire someone with domain expertise. Don't try and pass it off. You don't win any points for passing it off to someone who's never done this before.
Daniel Scrivner (36:07):
Yeah, I mean the other point that I've heard on that same note is when you're looking for a domain expert, look for someone that's done exactly what you're looking to have done, ideally at a higher level, and then you're bringing them kind of down market, as opposed to what a lot of people do, which is they're trying to swing for the fences, make a bet on someone that could potentially do it but hasn't done it before. And I don't know, the number of times I've heard that raised as well too is interesting. I want to ask one more question about the finance piece, because I imagine that you are not alone at all of thinking as finance is this non-strategic thing. So clearly one example of why finance is important is knowing how much money you're owed and doing collections. I imagine there are many other things, like you had talked about cashflow flow management; obviously having projections would be enormously helpful. For someone listening that's in that boat where you were, or just maybe you're talking to yourself from a few years ago, what other things would you point to as why finance is very important to invest in early on?
Justin Mares (37:00):
It's everything. It's planning, how do you make budgets, how do you make investment decisions, how do you plan, how you decide where to allocate resources across the company? It's all the way from that to running scenario analyses to... for us, margin improvement is a big thing. How do you make the decision between are we going to invest in X source for organic carrots, or are we going to invest in an organic carrot mash blend from another supplier, something like this. You just have this matrix of decisions that you make every day, every week, every year as part of a company. And I think finance gives you the tools and the ability to actually make those decisions in a way that's intelligent versus just guessing. And for so long, we were just guessing and we didn't have a rigorous plan, we didn't have a rigorous... any sort of model that we were operating off of, we didn't have any rigor around how we were making decisions. And I think that finance really provides that strategic lens and that way of thinking about where and how you should invest your limited resources.
Daniel Scrivner (38:06):
Very, very, very well said. And I would just say I feel like finance could maybe be a... I don't know, could maybe mean rigor. It's a great way of adding. I feel like any time finance is involved, the bar for rigor goes way, way up in any discussion that you're having. Because there's nowhere to hide, there's nowhere to hide. You have to have a real conversation.
Justin Mares (38:24):
I kind of think that we're moving into a... in startup land, we're moving towards an environment where we have been valuing the builders, the technologists, the marketers and all this sort of stuff really highly the last 10 to 20 years. And I think that if and as money gets tighter, as investments slow down, I think that really good operators and finance people are going to be unbelievably valuable in this next cycle. As if you're a company that can even eek out one to two more margin points, and you can use that to invest in better people, marketing, sales, whatever, it kicks off this feedback loop that will allow you to slowly out-compete a bunch of your competitors. And I think that that's something that we're going to start seeing a lot more of, is finance as a competitive advantage.
Daniel Scrivner (39:13):
Totally. And just people focused on compounding and taking... realizing that even a couple of percentages compounded over days and weeks and months and years adds up to a massive... massive changes over time.
So we've talked now a lot about Kettle & Fire, we've talked about some of the low lights, some of the mistakes. I want to now talk about Perfect Keto and Surely, and these are just two of a couple of the things you founded. Talk a little bit about why you founded those and maybe what you did better or differently, or what you learned from Kettle & Fire that informed the approach there.
Justin Mares (39:43):
Yeah. So unfortunately, I started Kettle & Fire and then I started Perfect Keto 18 months later. A lot of these things that I'm talking about that were lessons from Kettle & Fire, I felt like I learned or got hammered home at the same time at Perfect Keto.
Daniel Scrivner (39:57):
God, you learned them twice.
Justin Mares (39:59):
Yeah, but at the same time. It was horrible. Around the same time I learned that we should have a finance team at Kettle & Fire, it was becoming blindingly obvious that we should have a finance team at Perfect Keto; just brutal. And so both of these lessons got pounded very hard in my head. But yeah, I mean I think that we learned a lot about how to operate a business generally, how to hire, train, build culture, innovate, think about products, think about market sizing, think about where to invest resources. And I think that I feel very fortunate that I was able to look at two businesses at roughly the same time and extract learnings from each of them, and then apply some of those learnings to the other one. That was a really, really valuable thing.
And I think coming out of that, I felt very comfortable when we started Surely, feeling like this is much more of a... I felt like we identified a trend, we did a better job on the branding up front. We were more thoughtful about distribution, and marketing, and team, and all these sorts of things, certainly than we were in the early days of Kettle & Fire and Perfect Keto. We made a finance hire as one of our first 10 hires. The CEO and my co-founder at Surely is doing an incredible job. He was the president at Perfect Keto and has a finance background. And so I feel like a lot of the learnings that I had from Kettle & Fire and Perfect Keto, Surely got the brunt of those, and I learned bad lessons across both K & F and Perfect Keto at the same time.
Daniel Scrivner (41:36):
Yeah, well it's like maybe Surely has tailwinds as opposed to the other businesses having headwinds, and it's a nice thing to have. It's a nice thing to be set up for success and have an idea of what you're doing from day one.
I want to close by talking about a couple of the things that you cover in your newsletter. We will link to this in the show notes. I'm a huge fan, just going through a couple of the things that you've... printing them out, going through them and reading them to prepare for this, I think your newsletter's awesome. One of the things you talk about in-
... kind of prepare for this. I think your newsletter is awesome. One of the things you talk about inside there that I really love just because you got very specific with it and you have a unique approach I haven't heard other people share, is your annual review and goal setting process. And I think this started in 2012 or 2015, it's been quite a number of years that you've done this and you have a unique approach. I don't want to give it away. Can you talk a little bit about why you do the annual review, maybe what that looks like? And then I thought your process for how you set goals was also really interesting. Just touch on those.
Justin Mares (42:32):
Yeah. So I've gone through a couple iterations of an annual review, but the one that works for me now is of taking a couple days at the end of each year and just taking stock of what went well for me this last year. I have some metrics that I track, net worth generally at a high level. Some relationship health stuff like certain lifts, body weight, just some high level metrics, amount donated charity and the like. So I have a metrics driven piece, then I have this more subjective, what were my favorite moments of this past year? Looking at my calendar, what brought me a ton of joy? And then I kind of do a full calendar review and I go, what brought me joy? What was a total waste of time that I wish I hadn't done? And how can I get more of the things that brought me joy in the next year?
And make sure it created a list of absolutely do not do this list of things for future years. And so one of those things that I realized a couple years ago, just to give you an example, is that I really don't enjoy going to big conferences. I love going to small, less than 50 person events. Big conference, I get drained, I don't enjoy it, I don't meet that many people. It's not my thing. And so moving in this year, it was like great, I'm not going to go to any big conferences and I'm going to feel totally comfortable saying no to a bunch of these things. And that's made me slightly happier. So I do that and then I kind of move into a goal setting period where once I have a sense of what did I enjoy last year? What went well for me? What do I want to start? What do I want to stop?
What do I want to continue, moving to this coming year? Then I kind of have this goal setting process, look at goals that I set last year, how did I do on them? And I think about goals in a couple areas. It's randomly, this tweet that Naval sent a couple years ago has just been lodged in my head since I read it, which it's like a fit body, a calm mind, and a house full of love. These things cannot be bought, they can only be earned. And that's actually the framework that I use for setting my annual goals, which is like what are my physical body goals? What are my kind of mental, emotional, spiritual goals? What are my relationship goals with my fiance, my friends, my family, and the like? And then I have a business category and I just kind of go through and I say, "What are the things that are important to me and goals that I want to accomplish this year in each of those categories?"
And then write them down. And every month throughout the year, on one of the first... I actually do my annual review or my goal check in at some point this week, it's early October. I basically sit down and I look at how am I doing from a goal standpoint? What do I need to do, change, adjust, tweak to make sure that I'm achieving my goals? And it give me a really nice sense of progress. And just that generally tends to out... I think that staying on task give me a sense of what is this broader thing I'm working towards is really helpful for me, I don't know, as a type of neurotic person that does these sorts of exercises, I really get a lot out of it.
Daniel Scrivner (45:44):
Yeah, it's incredibly important. And my experience with that too is when you're in a position where have multiple businesses, you have a lot that you're doing, I think the more things you have in motion, the more valuable that time to pause and reflect and actually think deeply about these things and turn those dials is really, really, really important. We'll link to that newsletter in the show notes. You did a great job of outlining it. But for anyone that wants to learn more, we will link to the newsletter that's in. I've got literally probably 15 other questions I want to ask you. So I'm going to have to pick one because we're close on time. And this can be our closing question. And this it's less of a question, maybe more of a topic. One of the things I loved in one of your newsletters is you talk about extreme people have extreme outcomes, which is something I have seen.
It's really resonated with me. But you go even deeper than that and you talk about why that's the case. And one of the points that you make is... We're going to talk about why extreme people have extreme outcomes and why that's generally a positive thing. But one of the things you talk about is that because this is true, it's why you don't appreciate some of the criticisms of founders and artists. It makes me think of Kanye, it makes Elon Musk. You can go down the list of high profile people that have achieved a lot that are just quite different. And so it's people that they're getting criticism for maybe being eccentric or just how differently they are being extreme. And they've achieved incredible things. Talk a little bit about why that is special and significant to you and why being an extreme person is a good thing or can be a good thing.
Justin Mares (47:09):
Yeah, I think that basically the way that people tend to think about things is, oh, that's an interesting extreme result. LeBron James, Wow, what an incredible extreme outlier. And yet they don't think about what it took for LeBron to become LeBron. I'm sure that his friends, his mom are probably extremely well meaning, and at some point or another have been like, "LeBron, why don't you come to dinner with me and stop playing basketball?" You know what I mean? Or Kanye, why don't you get out of your room and stop composing music or whatever it is. And I think that people don't understand how... Or don't appreciate that extreme outliers, extreme results come from making distinctly different choices than the average person. And I just wish that... I want to live in a world that has way more human creativity, way more human flourishing, way more people being themselves, doing their weird thing, getting into whatever weird thing that people are into and getting into it 100%.
And I think that so many people are have this social pressure sort of norm where people expect that Kanye can be Kanye and then just be a totally normal house guest. You know what I mean? Whereas I want to remove that expectation and allow people to feel like, "Hey, I'm going to do this thing that it's exciting to me, that's unique to me, that's weird for me, and I'm also going to surrender the expectation that I'm going to be normal and understandable and perfectly understood and normal to everyone around me in my life." I just think that those two things are fundamentally incompatible.
And I wish that more people would realize that if you are going to do something amazing, great. Try and do something out there that no one's done before. Or even just try and improve yourself, 10%, 20%, whatever. You just have to accept that for whatever reason, other humans are going to tell you to chill out, slow down, don't try so hard. That's weird, whatever it is. And I wish that people would just be okay and internalize that if I'm going to try and start this company, if I'm going to try and be an outlier and become super wealthy, super great technologist, super great musician, I have to accept that what comes with that is a lot of amazing things and a lot of conversations where people are like, "Why are you doing that weird thing?" You know what I mean?
Daniel Scrivner (49:32):
Totally. Or just I think a lot of feeling judged. And to that point as well too, I think being different. And one of the things I wanted to talk about that is... One of the things I wanted to kind of do as a follow up to that was talk a little bit about steps to become an extreme person, because it reminded me, or at least it related at least to you also, and I think this was maybe part of the story of this idea of extreme people have extreme outcomes. It sounds like some of this came from this two week paleo experiment you had in college basically doing paleo before anyone really knew what paleo was and people being like, "What the hell are you doing?" And so one of the things I wanted to just ask you is what are the steps to become an extreme person?
And it sounds maybe a stupid question, but what I mean by that is I believe there are quite a few people listening that will buy into that. And yet the next thing is, what does it mean for me to open up to and accept extreme people and become an extreme person myself? Any thoughts on that?
Justin Mares (50:26):
Yeah. So when I was in college, and I will answer this question, I promise, but when I was in college, I remember I went paleo for two weeks and all of my friends. As a college student at least where I was in Pittsburgh in 2011, were like, "Wait, you're not drinking beer, you're not eating pizza. You're not like eating fresh. What is wrong with you?" And at the time, what I did is what I would... The absolute opposite of what I would recommend doing, which is I would shrug it off and I'd be like, "Oh, I'm not really into this paleo thing. It's just something I'm trying. I'm not feeling well. I want to eat it." I like didn't fully own that. I'm trying weird thing as an experiment because I'm interested in it.
And I think that as a way to practice being okay with becoming a more extreme, strange, out there, more fully expressed person, I think that figuring out how to own the things and the decisions and the choices that you're making, whether they're good, bad, weird, whatever it is, I think is a really good step to practicing and being more okay with being weird.
If you can just say, someone goes, "Why aren't you drinking beer?" And you don't have to make up an excuse that's not true, and you just go, "I read a thing that said beer is bad for you. I'm trying it for two weeks. We're going to see how it goes." And you just sit with full acceptance. So that's your decision and that's your choice. I think that that is the best sort of practice that you can do is starting to internalize and be okay with your choices. And then slowly as you build up the understanding and confidence that comes with internalizing and owning your choices, I think you become more and more okay being weird, being out there, being different.
Daniel Scrivner (52:01):
Yeah, you can try really weird stuff. Then you could be on Musk and Grimes having babies that have just crazy, crazy, crazy names. That's infinite possibilities.
Justin Mares (52:08):
Yeah, completely. It's amazing.
Daniel Scrivner (52:11):
Yeah. No, I love that story. I love the point you made in the newsletter and I agree with you. I think the world would be a better place if there were more extreme weird out there people just being open with trying stuff and being more intellectually honest and being less afraid of judgment. This has been so much fun, Justin. We have gone all over the map and talked about a bunch of stuff. I've really enjoyed our time together, so thank you so much for coming on.
Justin Mares (52:36):
Thank you so much for having me. Appreciate it.
Daniel Scrivner (52:37):
Thank you so much for listening. You can follow Justin Mares on Twitter at JWMares, and you can learn more about Kettle and Fire at kettleandfire.com. You can find a searchable transcript of this episode as well as our episode guide with ways to dive deeper at outlieracademy.com/144. That's outlieracademy.com/144. For more from Outlier Academy, follow us on Twitter, LinkedIn, Instagram or TikTok. Subscribe to our free weekly newsletter at cheatsheetnewsletter.com. Subscribe to our YouTube channel at youtube.com/outlieracademy where we share all of our video interviews as well as our favorite clips from every single episode, including this one. Or visit outlieracademy.com for more incredible Outlier Founder episodes profiling incredible companies like Forward, Eight Sleep, Common Stock, [inaudible 00:53:24] Space Industries, Superhuman, [inaudible 00:53:27] Kitchen, 1-800-GOT-JUNK, and many, many more. In every episode, we deconstruct the ideas, frameworks, and strategies they use to build these incredible companies. We'll see you right here with a brand new episode of Outlier Academy next Wednesday.
On Outlier Academy, Daniel Scrivner explores the tactics, routines, and habits of world-class performers working at the edge—in business, investing, entertainment, and more. In each episode, he decodes what they've mastered and what they've learned along the way. Start learning from the world’s best today.
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