Andrew: Hey, there, freedom fighters. My name is Andrew Warner. I’m the founder of Mixergy, where I do interviews for an audience of ambitious entrepreneurs who are really building their businesses as they’re listening to these interviews, you know, not necessarily in real-time, maybe they’re driving somewhere or running somewhere, as you’re literally listening to this. But basically, they’re building businesses. They’re not wantrepreneurs. They’re realepreneurs. It’s probably not the right word. They’re real entrepreneurs, Matthew, like you.
All right. So, if you’re a real entrepreneur, you might be interested to hear today’s guest because he took e-commerce and he added a subscription to it. And I’ve long been a fan of subscriptions because it gives you predictable revenue. It gives you a long-term relationship with your customer and it align your incentives with your customer. And so, what he did was he said, “You know, I like watches. watches are fantastic.” He tried selling them individually. That was nice business. And then he said, “What if I turn it into a monthly membership?” And then things really took off for him.
The Matthew that I mentioned earlier is Matthew Gallagher. He is the founder of Watch Gang. It is a watch club. You basically pay them a monthly fee, and they send you a watch that they say is worth more than the price that you pay them. And they also give you a chance to win a much, much, much more valuable watch while you’re a subscriber.
This interview is sponsored by two phenomenal companies. The first will host your website right. It’s called HostGator and the second, if you’re looking to hire anybody, you’re going to love them. And if not, you’re going to say, “Andrew, I’ve heard them million times.” There’s a reason why they’ve been sponsoring million times, it works for my audience. It’s called Toptal. I’ll tell you why you should hire them later if you want to . . . why you should turn to them later if you’re looking to hire.
First, Matthew, I’m going to ask you the revenue question right up front. What is your revenue?
Matthew: We . . . to date since launching, we’ve done close to $40 million in sales.
Andrew: And you guys launched when? How many months ago?
Matthew: We launched 24 months ago. This October made our second . . . it was our second anniversary.
Andrew: Wow wee. So you’re monthly subscription?
Matthew: Yes.
Andrew: So you can predict revenue, like I said, why don’t we look at September. September 2018? What was your revenue then?
Matthew: Over two and a half million?
Andrew: Two and a half million dollars. Fantastic. And then profit?
Matthew: Well, our gross profits are about 50%.
Andrew: What about net?
Matthew: Net, it kind of, it depends on how much we’re putting in future months. So we will spend money to buy inventory that we won’t send out for several months sometimes.
Andrew: Got it.
Matthew: So we haven’t baked up September yet, so I’m not really sure. But, you know, as we grow the infrastructure, that always changes where we’ve been hiring like crazy lately.
Andrew: You own the business by yourself?
Matthew: I mean, I’m the majority shareholder. I’ve given equity out to many of my employees, and we’re actually by the end of the year, every employee will have some equity.
Andrew: And have you taken money out of the business? Have you been able to put personally into your bank account over a million, over $2 million, over what number would you feel comfortable saying?
Matthew: No, I take a salary.
Andrew: That’s it?
Matthew: Yeah.
Andrew: And the rest you leave in the business?
Matthew: That’s it. Yeah.
Andrew: And am I right? That it’s a subscription model that makes this so exciting for you guys?
Matthew: Yeah, I mean, I think that, you know, having a subscription, sort of like you nailed it. It creates predictable revenue for you. So where any other watch company or retailer has to rely on sort of unpredictable metrics to know how many sales they’re going to do the following month, we sort of can nail it within 10%.
Andrew: So, Matthew, I’ve seen other e-commerce companies say, “You know what, we need to go subscription. Men hate buying underwear every month. They’re going to wait until their underwear basically withers away before they buy a new one. But they need help. We’re going to create an underwear subscription service.” And then it doesn’t really do so well.
And we’ve seen this for lots of different things. I get the sense that the reason it works for you partially because watch owners like to have a different . . . I’ve been reading the reviews. There are some people who say, “I want a different one for each outfit.” They like switching it up, etc. But I also get the sense that it’s because of the contest. Basically, they are entering to win a Rolex. They are entering to win a TAG Heuer. They’re entering every month to see what the next month’s great watch is going to be. But it’s that big chance to win a Rolex. That’s the big draw. Am I right?
Matthew: You know, you would think so. But I think that that makes up a very small percentage of our actual customer base. I think that people that sign up that just plan on winning a Rolex or a TAG or Seiko that we do these giveaways weekly, I think it makes up probably under 1% of our actual member base. I think if we took that away, it would be less fun. You know, we go live and we do these live giveaways every week. But I don’t think that we would lose many members.
Andrew: Live where? On Facebook Live?
Matthew: Yeah, we go Facebook, Instagram, YouTube, we go live every week and we make it a big production.
Andrew: You’re still saying that’s not a big draw?
Matthew: I don’t think it’s a big of a draw.
Andrew: You don’t have to say that it’s not a big draw. Because legally, it shouldn’t be. It becomes a lottery if that becomes the reason that people subscribe, right?
Matthew: Well, I mean, regardless of why people subscribe, it’s considered a sweepstakes. And that’s because you can’t incentivize people to sign up for something that you don’t allow the general public to sign up for also.
Andrew: So, if I wanted to sign up, how else could I sign up?
Matthew: We have like a section in our TOS in our rules, where you can just go in and mail in a either a postcard or you can, you know, click a link and sign up through that way. And then that puts you in the same database and then you can do that once a month or once a week, same as any other member.
Andrew: What about Wheel of Watches? I love that idea. We’re going to get to it later. Can anybody enter to be in the Wheel of Watches where you guys spin? Do you guys still do that?
Matthew: Yeah, we do. We do have that. So that’s basically a way to purchase a watch, but there’s a chance that what you’re purchasing, you could also land on something higher. So let’s say that you came in to get a Seiko 5 and it cost you 50 bucks or something, and then you spin, there’s also a chance that you land on, you know, a TAG or something like that as well.
Andrew: But don’t they also get chances to win if I refer a friend? So, if I were going to say to my brother, “Hey, Michael, go sign up for this thing. You like watches. You need to look a little bit better.” He signs up, don’t I get 50 entry points into the Wheel of Watches, and then he gets 50 entry points,?
Matthew: That’s right. Yeah, that’s part of our, you know, kind of a loyalty program. So same as like, if you. I mean, most membership clubs have something like that. But yeah, if you refer a friend and they sign up, then you’ll both get 50 points, which is worth $25 in our Wheel of Watches.
Andrew: Okay, all right. There is no way for me to frankly figure out what percentage of people are signing up just for that or not. But I wanted to bring it up.
Matthew: t’s not really possible. But, you know, you compared it to underwear and I think that the interesting sort of comparison there lies in you’re not going to trade your underwear with somebody else. And our community is sort of the magical part of our business which is, you know, nobody really cares about getting a used watch, a pre-owned watch if they like it. So we don’t send used watches out, but if you’ve got something that you didn’t necessarily like, you have a huge community of potential buyers or traders that will take that watch from you and give you something that you’ll like more.
Andrew: I saw that as one of the selling points for signing up.
Matthew: That’s right.
Andrew: I told you that I was going to hit you with the hard questions from the floor. You said, “Andrew, go for it.” Here’s another one. It seems like some of the watches are not really that valuable. But you guys create the perception of value by doing things that frankly the mattress companies have done for years. They basically will get one thing that you can’t get anywhere else. I saw you like, give a hint of a smile. You know what I’m talking about with the mattress companies, right? Where they say, “You could never find this mattress anywhere else.” And the reason is they’re the only ones who have that specific model because . . .
Matthew: You mean like the egg drop test and all the random stuff that they can do to like prove its value?
Andrew: Yeah, well. What they do actually is the old mattress companies would create the same mattress for every single local store. They would give it a different name in each store so that each guy could go on and say, “Mattress King in Santa Monica, you will never find the Sealy 1857 anywhere else lower. We will match anyone’s prices on the 1857, but we really have the lowest possible price on it.” Meanwhile, they’re the only ones who have it because the next guy has 1856 or 1855.
Matthew: Okay. So that’s an interesting point. That’s actually something that I can relate with. I used to sell TVs when I was a teenager, and I noticed that Walmart, BestBuy, HH Greg, they all basically had the exact same television. But they were one like SKU number off from each other. That way, they could offer different sales price and not match them. So that’s not really what goes on in watch industry.
And the way that we are . . . so here’s the thing. With a watch, certain components that make up the watch demand a value. That’s just like bottom line regardless of the brand if stainless steel bracelet 316L is the quality that you’re aiming for. If it has an automatic like Seiko movement or a Miyota if it has a sapphire glass. Like, there’s just . . . regardless of the brand, regardless of anything like that, those components demand a value. And so I can say with complete, you know, confidence that the watches that we send out that you just can’t get them for that price. It’s impossible. For $30, we’ve sent out Swiss Quartz watches. And, you know, for the same 30, you could go to Target and buy a Chinese Quartz, you know, off-brand with alloy case and stuff. It’s just, there’s just no comparison.
Andrew: I’m looking at one of them. For example, there’s the Maurice Eberle Gambrel men’s watch that you guys offered subscribers. It’s on sale on Amazon for 150. It’s on sale at Kmart for 174.
Matthew: What’s the watch?
Andrew: Maurice Eberle Gambrel men’s watch, I’m sure I’m butchering it.
Matthew: Doesn’t sound familiar.
Andrew: The truth is, I am not a watchdog. Frankly, if you told me, “Andrew, here’s what we’re doing.” I would be the person who’d like, sit there, smile and listen in. Instead of being the watch, I’ll go, “Oh, this is horrible.” I’m just trying to get a sense of the business model.
Matthew: Yeah.
Andrew: I think bringing it up gives me enough of a sense of what’s possible. But I’m not going to sit and investigate to see whether this is really true. I just want to understand the truth is how you build up your business to where it is today. To me, it’s more fascinating to see, how are you going to explain this to people? How did you get your early subscribers? How did you build this up? And how did you go from doing all this when you’re a dude who grew up . . . did you literally grow up in a trailer park?
Matthew: How do you know that?
Andrew: Because I finally have started hiring researchers before the pre-interviewer ever talks you to go research [things 00:10:40]. So I heard you grew up in a trailer park, and you even literally sold rocks.
Matthew: Yeah. I don’t even remember telling people this, but yeah. Yeah. I grew up in a trailer park. I was poor my whole. Yeah, I mean, it was bad.
Andrew: What do you mean when it’s bad being poor in a trailer park? Give me an example of what that means.
Matthew: Well, I mean, being in a trailer was lucky for us sometimes. So, you know, there were times that we didn’t have a home and that, you know, we were all sharing a can of Chef Boyardee.
Andrew: Literally homeless?
Matthew: Yeah.
Andrew: And you slept where when you were homeless?
Matthew: We bounced around motels. I’m pretty sure my dad would just not be able to pay, and then we’d have to leave them and go to a different one.
Andrew: Because of what? What was that your dad doing?
Matthew: My dad was disabled. He had a couple liver transplants. My mom was, well, she was neither of them were working for certain time. But they were addicts. Like I was, I just thought that was my life growing up. It was not a healthy childhood.
Andrew: I know that this . . . I’m looking at your eyes and trying to get a read of everything to see like where am I pushing? Where am I not, just to see how far I can go.
Matthew: I’ll answer any question you have.
Andrew: What were they addicted to? And what was it like to see them addicted?
Matthew: Heroin. And, you know, when I was a kid, I didn’t know better. But now I’m an adult and I look back and I know the situations that we were in were not safe.
Andrew: Like what? What was not safe but felt normal to you guys?
Matthew: Well, I guess being around drug dealers, I guess. You know, like, watching parents get arrested. Like, there were scary things. I’ve watched my car get taken away. And you know, I mean.
Andrew: When you saw your parents getting . . . when you saw, what was it? Mom or Dad getting arrested?
Matthew: Mom.
Andrew: Did mom fight it?
Matthew: I don’t remember her fighting. I’m pretty sure my dad tried to shelter us from that.
Andrew: And did you feel like, “The police are so wrong. They just want to bother people like us instead of leaving us alone.” Or did you feel . . .
Matthew: No, no. I don’t think that I was old enough to really form an opinion about that. Except just being scared.
Andrew: When did it finally come to head?
Matthew: When I was a teenager, maybe starting high school. I started kind of not looking up to my dad so much.
Andrew: And then did you stay with them until you were 18?
Matthew: I moved out when I was 17.
Andrew: 17?
Matthew: Yeah.
Andrew: Your uncle brought you a computer at one point. Was he a savior? Or was it just a lucky break?
Matthew: No. He was . . . my uncle gave me a bit of a male figure to look up to. So he was my dad’s brother. And when I was 12, he brought me a computer. And I learned how to code on that.
Andrew: And you just took it in the trailer park. You were coding on that. You were a guy who literally sold rocks to your friends, sold origami to kids on the school bus, right?
Matthew: Yeah. Yeah.
Andrew: There is this instinctive entrepreneurial part of you. Why didn’t you say, “I’m going to sell drugs”? Or did you?
Matthew: No, I never sold drugs.
Andrew: Did you aspire to that? I’ll be honest with you. When I was a kid, before I even knew what it meant, I said, “The drug dealers are the ones who make the most money in the movies.” I saw “Scarface.” I don’t have to be like what happens in the second VHS of Scarface. I could be like the first VHS, sell a lot, keep my head on straight and be rich. And, you didn’t feel that?
Matthew: You know, maybe if I had lived in more of an urban neighborhood, I would have. But that wasn’t really surrounding the kids in my neighborhood. You know, it was a trailer park, but it was like, kind of in suburbia, you know. It’s like, kind of white bread town. And so, I don’t think that drug use was that rampant with kids. So, maybe that’s why. But I, you know, I kind of gravitated away from that. But coding and being on computers is kind of what saved me, I think from that because I kind of just locked myself in my room and just sat on the computer and learned how to do that stuff as much as I could.
Andrew: To what end? Were you thinking you were going to build a successful business? Were you just thinking this is an interesting puzzle? I’ve got to solve how to code this or what?
Matthew: I told . . . I mean, I guess I didn’t really have a goal with it when I started except for not being out on the street, not being sort of with people that I didn’t want to be around.
Andrew: How was, it seems like what you’re saying is coding could get you out of there, but how? How is coding going to get you out?
Matthew: Well, I mean, in the beginning, it was just a hobby. It was just something that I could do to not be, you know, doing anything else. So I was alone and I was learning and it’s kind of fed me. And I think that, you know, I think that you can go one of two ways when you grow up in an environment that I grew up in, and you can either go down the route that you just kind of talked about, or you can kind of do what I’ve done. And, you know, I don’t know what events kind of led me to be able to be an entrepreneur, think the way that I think. But I’m sure that it could have gone another way and there are probably a lot of people, more people out there that have gone the other way.
Andrew: And still your dad somehow had a Rolex growing up? How did this drug addict have a Rolex?
Matthew: It was the only thing of any value. And when we’re talking, you know, people think Rolex, they automatically think like a $10,000 watch. This was like a $700 watch that, you know, barely fit him. And it was the only watch I think he’s ever owned. And so, you know, when he passed and I got that, you know, I had a couple watches but, and even though like all the stuff with my dad kind of drove us apart, it was still like very special to me. And so I still have it and I still wear it occasionally if I’m not doing anything too active. I don’t want to break it. But that’s what drove me to do watches.
Andrew: A 1953 Rolex Oyster Perpetual, that’s what it was?
Matthew: Yeah. That’s when it was born. Fifty-three.
Andrew: Oh, I’m sorry?
Matthew: That’s was his birth year. He was born in 1953.
Andrew: A friend of mine got Rolex as a client. And before going into a meeting with them in Switzerland, and somebody said, “You know you’re going to wear your Rolex in?” And he goes, “My what?” This friend goes, “Well, if I’m going to close them, I got to get a Rolex.” He went out and bought a Rolex and before he finished his sale, they said, “What do you want inscribed?” He goes, “I don’t know. I’ve got to go to a meeting here the next day. It doesn’t matter. I don’t have time for it.” He said, “You can’t have a Rolex without having an inscription. It’s got to feel right.”
So he picked an inscription, they’ve inscribed it, they got it to him. He went in to see them to the meeting. The person looked at his watch and said something like, “Well, it looks like you got this watch for the meeting.” He said, “Yeah.” He goes, “Well, what did you have on the back inscribed?” And he said, “What’s on my tattoo here, that’s what I got inscribed on the back.” It’s something related to his love music. And the man at Rolex said to him, the one on your wrist, you take with you to the grave. The one that’s tattooed, you take with you to the grave. The one that’s on your wrist, you give to the next generation.” And they’ve always had this sense of, we’re creating something for you to own and then to pass on for future generations and it hit you. And because of that, you somehow said, “I’m going to start a business around this feeling that I’ve got from my dad’s Rolex.” And what was the original version of the business then?
Matthew: The original version was it was a $30 a month watch subscription, sort of like what we still offer. You get a watch. The first month, there was no value guarantee at all. It was just, and, you know, in the beginning, my vision was, “Oh, I’ll go buy watches that are cheaper than $30. And they’ll be happy because I curated it for them.” No.
Andrew: That’s the curation part.
Matthew: Yeah, that was. You know, month one, that was . . .
Andrew: I thought it was. I’m going to have the best collection of watches on my site. And then people want to buy it from me because I know . . . no, it wasn’t. It was a subscription. And wondering how you knew then that the subscription was the right approach. And I wonder how much of that was because you were in performance marketing? [inaudible 00:18:35] performance marketing?
Matthew: Yeah. So I did performance marketing for a lot of different companies for years. And part of that involved subscriptions. And so, you know, basically, the way performance marketing works is you’re getting some of the upside. So, instead of just paying like an agency, you’ll get 20% of the advertising fee. If I’m, let’s say it’s for watches. If I’m selling watches that retail for $300, and the deal is, we’ll give you 20% of that sale. Okay. Then I have made $60 on that sale. So that’s sort of like in the name.
Andrew: Can you give me a more specific one that you actually were a part of? Was this at Kurtz Media, your company?
Matthew: Yes.
Andrew: Okay. So Kurtz Media. Give me an example of some kind of performance marketing that you did. Something that’s typical, not the nice example that we’re supposed to talk about.
Matthew: Yeah. Well, I mean, I did advertising for Johnson and Johnson, for Nike, for Lionsgate. I did stuff for Yanni, the singer. So to drive like signups to a concert, a big one was real estate leads.
Andrew: What was the real estate leads part?
Matthew: Yeah, so basically, they flip houses. So they buy cheap houses, they flip them and then they sell or, you know, they repair them and then they sell them.
Andrew: And then they look for people to sell their homes?
Matthew: Yeah. Yeah, kind of. So they wanted to find . . . the leads that they were looking for were people that owned a house but they were looking to sell and they didn’t want to go through traditional sort of sales process. So, yeah. I mean, that was a big client of mine and I was getting them leads through Facebook ads. And so, finding people that own houses that want to sell to a company quickly for cash. And so that was big for them.
Andrew: And what about one of the subscription services that you did that you bought advertising for? Do you have an example of that?
Matthew: Yeah, skincare products.
Andrew: Okay. So skincare products notoriously online have been subscription-based business. The guys who created Myspace we’re in that spot for a while.
Matthew: Oh, no kidding?
Andrew: Yeah. Yeah. You could buy some kind of makeup from them. And then they would have . . . it was like free plus shipping and handling. Then every month they would send you more skincare stuff and it was basically a subscription and they would pay an affiliate commission that was equivalent to like the whole first price, you know, the cost which was basically free or $1 plus shipping, which might have been 25 bucks. So they give you $26 every time you get them somebody to take the stuff for free.
Matthew: Right.
Andrew: Was that the kind of thing you did?
Matthew: There was a mix of that for sure. That wasn’t the majority of the sales, but I definitely dabbled in that plus I mean, I’d say real estate was more of it, but yeah.
Andrew: Okay. All right. And so you said this has got to work for watches. It still feels like, how did you know that it was going to work for watches?
Matthew: I didn’t know. I didn’t know at all.
Andrew: Did you try other things then?
Matthew: No. Well, I didn’t try other things. I thought of other stuff, you know, way before I started Watch Gang. I wanted to do a snack subscription at some point where you just curate like snacks from around the world. But ultimately, I didn’t want to provide something that you eat. I just didn’t want to take the risk of that. And so, I thought about watches because of my dad and I figured there’s some sort of hook here, you know, like with watches in a subscription because people collect watches. Being collectible, they must want more than one. And so I figured I would build us a website which I did, and I would start posting Instagram ads or Instagram feed rather. I put pictures up.
I got sales before I ever spent any money on marketing. That’s how I knew that I had something. And so I took all these watches. I must have bought 100 different watches. I brought them to a friend’s house. Then I had a little party where I had a questionnaire, and people went around ranking watches that they liked, what they thought the value of it would be, etc. And I used that information to source the watches for my first shipment.
Andrew: This was on Instagram that you did this?
Matthew: No, that was on a friend’s house. But I had an Instagram page that I just started posting pictures of watches that I was liking.
Andrew: Okay, let me talk about my first sponsor and then come back in and see how this story progressed. I also want to understand why. I can’t find where this researcher found that you said, “Eventually, people didn’t give a shit about the curation part.”
Matthew: Yes. I’ll be happy to tell you about that.
Andrew: That is true. Okay, good. All right. First sponsor is a company called Toptal. Let me ask you this, where do get your developers?
Matthew: Me?
Andrew: Yeah.
Matthew: I only have one.
Andrew: One developer?
Matthew: Yeah.
Andrew: What’s your site built on? How do I not know that?
Matthew: PHP, LAMP stack.
Andrew: And that’s it? You have one developer, if you have an idea, that’s it. You’re stuck. Do you ever feel like, “I’ve got this other great idea, but my developer doesn’t have time to build it and you’re just passing it?
Matthew: Well, luckily, that’s my background also. So I still code.
Andrew: And so it’s the two of you?
Matthew: Yeah.
Andrew: And you guys feel like you’ve got enough. You don’t need anymore?
Matthew: Not at all. We have a VP of Engineering starting next week.
Andrew: Tell me how you found that person, because this is kind of part of my ad for Toptal. How long did take you to find them?
Matthew: A long time.
Andrew: Months and months and months?
Matthew: Yeah, months.
Andrew: What was the hardest part about that?
Matthew: Filtering through all of the candidates that didn’t really matter.
Andrew: Where’d you eventually find them?
Matthew: What does . . . the guy that I have?
Andrew: Yeah.
Matthew: On LinkedIn still, but it just took a lot of man-hours to make that happen.
Andrew: And then a lot of conversations on your part.
Matthew: Yes.
Andrew: A lot of conversation on your developer’s part.
Matthew: Yeah.
Andrew: Let me show you an alternate way.
Matthew: Let me hear it.
Andrew: You’re probably going to be skeptical. So I’m going to tell you, there’s no fee in here. And then, frankly, even after you start off, if you’re not happy, they’re reducing the risk by eliminating the risk by saying, “Just don’t pay us. They’ll still pay the developer.” Here’s the deal with Toptal. They realized it’s a real pain in the ass to go hire people. And they said, you know, what if we just put together a list of people who are the best of the best, and we’ll just have them in our database. So, when someone like Matthew says, “I need to hire a developer,” well, he’ll come to us. I’m not doing a good job with this.
Here’s what happens when you go to Toptal. You go to this URL I’m about to give you. You hit a button. You, when you press the button, you’re basically scheduling a conversation with someone at Toptal. You tell them what you’re looking for. All the quirks. What’s one of your . . . What’s your quirkiest thing? Is it that the whole operation runs on Slack? What’s the biggest quirk of your company?
Matthew: Yeah.
Andrew: That’s it. Nobody comes to the office?
Matthew: No, I’m just kidding. Of course, we have an office. Yes.
Andrew: Okay.
Matthew: All right.
Andrew: A lot of people don’t. And I hate people working out of my office.
Matthew: Really?
Andrew: I prefer that everybody works outside of my office. My quirk is that I need everything clearly documented in a Google Doc. My quirk is that we want everything running in Basecamp instead of Slack. I know that Slack is more modern. I don’t want the noise. I want it calm. But you just tell them all the quirks and that’s just the quirks of the way we operate.
Beyond the culture, there’s also the quirks of the way that we code and what we want done. You tell them all that, they go to their network of developers, they pick two or three for you, they say, “Okay, here are the two, Matthew.” You only have to have conversations with the two or three people. If you’re happy with them, you can often start within a day or two. I happen to have been able to start the next day. They like me not to promote that. Maybe it’ll take a week, but it doesn’t take a long time to get started.
If you’re not happy, you just walk away. There’s no cost, no nothing. Now, because they are Mixergy listeners who created this company even after they got really big, raised money from Andreessen Horowitz, they still remember their friendship with Mixergy and their love for Mixergy. And I appreciate them for it.
And as a result of that, they’re offering Mixergy listeners a no-risk trial period of up to two weeks. If at the end of the trial period you’re not 100% satisfied, you will not be billed. So that’s why I’m saying. Imagine through this process when this whole thing was a headache, you just said, let’s give Toptal shot. If you thought that they were not as great as I say, you don’t have to follow through. If you hire someone from them and that person is not as great as it seem, you don’t have to pay. You will not be billed. And, if you are happy, they’re going to give you 80 hours of Toptal developer credit when you pay for your first 80 hours and that’s in addition to that no-risk trial period. Here’s the URL guys. Matthew is already got his person. If you don’t and you are stuck trying to find that right person, what is it going to hurt you to go give them a shot? Toptal.com/mixergy. That’s top, as in top of your head. Tal is in talent, T-O-P-T-A-L.com/mixergy.
All right. Why do you think that people didn’t give a shit about the curation? How did you even know that?
Matthew: They were very vocal about it.
Andrew: They told you that? What do you mean?
Matthew: Yeah. Well, I mean, the first members that I got, there were 253 of them. And I reached out personally to every one of them to ask about their experience, why or why not they were staying on with us, what we could be doing better. And the vast majority of them were telling me that, “Hey, you know, I googled my watch here and I see that I could have bought it from TJ Maxx or from Amazon for $20, $25. And, you know, they’re like, “The curation is cool. I didn’t have to pick it, but I don’t like that I can buy it for less money.” I’m like, “Okay. Well, fair assessment.”
I assumed that people would be willing to pay extra for the curation part of it. I was wrong about that. And so that’s when the idea of partnering with watch brands kind of hit me. And so month two we did our first partnership with SO & CO watch company in New York.
Andrew: And what’s a partnership for you? I’ve seen that a lot in my research that it took you a long time to get partnerships. That people didn’t know who you were. The partnerships with an issue. I don’t understand what your partnerships mean.
Matthew: Partnerships mean that the watch brand is . . . So we’re not just a typical sales platform, you know. Most retailers will either buy on consignment, or they’ll just buy a few watches that they hope that they can sell. We’re moving so many pieces that, you know, the partnership means that sometimes the watch brands lose money to sell to us. And they do that because of the marketing benefit that they get out of the partnership.
Andrew: Which is what? What’s the marketing benefit that you get at the first company?
Matthew: Let’s say you are a craft brand, a watch company and you’re buying Facebook ads and you’re putting ads in front of people’s faces and people are not buying the watches or they are, either way, there’s no better way to advertise your brand than to put your watch on somebody’s wrist and then have other watches that they can go buy or have their friends go buy them. And so, you know, we do these media reports for these brands that we work with sometimes and basically show them these are the searches of watch brand prior to the advertising or to the partnership with us.
And then after it shoots up, same with their sales. And that’s because we don’t send the same watch to every person. And so, if you’re a brand and you have a collection, we might send that collection out. And then you have other collections available. If people like your brand, then they’ll go buy them, and they won’t buy them from us. They will be buying them from you. And so that’s where the partnership kind of comes in.
Andrew: All right. I think I get that. All right. So the first company that you partnered up with you said, “I need something that costs more than my membership price, and I’m going to buy from you for less than my membership price.” And what is the advantage and the advantage was what for?
Matthew: For them, it was, let’s see. The first partner, the advantage for them was more about buying so many pieces. And so we were able to buy I think in our, let’s see. In our second month, we bought like 2,000 watches. And so, number one, they didn’t take me seriously. They didn’t think that I was actually looking to buy. They’re like, “Okay, well, you know, are you a gray market seller? Are you overseas? You know, are you looking for crazy terms?” I said, “No, I’ll pay you upfront for these watches. I have a membership club, then I’ll send them out.”
And so all of these watches everywhere that I could find, you know, I was doing all this by myself still. I looked on Amazon, on eBay, on every retailer that they offered. And these watches were worth like 80 bucks. And so I paid them I think $18 or $19 per watch and bought all those watches, and I sent them out to my members and they were pretty much a hit, way, way more popular than the first month.
Andrew: How did you get the first subscribers? You said you got them before you started buying ads?
Matthew: Yeah. My very first subscriber was a guy named Cory Johnson, and he found our Instagram page and he just clicked the URL on our profile and he purchased a membership.
Andrew: Okay. Instagram seems to have been a big resource for you in the beginning.
Matthew: Instagram and Facebook, you know, they were the biggest drivers of traffic and sales for us in the beginning. And, you know, as we grew, we advertised outside of that. But in the beginning, definitely, I think it’s a very strong place to test a funnel of signing people up.
Andrew: You know what, I’m looking at the first version of your site. The big headline is “Watch club with surprise Rolex.”
Matthew: Yeah.
Andrew: It feels like that was a big part of the beginning at least. You said, “Receive a great watch every month for as little as $22. One person each month gets a surprise Rolex for real. All watches are yours to keep.”
Matthew: Yeah.
Andrew: That was a big part of it, no?
Matthew: Yeah, it was definitely a big part of the messaging in our offering. But what I learned from, you know, the last two years of people signing up is that they look at it as a bonus. I can’t hinge the success of the company on being able to give stuff away, you know. And so the main product has to still be worth it.
Andrew: I love this model by the way. I’m prying because I’m fascinated by this and I know that there’s someone in my audience, probably a lot of someones in my audience going, the gears are grinding going, “How do I do this in another space? Could I do this?” And I’ll ask you about that later on.
Matthew: Okay.
Andrew: So then, it was Instagram, it was Facebook, getting attention that way. At some point, you told our producer, “We did an Instagram focus group. I bolded that. I made it big.” I want to understand what that is. What did you mean by an Instagram focus group?
Matthew: No, sorry. Not an Instagram focus group. We had a focus group here in Los Angeles, and I posted the results of that on Instagram. And so, basically, I had people I kind of talked about it a little bit before. I had friends kind of circle around a table with, there were watches laid out with a sticky note and a number. And then they had to go through a four-page questionnaire on the . . . so, all these questions on each watch that they had. And so, those questions ranged from what do you think this watch is worth. Where would you wear this watch? Is it something you like? Would you be excited to receive this as a gift? Things like that.
Andrew: Okay. All right. I see that. And then partnerships came in, then the watch community. Was that always on Facebook? Or did that start out on Facebook?
Matthew: Yeah, in November of 2016, I think. I had the idea to give people a place to sort of come together and trade the watches. And that’s really what took us to another level. It was that, look, if I sent you a watch, and you didn’t love it, if I sent you a dress watch and you never wear them, you don’t want a dive watch, the only thing you could do is sell that thing on eBay or give it away or something. And so creating that group gave people a place to trade between each other.
Andrew: Have you thought about, this is what I thought about with our Facebook groups. It’s really easy to figure out who your customers are, and then pick them off. And I even was at a conference recently and a guy sat down. I take people to lunch at conferences all the time just to get to know them. And one of the people said, “You know Andrew, you can actually scrape a Facebook group. I can scrape people’s Facebook group for you. You can start buying ads towards those people and you could start taking their people away from them.” I had no idea this was even possible. So, he said you’re not supposed to do it. I would do it in a sub angle. All right, that’s interesting. So you feel like that? Like, now everyone knows who your customers are because they’re in a public Facebook group?
Matthew: I don’t mind. I mean, okay. Hypothetically, what could hurt me by having people know who my customers are? They’re going to create, you know, a competing subscription, and try and steal them?
Andrew: Some asshole in my audience will go and copy their names, message them directly one on one using a throwaway Facebook account, try to steal your people away. People do that to me.
Matthew: Yeah, I mean, I’m okay with that. I mean, if they want to do that, eventually we’re going to find it. We’re going to stop it. And I mean, if they get themselves 100 customers and they can carve out a little watch subscription out of 100 customers and, you know, bless them.
Andrew: All right. I guess I’m more paranoid sometimes than I should be.
Matthew: I used to be, but I’ve learned that you can’t, I mean, this is not easy. You know, the execution is way more important than the idea or any . . .
Andrew: What’s the hardest part of execution? Shipping, getting customers, keeping them happy?
Matthew: I mean, it’s all of that. You know, this is mostly a fun business. But there are a lot of stressful things that happen. And you can’t always make everybody happy. And, you know, I want to, but I’ve learned that some people number one, they’re not going to give me the benefit of getting a few months in to see if they get a good collection. They’ll cancel month one if they don’t like what they have. And I just have to accept that and I have to accept that competitors will pop up, which many have. I have to accept that some of my vendors will try and steal customers and create a competitor. That’s happened twice. And so, I can’t lose sleep over every possible bad thing that’s going to happen.
Andrew: Who ships out the product to your customers?
Matthew: Generally, we do.
Andrew: Okay.
Matthew: So we’ll take it in our warehouses, and then we’ll ship it.
Andrew: Customer service started out with you. Did you hand write letters to people?
Matthew: Yes.
Andrew: Why?
Matthew: I thought it was a nice touch.
Andrew: It was just like, new customer comes in you, you sit down, you hand write a letter to them?
Matthew: Yes.
Andrew: In the back of your head, were you thinking this doesn’t scale, I’ve committed . . .
Matthew: Of course. I knew that it wouldn’t scale. But I knew that I would build a base of people that really appreciate the effort in what I’m doing. Look, month one, I had a guy that told me he’s glad my dad died. And like that was month one, because he didn’t like a watch that he gotten.
Andrew: Oh, wow.
Matthew: Yeah. And, you know, back then, my skin was a lot thinner and I kind of sat with that for a while. And I just thought like, it’s really sad that there’s a person that is so miserable that they would say that or they’re just a troll. Either way, they don’t care how that affects me. And it made me think a lot about how, you know, I don’t know everybody’s situation and the stuff that they’re going to go through. Maybe I’m just catching them on a bad day, whatever it is, I can’t take it personal. And so it’s kind of, yeah.
Andrew: Well, you outsourced customer service at one point.
Matthew: I did.
Andrew: And you brought it in. Who do you outsource customer service to?
Matthew: It was a company called QCSS. It’s a USA-based call center, and I wanted to well, number one I just wanted to provide really good customer service. So I chose a USA-based center. I overpaid on having a center and having it 24/7. I just thought why not? Like, I want them to be able to get on the phone if they want to. And then I realized that I had very little kind of control over an external call center who’s also answering the phone for I don’t know, a sheets company. It doesn’t matter. I wanted Watch Gang employees to be answering the phones.
Andrew: I’m looking at it right here on this monitor. I would think of using them for myself temporarily just to have a phone number up on the side. I think it’s really helpful even if people don’t use it. What worked about it? And then where the issues with it?
Matthew: Well, first, the first number we had on the site just came directly to my cell phone. And so I answered all customer service calls on my cell phone.
Andrew: You know what, I could have sworn. So I went back in the Internet Archive, I go, “This is not look like a customer service main number.” I was going [inaudible 00:38:16] to see if it was you still.
Matthew: Yeah, the number that was up there was a Grasshopper number that routed to my cell phone.
Andrew: Okay. That makes sense.
Matthew: Yeah, like RingCentral, Grasshopper. So that went straight to my cell phone. I was answering phones at 3:00 in the morning sometimes. And it was just me. So I wanted to know exactly what was going on in the company. So I handled every single aspect of it. Once I outsourced the QCSS, it helped me scale a little bit so I could focus on growth instead of just answering phones. And so I just realized a few months later that, you know, if I really wanted to do this right and give the experience that I had in mind, it would have to be in in-house.
Andrew: And then, when you work with an outside service, it’s basically them dealing with people who say, “I don’t like this watch. I want to send it back. How do I cancel? How do I go buy another one?” It’s a standard set of questions.
Matthew: Right. There’s a script involved. I mean, these people are not employees. So, you know, they have to know, “Oh, this person’s calling for Watch Gang and here are the questions they might ask you, or the answers I’m allowed to say.” And that didn’t fit into the culture that I wanted to build. And so now there is no script at all. It’s like, “Hey, listen to the person. Their issue might be similar to somebody else’s, but it’s not the same.”
Andrew: How do you do that? How do you . . . your margins? What’s the lowest price now? It’s not 22 bucks a month.
Matthew: he $22 was if you bought like a year up front, and you know, but anyway. I think you can get a year of the original tier membership for $25 if you pay for a year up front.
Andrew: And then shipping also, or is that the whole thing?
Matthew: No, that’s just for the watch. The shipping ends up being . . . in all in it might be $28 with shipping.
Andrew: Yeah. So let’s round it up like crazy people to 30 bucks. The watch has to cost you something.
Matthew: Yeah, of course.
Andrew: How the hell do you have the margin to let people stay on the phone forever to do all this customer service? The whole thing.
Matthew: I wanted to adopt the whole like Zappos Customer Care mindset, which is, you know, we don’t rush people off the phones. We let them talk. We hear them. And if there’s an . . . . we have this thing called the golden rule. Which is, I mean, there’s a baseline of what we can do for people, but no matter what, their experience is unique. And if we can help them, I want to help them. And so our customer service people, they don’t have to escalate to a supervisor. They make decisions on the phone without transferring. They do it because they want to and because we’ve enabled them to do that.
You’re asking about margins and how that works. I mean, luckily, we have those other tiers and there’s more money in those subscriptions and there’s the wheel and, you know, there’s ways that people are able to spend more money with us than just the subscription. So it’s low margin if you low bottom line margin. But it works because it’s, you know, it’s bigger than just one member and I think that there’s a longer vision for us than just a subscription company.
Andrew: So there’s the lower tier. Then you have two other tiers I think on top of that, and with each tier, you get more valuable watches, always guaranteed to be more. I don’t know if it’s the guarantee. But always, the goal is to have them be worth more than people pay per month.
Matthew: Yes.
Andrew: Let’s talk about advertising.
Matthew: Okay.
Andrew: You got really good at advertising. I was trying to figure out where are you buying ads. You’re on to Taboola, Skimlinks, Outbrain, you’re also Google Display, Pepperjam, like the works. What did you start out with?
Matthew: Started with Facebook and Instagram and then moved quickly into search because you know, as we build and people aren’t, you know, then they’re googling us, I wanted to make sure that we’re always at the top there. Tested a little Display, that’s never as good as, you know, or as social.
Andrew: And this was you figuring it out?
Matthew: Yeah. It was just me. Then I started doing native really early on, Taboola and Outbrain and then I just kind of, you know, I had all these channels kind of feeding small links in. I would test paths and see what channels were working better. I would scale those up and, you know, cut the losers. I tested radio early on. I’ll probably do that again one day. Back then, the CPA wasn’t sustainable and it could work now. So I might do that.
Andrew: How much of your time were you spending on that versus the rest of the business advertising?
Matthew: Advertising made up probably half of my time. And then the other half was finding watch partners, organizing the shipments, customer service, web development and design.
Andrew: I told you that before I got on with you, I did a lot of research. I saw that there are a bunch of articles written about you. The “Esquire” article currently seems to be sending you the most out of all articles, but there are others. How did you get all these articles written about you? What’s your process for getting PR considering [inaudible 00:43:01]
Matthew: I went through a handful of PR agencies until I landed on the one that I have now that I really like. And so, like, there was a Huffington Post piece early on. And, at first, I was like, “Oh, this is going to be great. Huffington Post is interviewing me.” No, it was like some college kid with, you know, 10 followers that happened to be a contributor for Huffington. So stuff like that. I realized early on that, you know, there is a difference between real press and then just kind of being in hidden pages that will never get posted anywhere.
And so I went through three or four PR agencies and found the one that I have now and I love them. And they, you know, they will reach out to publications and say, “Here’s what we have.” Sometimes we get the press that we don’t reach out to, which is great. But yeah, that’s how it’s done.
Andrew: Wow. And this whole thing started with how much money?
Matthew: I put probably 20 grand into it to start.
Andrew: And then more money after that?
Matthew: Yeah. A friend. I had a friend invest and he took some equity early on to give me money to market because that’s really where the money gets dumped into is the advertising and then you have to pay for the watches. So it always pushes cash flow out.
Andrew: How long does it take you to earn back your spend on a customer?
Matthew: Two and a half months.
Andrew: You spend some time talking to venture cap . . . you know what, before we get into a venture capitalist, I’ve got to talk about my second sponsor and then we get into the venture capitalist, thing that happened to you.
So my second sponsor is HostGator. The whole time I’m talking to you, I got to be honest with you. I’m thinking, Matthew, I told you, could this be used in other plans? Can somebody sign up to HostGator, set up a basic website and say, “You know what I’m going to do? I think digital watches is a group of people who don’t appreciate the old timeless watches.” This doesn’t have a lot of creativity to it. So you know what, Apple watch people don’t want their watch to look the same as everybody else. I’m going to sell them straps for their Apple watches. And sometimes it’ll be a little bit less fancy. Sometimes it’ll be really high end and sometimes that might slip in an actual Apple watch into the thing. Would that work? Can somebody go set up a HostGator account, set up their landing page and start getting customers for that?
Matthew: Of course.
Andrew: Interesting. Now, I feel like maybe that’s what I should do. What other models have you seen that work that are similar to yours?
Matthew: In the subscription space?
Andrew: Yeah.
Matthew: Well, there are a lot of different boxes sending out like ties and, you know, socks and flasks. There are subscriptions sending snacks out, which are pretty cool. You get snacks from around the world. There’s a hot sauce box. There’s honestly almost a subscription for everything. I don’t know if they are all going to last, but you can almost find anything that is a subscription right now.
Andrew: I think it was Stick in a Box that I interviewed the founder of it. It was a stick of jerky in a box.
Matthew: Really?
Andrew: Yeah, I think they’re playing off of the old SNL sketch.
Matthew: Yeah.
Andrew: Yeah. The thing that’s fascinating about yours is that it actually works and I think part of it is you’re right. These watch people, they freaking love it. I don’t see men collect anything except for sneakers. Sometimes shoes though not so much and freaking watches, it’s unreal. All right. So whatever it is, if you are out there and you’ve got an idea, one of the things that I love about Matthew’s business is it’s fairly simple. It’s hard to actually execute but the concept is fairly simple.
If you want to take it to HostGator, they are going to make it super easy for you to get started. I would highly recommend you take that medium plan because what you might want to do is check out an idea that’s maybe watch straps for Apple watch. I like that because I see people do have those big collections. I was on Reddit last night, this dude said, “Stop me. I have a big collection.” Sure enough, he posted a picture. He’s got everything. He’s got the fake Hermes thing. He’s got the metal one. He’s got the sports band, the works.
All right. Whatever your idea is, if you have that medium plan, you can start out with one. If it feels that’s not right, you can go and get another domain hosted and another, another, all unlimited. It won’t cost you any extra except for obviously, buying the actual URL, the domain. So, maybe it’s like, Apple, no, don’t use Apple. They’ll hate you. watchstrap.com, is that available? And then maybe you say . . .
Matthew: Definitely not.
Andrew: What’s that?
Matthew: That’s definitely not available.
Andrew: No. Okay, let’s say not, that’s not. Something like that. And then maybe you see that doesn’t work but you know what, cases for Apple watches, for Apple phones. Those people are crazy. So it’s casewatch.com. You buy the domain and then they’ll host it for you for free and you can keep all them running. Maybe you get customers for one and then you start referring them to another. I don’t know what the idea is. Or maybe you already have a great business and it’s working and you hate your hosting company. Regardless, if you want a really good hosting company, go to hostgator.com/mixergy. When you go there, you’re going to get an unbelievably low price. They’re even going to throw in some support to help you get advertising started for your site and they just work. They work. Hostgator.com/mixergy.
VC. Why did you go after VC and what happened?
Matthew: Yeah. I was getting approached first from I got a bunch of random emails asking where I was in the process, if I had a deck, if I wanted to raise money, and my plan was never to do that. But I started talking to people that kind of were in that space. And they were like, “Look, you know, you can stop worrying about the cash flow nightmare. And, you know, you get to kind of get a little war chest going and grow this thing. And then eventually, you know, you either like sell or go public or any of these different exit routes.”
So I entertained it. I built a deck. I went to the Valley and I took some meetings, got some term sheets that opened my eyes to sort of that world and did I want to give up control of my company? Did I want to sort of leave my future in the hands of somebody else? And at that time, it was not something that I was willing to do. I even got an acquisition offer to buy the company that I turned down.
Andrew: How much was it for at the time?
Matthew: I’m not going to tell you that.
Andrew: Really? Was it painful to go through that process? It seems like it was. It seems like it was distracting.
Matthew: It’s a beating. And it is distracting. And it’s demoralizing to be told no when you think that you have something awesome. And, you know, like, I was a company that came in with one year in business and $15 million in sales. And half of the people that I talked to were like, “Well, let’s see what else. Like, let’s see what happens at the end of year two.” And I’m like, “I don’t need your money at the end of year two. I need it now. I want to grow it now.”
And, you know, half the guys out there were just like, “We don’t think it’s sustainable. We don’t think that it’s scalable.” I think that I would have had a better chance getting VC money from everybody if I had done 100 grand and sales and then 500 grand and then a million dollars in sales and I think then I could have gotten funded if I wanted to.
Andrew: I wonder if it’s just that you didn’t know how to present it. Did you get any advisors to help you think it through?
Matthew: I have an advisor. I’ve one advisor, and we did think it through. And you know, I think that I don’t look at that process as failing because I could have walked away with money but I don’t know. I don’t know if the terms that I’m going to demand are really going to be out there for me. So I want to make sure that we can sustain and grow without the necessity of VC.
Andrew: You know what? I used to keep this thing on my site. I still like it. A little widget that comes up on the site, it’s called Proof, that tells whoever is on the site who just bought recently or who enter their email address and adds a little social proof and people are supposed to subscribe and take action because of that. They’re also doing a lot of revenue, building up their business. Proof is phenomenal product.
Matthew: I like Proof. I used to use Proof.
Andrew: They are fantastic. It’s a kind of thing that you test for a while, it works and then . . .
Matthew: Yeah.
Andrew: They’re doing really well. The guy at the founder told me the numbers that, how they’re doing for themselves for their customers, but they don’t want to do well. They want to be venture-backed. So I had them here for scotch night with one of their advisors, a guy who is also an investor, who’s a former entrepreneur. They are not talking about the widget. They are talking about how they are reshaping e-commerce and, dude, you sit down at first you go, “Ha-ha, come on. You’re obviously, you’re bullshitting. This is like the San Francisco thing to say, let’s all get in on the joke.”
And then, after a few rounds of this, or a few paragraphs of their pitch, I go, “Holy crap. These guys are changing everything. This is going to change all of e-commerce. Every site needs it.” They had that pitch down and you know what, they are going for that. They’re giving up this really solid profit, really solid a business for that bigger, better dream that could be on every single e-commerce site. It seems like maybe you didn’t do that. Maybe you weren’t willing to present yourself that way. Is that it?
Matthew: That’s definitely, that’s probably part of it. You know, I learned later in the process that you have to go in with this crazy big vision because that’s all that they care about. Because one percent of their investments are going to become a unicorn. And those are the ones that they want. So every one that they invest in has to have that unicorn vision and they know that 1% will execute on it and be able to . . .
Andrew: Do you think I may be lying and saying this is going to be the future of all, I don’t know, shopping? Like look, Underground Cellar, the founder was on here. He just does wine. And wine people are also collectors. He’s also saying, you pay x, I give you 2x, 3x, or who knows, a million x in value. He doesn’t have a subscription though you might want to do that. But I saw his Y Combinator pitch in preparation for his interview here, he didn’t just pitch the investors that this is the future of wine. This is the future of all e-commerce. And I’m going, “You know what, this makes sense.” The guy blew up really fast. If you could do this to other industries, of course, it’s going to be fantastic. That’s not you. It’s not you.
Matthew: I think what’s me is it’s not about changing the way that people are buying everything. But I think when it comes to watches, my big vision is sort of, it’s definitely changing that industry. And we’ve already done it a bit and I think that the five-year plan is to basically be the one stop shop for everything watches. You know, it’s . . . subscription makes up, say, 70% of our revenue now. And, you know, a year ago, it was 100%. And next year, I would hope that it’s 50%. And so, I want to keep diversifying out of just subscription because I think that there’s a ceiling there. Not everybody is willing look, let’s say you have 30 million watch buyers in the U.S., maybe a million of them will sign up for a subscription. But the other 29 million, I’m going to leave them on the table if I don’t offer something big for the masses. And that’s what’s coming next year.
Andrew: The first step outside of subscription was what?
Matthew: Flash sales.
Andrew: Flash sale. So only for subscribers?
Matthew: Yes.
Andrew: You had to be a member to get part of the flash sale.
Matthew: That’s right.
Andrew: And then, the flash sale is this is a thing that we’re clearly telling you what it is, you’re going to pay this price, but only if you buy within a limited time.
Matthew: Yes. Yeah, exactly.
Andrew: That’s really fascinating. That’s effective, I’m imagining.
Matthew: Yeah.
Andrew: What percentage of your sales is that?
Matthew: Well, it makes up about 30% of our sales right now.
Andrew: Okay. And then what about . . .
Matthew: That’s flash sales and the wheel right now. That’s all kind of combined into one which is like one-time sale.
Andrew: What’s the wheel?
Matthew: The wheel is, it’s the Wheel of Watches. And basically, it’s this gamified way to purchase something. So let’s say that you were looking for a Seiko 5 and we have it on one of our wheels. Well, you could come and you could spin this wheel and chances are, I think there’s an 86% chance that you’ll land on the Seiko 5. But there’s a 14% chance that you’re going to land on something worth more than the Seiko 5. So it could be one step up which is, instead of a $60 watch, it’s $110 or $130 watch. It could be two steps up and now it’s worth 250 or so on. So we’ve got all this inventory from partners that put their stuff on the wheel and there’s always this 14% chance that you’re going to land on something higher than what you’re spinning for.
Andrew: Okay. And that’s another thing that I could not have access to because I didn’t subscribe.
Matthew: Correct.
Andrew: I can go to your URL, it automatically says now log in.
Matthew: Yes. It makes you . . . well, you have to be a current member to access that.
Andrew: I’m really good at Google searches. I found like old like articles on your site. I wasn’t able to find a way in. I should have just, I don’t know why it didn’t occur to me.
Matthew: Just sign up?
Andrew: I should have just freaking signed up. I think you know what it is? I’m not a watch person, I’m like a digital person. And so, now I’m becoming a little bit more aware of watches because I have one on but I’ve got the iPhone, the Apple Watch. How much of this is a threat to your business, the digital watches?
Matthew: I don’t think it’s a threat I think that eventually what I’m seeing happen is that people are sort of, they’re kind of over getting notified all the time and they feel like they can’t disconnect at all. And so I think that obviously, I have an Apple Watch. Apple watches have a place in the market. But for people that are watch people, they’re never going to just wear an Apple Watch. You know, they want what they call a Grail piece, which is like the one that they aspire to get. The one that they’ll leave to their son or daughter when they pass. And then, there’s just like something cool about, I love automatic watches. It’s literally a little machine on your wrist that’s, you know, it’s keeping the time. And it’s kind of amazing. You know, there are always people that will appreciate that stuff.
Andrew: And automatic watches are the ones that as I move my arm, it gets refilled.
Matthew: Yeah. So it has a rotor that spins the spring. And as it gets tighter, it releases the energy and then it, you know, it ticks or . . .
Andrew: Yeah, that’s kind of amazing to me too actually that it works.
Matthew: Yeah.
Andrew: It’s a kind of thing that you have to be brought into to fully appreciate. You don’t randomly say, “Oh, this watch is interesting that it works.” You just kind of take everything for granted. I take for granted that my lights work, I take for granted that my phone works, but then they show you here’s how this works internally and go, “Holy, crap. This looks amazing.”
Matthew: Yeah.
Andrew: It seems like it was fairly easy in this business. Huh? What was the biggest challenge?
Matthew: What? Everything. Everything was a challenge.
Andrew: What was the biggest one? It feels like advertising worked out pretty well. Finding the product for curation to this, you figured it out. What was the biggest challenge? The one that was almost going to kill your company?
Matthew: ell, let’s see, you know what, maybe the challenges that I faced were more at home than just in business because . . .
Andrew: What do you mean?
Matthew: I put 20 hours a day into the business to get it to where it is. So it wasn’t easy at all. And that sacrifice comes from somewhere, right? It’s either going to come from my health, or my marriage, or my business. And I had to kind of . . .
Andrew: Come close to losing a marriage. Did you lose your marriage?
Matthew: No, no, no, I didn’t lose my marriage. But that’s because I have a very supportive wife that believed in what I was doing. But I mean, I wasn’t the husband and dad that I wanted to be during the year that it took me to really grow this to a point where I could kind of work normal sane hours now.
Andrew: What did you miss out that you felt bad about especially with the kids? Do you have two kids?
Matthew: I have two kids. My son was diagnosed with autism, and I wasn’t as present as I would have been if that happened today. You know, my wife luckily was able to handle like all of the therapy and the appointments and making like, you know, just handling all of it. And then my daughter, you know, she started kindergarten, which I walked her to school and I took her daily, but I didn’t get to spend as much time like after school talking to her. I’m not trying to make this like a pity story, but that’s, you know, there’s definitely . . . You have to pull from somewhere to put it in another place.
Andrew: Secretly, did you feel okay about it? Like I know we as dads are supposed to feel bad about it but secretly, I think I’m okay with that. I feel like this is an investment in the long-term health of our relationship, you do well right now and that means that I could be there for you later on.
Matthew: So I think that there’s definitely a bit of that, but what I’ve seen too many times is dads the end up sort of finding their balance when their kids are already teenagers, and then they wish that they didn’t miss around so much when they were kids. And so I made it a very sort of clear goal for me that I couldn’t keep doing that for the long term. I wanted to get something built that I could hire a solid team that I sort of respected and like trusted to handle things so I could work normal hours and live a life outside of work. And that’s what I’ve done now.
Andrew: And what have you been able to do now? Because you’ve gotten there. What’s one example of what you’ve been able to do with the kids?
Matthew: I hang out with my kids every day. When I’m at home, I try not to work. We skateboard. We watch movies. My daughter and I watched a UFC fight the other day and she really liked it. Anything that we can spend time, where I’m not on my phone or on a computer, I value so much now because, you know, it was not like that for the first few years of her life.
Andrew: You know, I’m like that too. And I do really appreciate that so much more than just about anything else that it’s a little bit of time with the kids. My wife thought that Columbus Day was off for the kids, so I said, “All right. I’m going to be there for them.” She said we can get them into daycare, whatever. I said, “No, I’m going to take a day off. We get up, we look at their school, the school is full of kids. We were wrong. It’s not a holiday in California. I think it’s . . . anyway. So I said to the kids, “All right. You guys are going to go to school.” And I looked at their face and I go, “Actually, screw that. Let’s go spend the day together.” So good. So good.
Matthew: Fantastic.
Andrew: Yeah, those are the memorable times. All right. I love that I got to find out about your company. I really liked it. From the beginning, I told you I was going to ask the asshole jerky questions and you were totally fine with it. I think there might have been times you said, “Who is this guy? I am here as a guest. He’s treating me like I’m a criminal.” It’s because you’ve got the name “gang” in your company and I wanted to see if it was . . . no. It’s because I really just want to see the substance of it.
I used to actually sell sandwiches to guys who sold television sets. I remember walking in to one guy and the people he was talking to walked away and I said, “I’m so sorry. I’m not here to interrupt your sales. I know you’re here to sell. I’m just here to sell sandwiches to you and not interrupt your sale to . . . ” He goes, “That I was not going to buy.” I said, “How do you know?” He said because everything I told him about the TV. He smiled and said, “Yeah, that’s fantastic. That’s great.” I said does that mean that they’re going to buy because they like everything? He says, “No.” He says, “People who really are going to buy, they’re going to take it home. They want to make sure it’s the right thing. And so they’ll ask you questions about this. How does it compare to that? What happens if it doesn’t work? What’s this warranty? What’s the company, the whole thing.”
And so the same thing here. The guests that I am really fascinated by whose ideas I really want to buy and internalize, I want to beat it up to really understand it because I want to live with this and internalize it. I think that’s what happened here today. The website for anyone who wants to go check out is watchgang.com
Congratulations on doing this. And by this I mean, withstanding a Mixergy interview. I’ve got legitimately friends who say, “Screw that. I’m not coming on here.” And I think you can understand why.
Matthew: Yeah.
Andrew: For anyone who wants to go check them out, watchgang.com. And if you want to check out my two sponsors, really phenomenal hiring company, go check out toptal.com/mixergy. There’s a reason why they’ve survived with me for so long. They really do good work for our listeners and the second is the company where if you want to start your own subscription, bring it over to them, hostgator.com/mixergy. But really, frankly, don’t try to compete in the watch space. It does not seem like the easiest.
Matthew: It’s not safe for you.
Andrew: Any business where the client calls, and he says that about your dad is really . . . They really, they take their stuff seriously.
Matthew: Yeah.
Andrew: All right. Matthew, thanks so much.
Matthew: Thank you.
Andrew: Bye, everyone.
