Andrew: Hey there, freedom fighters. My name is Andrew Warner. I am the rude gentleman who starts off every interview with his hand in your face. I also ha, ha, have my guests doing the same thing. I’m also the founder of Mixergy, home of the ambitious upstart, which really means this is the place for people who want to leave their mark on the world and don’t have their daddy’s millions to get them started in the world and their daddy’s billions to keep them going. It’s for people who want to learn how to do it by listening and learning from other people who have done it and want to come here and share their stories.
Today I got for you, the story of a sale entrepreneur who just couldn’t get his companies to take off until he hit on the company that he’s going to talk about today. Jason Seeber is the founder of TheWineSpies, a unique wine retailer that features one exceptional wine each day online, in a limited 24-hour sale. I invited him here to talk about how he built up the business.
This interview is sponsored by Scott Edward Walker of Walker Corporate Law. I’ll tell you more about why you need to talk to him if you’re an entrepreneur looking for a lawyer. First, Jason, welcome.
Jason: Hey, Andrew. How are you?
Andrew: Good. It’s good to have a Mixergy fan on here.
Jason: It’s such a great pleasure to be here. Thanks so much for having me on.
Andrew: I’ve been looking forward to it. Especially, after this thing that you sent me that I’ll show here later on. I’ve got quite a few questions here.
Jason: Uh-uh. I wonder what that was.
Andrew: I want to go back to a time when you walked into a grocery store with your ATM card and didn’t feel so comfortable. Why not?
Jason: Unfortunately, this was something that repeated itself a lot. Walking into the grocery store at the time…one instance, in particular, I had just had my second child. Congratulations, by the way, on the birth of your first.
Andrew: Thank you.
Jason: Awesome. I had a family to feed, and I was an entrepreneur. I wasn’t cut out for the corporate world, hadn’t worked in corporate and wanted to run my own companies. At that time, I was pretty much hand-to-mouth in the company that I was running. Got to the check-out, swiped the card, card declined. This, unfortunately, happened a few times in my life. At that point, with small children, that was an especially low point.
Andrew: Why didn’t you give it up at that point? I mean, really, it seems a little bit irresponsible then. You have kids, you have responsibilities, and here you are taking a risk, for what? A risk that really mean that they could go hungry or they could suffer or they could feel ashamed and for the rest of their lives have this scar. Why didn’t you stop?
Jason: Gee, you make it sound so bad. (laughs)
Andrew: Sometimes, I wonder if it is bad. Sometimes I see the direction I’m going and I say…I know over the years I’ve said, “I could get a job and have some safety. I can get a job and really spend time on other things. Am I making the responsible choice?” I know why I decided to do it. Why did you decide to keep going?
Jason: I have turned down cushy, corporate jobs. Punch the clock, nine to five.
Andrew: How many imbecile friends do we have, real imbeciles, let’s be honest, who are doing well at their corporate jobs? When they fly, they get to fly business class. When they get hurt, they have top insurance and this has been going on for years for them, and they’re upset because they didn’t get the five percent bump for being nothing? Here we are, we’re suffering. You go to the ATM…You go to the grocery store, and you can’t do it. Why did you continue then?
Jason: We are the crazy ones, I guess. It was a drive that I had to chart my own course in life.
Andrew: A drive from where? I’ve talked…for me, there was a creative need that goes all the way back to elementary school when I sold candy. There was also the feeling of being a loser for most of my life and saying, “No, I can’t compensate for being a loser by just being an okay guy in a job. I have to compensate for being a loser by being something extraordinary that hopefully it will average out the loserness of my first 20 years, and make me feel like I’m a real person.” Those are my inner holds. What about you? What brought you to this?
Jason: Who am I proving myself to? I guess only to myself. I was set up earlier in life, I think, to realize that I could do anything. When I was a really small child, my parents would tell me how smart I was and how I could accomplish anything in life. I didn’t really believe it. I had a period of my early teen years where I was given a great deal of responsibility. I grew up in a hippie commune in India. In America…
Andrew: How did you end up in India?
Jason: When I was about twelve years old, my mom had an illness and that drove her to seek out some alternative healing methodologies. A friend of hers gave her a bunch of audio cassettes, back when that was the thing, back in the 80’s, of an Indian guru.
Andrew: What’s the guru’s name?
Jason: His name was Osho, O-S-H-O.
Jason: Yeah. She listened to all of these audio cassettes while she was in Jamaica making her recovery. She came back and said, “Hey, I’m going to India.” We said, “Okay. Bye.” She came back a few months later, and she was dressed all in orange. She had a string of beads around her neck and a picture of some old Indian dude around her neck. She said, “We’re all going to India now.” I said, “No way do I want to do that.”
Ultimately, I decided that that was the way to go, and I had an incredible year. We thought we would stay there for a very long time, but then the guru up and left and came to America. We came back. My last former grade of U.S. education in a classroom was…the last complete grade was actually grade five.
Andrew: Fifth grade?
Jason: Fifth grade. I have a fifth grade education. Andrew. I could have had…
Andrew: Wait until people see what you built up with this fifth grade education. TheWineSpies is an incredibly simple site that’s just doing so phenomenally well with a fifth grade education. Something stood out for me. You said you went to India and you had a good time. If I were, at that age, going to India, a whole other country, I’d feel so out of place. I’d feel so resentful of my parents. Believe me, my parents did less and I felt resentful.
Andrew: Why did you like it?
Jason: I landed there and first of all, India, at the time, especially was like America turned upside down and inside out. It was as different from America as different can be. [??] there were a lot of kids there that were my age, from Germany, from England, from Australia, and I made fast friends with all of them. We had an incredible amount of freedom.
I saw my parents, literally, once a day, usually in the evening. My mom would give me 100 rupees, which back then was like having $100 dollars a day in the U.S. I could travel around. I did a 100 kilometer circle from this planned place called Kuna [SP] where we lived. I made friends with the rich fare drivers, and I led a life unlike any American 12-year-old. I turned 13 there. I had a tremendous amount of freedom and it was like one of Peter Pan’s lost boys. I (??).
Andrew: The independence must have felt so liberating?
Jason: Tremendous independence. At that time I think not…Independence is a great thing for a teenager, but too much independence, I don’t know. I think I was at the right age. I think there were kids that were of a younger age that I don’t think had it as well. They didn’t get to spend as much time with their parents as they should have at that young age. I think I was in that sweet spot, in terms of age.
Andrew: When you come back, at that point do you feel, “What am I doing back here? I had 100 rupees a day. I was king and traveled anywhere I wanted.”
Jason: Suddenly, we were in a commune in America and it was a different story. There was some time spent in a classroom, but it was nothing like a formal American classroom. It was a lot more free-formed. The curriculum was very free-formed. We spent half of our day there doing almost nothing, and the other half in an actual job. We had careers at 13. From 13 to 17, I was everything from a sheet metal worker to a plumber to the ice cream parlor manager to… This was a city with about 2500 people and in the summer time when people were coming from all over the world, it would swell to almost 10,000 people.
Andrew: It was basically the commune that controlled the city?
Jason: Yes. Yeah. It was our city. We incorporated a city. If you look on a map of Oregon, and you search for Big Muddy Ranch, this is where we moved in. We converted it from this mud pit to an oasis in the middle of the Oregon desert.
Andrew: That sounds idyllic.
Jason: Yeah. Yeah. I ran the airport. We had big airplanes, and I ran the airport. I managed the maintenance schedules. I made sure that the pre- flight checks were done. I fueled them. I had my own truck, my own pager, this big old Motorola pager, a big radio.
Andrew: Sounds fantastic. This was one of the reasons I would have resented my parents when we were growing up. “Why did you have to be so conventional in New York? Why can’t we do this?'” This was a really fun, idyllic lifestyle.
Jason: It was. We thought that would persist forever, and then it all fell apart.
Andrew: Why not? I read the book, Drop City. I can see why some personality clashes could be a problem. I could see why people need to take responsibilities and others just want to… Is that what it was?
Jason: That caused the downfall?
Andrew: Yeah. Why didn’t…Why is it…
Jason: It was corruption, actually that…
Jason: …caused the ultimate downfall. Yeah. The people who were…not the guru, himself, but the people who were around him, that were in power, were stealing millions of dollars. When all that money went away, the whole thing imploded. There were also a bunch of legal things. This was a bunch of hippies in the middle of Oregon, surrounded by rednecks. There was some conflict there, of course. Anyway.
Andrew: Wow. Do you still have any of this hippie personality in you?
Jason: I guess, people who know me well might say that some of that flavor continues.
Andrew: Wow. You certainly have it in the sense that, boy, you are a generous person. I have bottles of wine from you that…It took me a while to even write you a thank you note because I just felt so overwhelmed by the generosity of the gifts that you sent. It wasn’t just the gifts. It was the note that you attached with it. Where is that? I took a screenshot of it so that I could talk about it here. Can I read some of it here?
Andrew: Here’s what you sent me. And then I’ll hear the story in a moment. You sent me this bottle, which says I’m a Mixergy fan for life. Thank you, from this ambitious upstart, Agent Red. That is your name, and we’ll find out how you got it. And you sent me these other bottles. Sonoma. That’s where you are, right?
Jason: That’s right.
Andrew: Here’s the note that came along with it. I have so many more than I can hold up here. It said, I really enjoyed my pre-interview with Jeremy, who is now an official WineSpies operative, dubbed Agent (whoa, I’ve got it so small), Porto. And I’m excited for my interview with you. I dug up from my personal wine cave, and I’m happy to present you with six very lovely wines, each with their own story.
Each wine is from a winery with which I have a very personal connection. For example, I proposed marriage at Deerfield Winery. She said yes. And I helped determine the final varietal composition of the Consentia wine. Anyway, I could keep on reading it but people get the message. Thank you so much.
Jason: You’re welcome.
Andrew: That does feel like a hippy thing to do.
Jason: Well, you’re welcome. When I started the business I made a very conscious decision that I wanted to create a virtuous cycle in everything that we do. I want our customers to win. I want our suppliers, in this case wineries, to feel like they’ve had a great experience, that they’ve won. That any love that we show to them will come back to us. And I try to bring that into all of my business dealings, and I think it works.
Andrew: The idea for the business was inspired by Woot.com, the site that famously would offer only one thing at a deep discount. Is that right?
Jason: It was more like, the timing was sort of concurrent with theirs. I discovered at the time, so, I was doing a joint venture with a Swiss toy company. At the very end of it, just beginning to look into deal of the day sort of models, or deal of the week.
Andrew: For the toy business.
Jason: For the toy business, as a way to put one product in a featured spotlight and have all the other products around it. I discovered though that Woot had just started selling wine on that same model. And rather than be dissuaded by it I looked at what they were doing. What they were doing well and what they could have been doing better.
The Swiss company had some banking issues in Switzerland, and so that partnership ended. It was great timing.
So, thinking of this model. While we were running this company with the Swiss partner they had a guy in our office. He pretty much sent emails and made phone calls all day. Great guy. He would take us out to lunch all the time, but didn’t do very much. But he had a keen interest in wine and so I would take him on little field trips around to various wineries in the area. There are literally hundreds. There are thousands of wine brands, literally within arm’s reach of us here.
Andrew: I bet.
Jason: So, I just sort of put it all together and had a light bulb moment, wine plus deal of the day, plus the fact that my friend and original cofounder, Agent White. We had been friends for a very long time. We had done business in the past. We always knew we would be in business together again. And I, in this perfect storm called him and said, here’s the idea. Here’s what we’re going to do. He funded it. And in less than 90 days we were licensed and operational, had a website.
Andrew: Funded it with how much money?
Jason: Funded it with less than $25,000.
Andrew: Less than $25,000. And the idea was one wine a day at a discount. But Woot was already coming out with Wine, Woot. Why didn’t you why say at that point, you know what? This idea is being done. Let’s look for something else. How about a beer of the day, how about a scotch of the day? We can’t touch wine of the day. Why did you stick with it?
Jason: I actually called the guys who were doing the procurement for Woot for Wine,Woot.com. And I said hey, why don’t we do something together? This is a category that’s really interesting to me. And he, you know, I don’t know how to say it politely, but he told me to go away. He said it in more strict words than that. Told me to go away, and at that point I was like, hmm, I can do a better job. I called on some wineries.
Andrew: What could you do that’s better than them? They had a built-in market, a built-in audience. They had the software already in place. They had the reputation. What could you do? And the reason I ask is this.
Andrew: Jason, I talk to so many entrepreneurs who feel as soon as their idea is being done by someone else, that it’s over. And frankly even for me, even though I know that it doesn’t mean it’s over if you see someone else doing it, when Jason Calacanis started doing interviews too, with entrepreneurs, I thought maybe it’s over for me. Maybe, this guy is going to take the whole attention away, and my work is going to be done.
Jason: Just as Jason Calacanis is a great interviewer, he really is. I love his shows. Yours are very different. The personality and style and flavor and heart that you bring to it are very different than Jason Calacanis. I thought, similarly, that I could bring my own flavor to this.
Andrew: So what was going to be your difference? What was going to make this special?
Jason: Well, I think what we tried to make really clear, what we still make very clear to our customers, is that we are about the quality of our curation. The other thing is I really truly live the brand. Here I am in my Wine Spies shirt, drinking out of my Wine Spies mug.
Andrew: Yeah, you call yourself Agent Red, even on the bottle. I didn’t really know your name until I went back into the research.
Jason: My Twitter handle is Agent Red.
Andrew: So, let’s talk about that. This is one of the ways that you’re distinguishing yourself and differentiating yourself. You and Agent White sat down and said, “What is going to be our thing, right?” You started to brainstorm. What were some of the ideas that you talked about for branding?
Jason: Yeah, we had some silly names. “One Vine Day.”
Andrew: Yeah, like One Fine Day, except One Vine Day.
Jason: Yeah, it was kind of fun, and kind of interesting, but didn’t really have the flavor. And when I thought about how many wineries there are, giant to teeny tiny, what I didn’t see anybody doing was really going around to these wineries and doing a quality check. What are these wineries about? What’s their story? What’s in the bottle?
Andrew: Like, spy on them to see what’s going on inside.
Jason: Right. Yeah. To really get behind the scenes and really see what’s going on with these wineries. And so we thought this idea of spies and being covert and visiting with wineries without them even knowing how we were, we did a lot of that in the early days.
Andrew: Well, you literally would walk into a winery and you’d look around. What would you see? I’ve been in wineries. I don’t know what to look for.
Jason: I didn’t either, and so I just went and looked, and I tasted their wines. And the real proof was in the glass.
Andrew: In just the taste of it.
Jason: Yeah. Did I love the wine? And that became our top wine criteria when choosing a wine for sale. Look at all these wines behind me. These are all samples waiting to be tasted. So, we’ re being bombarded with wines, and there are only 365 days on the calendar. I have a couple of other ways to sell wine, but . . .
Andrew: You have a couple other ways to sell wine?
Jason: To start wine online. So, we have a featured wine of the day. If you look at our website, the wine at the top is in our “featured” channel. And we have some other channels and some other . . .
Andrew: Yeah, right underneath it there is a “Buy Now for Agent’s Choice, Top Hidden Gem,” for example.
Jason: Yeah, we have another wine there today.
Andrew: But it’s not another website in addition to this, is it?
Jason: It’s not, but we do have a new partnership with a mobile app called Vivino. The use case there is you’re in a store, you’re wondering about a bottle that’s on the shelf and you take a picture of the bottle. It does some label recognition, looks for the community reviews, tells you some things about the wine, gives you a general rating of the wine. So we’re curating wines for them as well, and they’re putting it out to their audience, and we’re doing all the curation through fulfillment.
Andrew: Looking at your background, what I see is that you did consulting for Internet companies. It seems like more Internet than wines. Can you tell me a little bit about some of the businesses you were with before, some of the ones that we said earlier made you a serial entrepreneur but not a terribly successful one?
Jason: Serial failure?
Andrew: You know what? I said, “Do I have enough comfort here with Jason to say that in a headline, is he going to feel okay with it?” And I thought, maybe he’s not, let’s not say that. But I considered even saying “serial failure” for dramatic effect at the top of the interview, to be honest.
Jason: Right. It’s all good, Andrew. Ask me any question.
Andrew: So, what were those serial failures, then?
Jason: So the first one was I had just come off a stint as a director of marketing for a Macintosh-centric ISP. And that went really well. We grew the company very quickly.
Andrew: This is in the 90s.
Jason: Yeah. In the 90s, early 90s. And the friend who owned the company spun it and sold most of it off to a bigger ISP. And so that ended. And at that time, the commercial Internet was just starting to be a thing. So, most people, their on-ramp to the Internet was something like AOL, one of those services. This is way back, I’m dating myself a lot right now, as if my gray hair didn’t do it already. And by the way, Andrew, the beard – I’m loving it.
Andrew: You do?
Jason: Yep. Why do you think I grew mine?
Andrew: [laughs] I do like the convenience of it.
Jason: So I started a company that was a consulting firm that helped companies understand what the heck to do with the Internet. And so we had some big clients, we had Sony and Philips and KPMG and a company called Urban Decay, and all kinds of really cool companies.
Andrew: That sounds like a successful business.
Jason: Yeah. Big and small. And it was during one of those engagements with that consulting company that I met Agent White. We were hired by the San Francisco newspaper agency. There used to be two papers in the city in San Francisco. There was an entity that sat in between them and there were some shared technological resources. We did a really interesting tech consulting project for them that would pull the news stories off of the AP satellite and then automatically publish them to the website into their appropriate channels.
Jason: Where previously the editors would have to – there was a team of 12 actual newspapers editors that had to first learn HTML, then take that data, untangle it, and then manually publish it to the web site. So we built a system that did that automatically for them and that’s where I met Agent White. We didn’t have the technological expertise, his company did, and we became friends.
Andrew: Why didn’t it work? It sounds like it got some really good traction with great companies.
Jason: We got traction, and I at the time had the wrong business partner, and it turned out that this business partner was writing himself very large checks from the back of the checkbook.
Andrew: Oh, I see. Did you meet this guy in a commune?
Jason: No, not, did not.
Jason: By the time I discovered it, it was too late. The money was –
Jason: You know, the company was drained of funds.
Andrew: Did you ever confront him about it?
Jason: Oh yeah, we engaged an attorney and the cost of getting his butt out of the company further drained the accounts and we just couldn’t recover from it at that point.
Andrew: Wow. This is Studio Unity?
Andrew: It was.
Andrew: Is the guy’s first name Brandon?
Jason: Uh, Brandon is Agent White.
Andrew: Oh, Brandon Wu is Agent White. Okay, I see.
Andrew: Wow. I would stop trusting anyone. I would never even trust Brandon after that.
Andrew: You didn’t go through that period at all?
Jason: A little. And then you know, a couple of other companies inconsequential and then I find my way into the toy business, which is, surprisingly, a ruthless and cutthroat industry.
Andrew: Why is the toy business so ruthless? It feels like it should be so successful because there’s so many kids, there’s no huge online presence, it feels like there should be a bunch of online businesses that are doing incredibly well. I haven’t interviewed one. Why aren’t they doing well?
Jason: The toy business, it’s a multi, probably a hundred billion dollar business.
Andrew: But still, going all the way back to toys.com I’ve seen nothing but failures online. There is no WineSpies of toys, for example, and I feel like there should be. Why? What’s going on?
Jason: I don’t know.
Jason: I think it’s also a fairly – it’s a very competitive business and it’s fairly low margin, I think. Toys.com, their whole thing was about the low, low prices of toys. And that’s, you know, low prices is hard platform from which to build a sustainable business.
Andrew: I see.
Jason: While TheWineSpies does focus on quality first, that’s our most important, top line criteria for a wine, there is a small discount, but really the discount is there as a way to lower the barrier for people who have maybe never tried a particular brand of wine before.
Andrew: How did you learn about wine well enough to discern the good from the bad and to be able to tell a large online audience what to buy?
Jason: So the secret is, I knew nothing about wine when I started the company. Very little.
Andrew: I don’t see anything on your Linkedin profile. I don’t see anything anywhere that says you’re a wine lover going all the way back.
Jason: Yeah, Agent White knew more about wine than I did.
Jason: And we actually decided early on that that was a benefit, because this allowed us, me primarily, as the guy who was doing most of the reviewing of wines, a way to talk about wine that wasn’t up here, that wasn’t, you know, snobby or pretentious. It was more down to earth, more accessible, more plain language. That was an early goal of the company and we succeeded in that goal because I didn’t know any better. And to this day we try to keep it very down to earth.
Andrew: And so going back then to the spies idea, I understand you go into the wineries, you’re spying on them, you’re seeing which one, what tastes good, you’re getting a sense of the place. Taking it from there to giving yourself a name of Agent White and Agent Red, and Jeremy gets an agent name….talk to me a little bit about that, about this whole branding and the way you extend it beyond the name of the site.
Jason: I live it. You know, when I go out and order a coffee, they ask me my name, I tell them it’s Red. Most people know me as Red or Agent Red, and in some cases I’ll call on a winery and it’ll be a door opener, it’ll be something that once I repeat it because they didn’t believe it or didn’t hear it right the first time….”Agent Red, really? Is that really your name?” It lowers their defenses as well. We certainly want to have fun. I want to have fun in life. And if such a large proportion of my life is in this business, I might as well make it fun.
Andrew: I like that.
Jason: And it’s also a way that wineries can talk among themselves and now seven-plus years in, I’ll call in a winery, and even if we’ve never talked before, they know who I am. They know who Agent Red is. They know who the wine spies are, by virtue of this . . .
Andrew: More memorable than Jason Seeber.
Jason: . . . Yeah, this quirky, memorable name. Exactly.
Andrew: Looking at the first version of the site, from July 4th 2007, one of the first versions, it had the two agents at the top already, it had the folder that looks like your information on the winery, it says “Confidential Wine Dossier.” Dark Winery, today’s featured wine – I don’t know how to pronounce this – Castello de Marcum? . . . Only ten cases available, average price is $99.99, we’re selling it for just $29.99, and we’re selling it for just 24 hours. There it is, right there. The simplicity of the whole model. Right?
Jason: Right. And it’s a very simple model.
Andrew: Was it as easy as going into a local winery and saying, “Look, I’d like to offer yours for a discount on my site, it’ll be for 24 hours, you won’t hurt your brand because I’m not going to cheapen it by selling it forever.” That was it.
Jason: Yeah, but it was a big challenge early on. We came into the industry at a time where there was actually a glut of inventory. Wineries had overproduced. If it weren’t for that, I think it would have been very hard for us to find our way into wineries. There is no such glut any more. Inventory levels are much more balanced. Every now and then there’s something that happens in Mother Nature that throws that balance out of whack, but largely that whole inventory balance problem has been solved.
Today we see people jumping into the category and not surviving more than a couple of months, because they’re calling on wineries that don’t need them. Now, why do they need the Wine Spies and not these new companies? I guess it’s because we’ve been around for so long, and so they treat us as a viable additional channel of distribution for their product, and a way to reach new customers. So, it used to be, the original problem was, help wineries offload all of this excess inventory.
Jason: Now, it’s really about helping wineries to reach new customers. Because if you put the wine in somebody’s glass and they fall in love with it, well, they’re not going to come back to the Wine Spies to buy more of it. They can’t. We encourage that customer to go back to the winery, to join their wine club, to continue a relationship with the winery. Again, part of this virtuous cycle. I think there’s value beyond the sale.
Andrew: And so, your cost was the cost of the website, which is not terribly much – I don’t see tons of crazy Flash going on or anything, very straightforward. So it’s the cost of that, and the cost of the cases of wine that you buy up front. And you only buy the ten cases, right? If you sell out, you sell out?
Andrew: So it seems like a fairly easy model except we’ll get to where you get your traffic and how you get people to come in. What happened if you didn’t, or if you didn’t sell out the ten cases or however many you got?
Jason: Well, here’s the secret. We commit to buy up to a certain amount from the winery.
Andrew: Ah, so you don’t have to pay for it if you don’t sell it.
Jason: That’s right.
Andrew: That’s a great model right there!
Jason: That was the model initially. The model, because the demand has gone up so high . . . Now, more frequently we’re buying inventory in advance. From a cash flow perspective it’s not as elegant, but it gives us an additional competitive advantage in that if we have it in our warehouse as it’s selling, those orders are going out on a real time basis.
Andrew: How long did it take you to make a profit with this model?
Jason: Only six months. Within six months, we were profitable and debt- free. In the first couple of years, we grew at a very slow, respectable rate. What we didn’t know early on is that the industry is so regulated. It’s so incredibly, heavily regulated, and the rules vary widely from state to state in terms of . . .
Andrew: I don’t know how you can even keep track of it. You told Jeremy that if you sell wine in Utah, you go to jail, right?
Andrew: Any wine at all by mail. If it arrives in the mail in Utah, you go to jail.
Jason: I can go to jail. So obviously we stay out of states that we can’t ship to.
Andrew: And then there are certain cities you can’t ship to? I tried to get a bottle of something shipped to a friend of Texas, it was way too tough. I think there are certain cities where you’re allowed, right? But not others? How do you keep track of it all?
Jason: It gets more ugly than that. It’s to not just the zip code level, but what side of the street this customer is on . . .
Jason: It’s really specific so we had to build our own compliance engine. And so our entire platform is proprietary. We built the whole thing from the ground up. On the second version of our platform we dropped the first one and launched with a new one after a year and a half ago. And the regulatory concerns were a cause for . . .
Andrew: Yeah, the site looks really easy to build. That couldn’t have taken you too much money, but you have some wine to buy. I’ve got it backwards. You didn’t have wind costs. You did have costs involved, at least, time costs if nothing else in building the site.
Jason: And at least extending the laws and navigate them, stay out of jail.
Andrew: How did you do that? How do you figure out where all the laws are? Is there a database somewhere? Is there an API that you can use to figure out which side of the street you’re allowed to deliver on and which side will put you in jail?
Jason: There are services that are available. They are expensive and hard to work with, hard to implement, but they exist. We decided, again, to roll our own so that we weren’t reliant on other people’s technologies. What that required was a great deal of research. It required getting involved with each of our shippable states. And we have an understanding with them what the rules are.
Andrew: Each of your what states?
Jason: Those states that we can ship to.
Andrew: Oh so who do you talk to, or how do you get information from each state?
Jason: Yeah, how do you? You have to do a lot of research to find that person.
Andrew: And then that person tells you, “Hey, look, this side of the street is okay, that side is not.” Updating your database, making sure because it could change tomorrow.
Jason: And it does change all the time, a lot of change all the time. And hopefully we’re moving toward a more open sort of, more loosely regulated involvement. But the truth is that environment, those laws are held in place by very powerful, very big money distributors. And we have to work with them and not against them, and we have to fear them a little bit. But, you know, it’s kind of one of those constant prices of entry, if you will.
Andrew: So I was trying to do a little bit of my own spying. I just went to a similar web .com. They gave me a membership so I can see where traffic is coming from to my guests. You don’t have that. I don’t see where your traffic is coming from. As far as referrals go, they’re showing that Vino.com as a traffic source for you. Where did you get your traffic in the early days, the people who ended up buying?
Jason: Well that remains our biggest challenge, that’s when we’re going to keep them around. Our top customer has purchased from us almost 200 times. The lifetime value of that customer is something like $35,000 plus. We need more customers, and that’s the problem that we’re solving right now. You know, I thought in preparing for this interview this might be one of those interviews where if you follow up with me within a year I’ll have a really cool following story for you.
It’s my goal to double revenue in this next 12 months. Today, the day that we’re recording this interview, is the first day of our fiscal year. And we just closed our fiscal 2013 at something like 39% year over year gross.
Andrew: What is your revenue from June, 2013, to June, 2014, your full fiscal year?
Jason: we won’t disclose, but we are a seven figure company, I’ll say that.
Andrew: You mean, over seven million in revenue? Excuse me, over a million in revenue?
Jason: Over a million in revenue.
Andrew: So where does the traffic come from? I don’t see traffic even today. It looks like, according to a similar web, you have 100 hits. No, I can’t really tell actually.
Jason: I don’t think that’s it.
Andrew: No, that’s not accurate. They don’t have enough data for you.
Jason: It’s hard. The primary method is email and our list. We do a very good job of . . . We have a couple of email lists. About 50-60% of our revenue comes from a very targeted email that we send every day. Ninety percent of our revenue overall comes from our emails.
Andrew: Where do you get your email lists? It’s not coming from the site. People aren’t coming in and registering by putting in their email address.
Jason: Yeah, how do people learn about it? So, again, another secret for you. A couple of months in when . . . we can’t sustain a business on (?) mom buying an occasional case of wine. You need something more than that. We worked all of our friends and family and word of mouth and networks that we could, but realized early on that if we asked our wineries to help make noise about a sale that they would sell TheWineSpies to their membership.
Andrew: I see. So you put it up on discount on your site. You say to the winery, “Tell your audience that they could get it on discount on my site.” What’s in it for the winery?
Jason: Wineries thought that this was a crazy idea.
Andrew: Did they put it up for sale on their own site and say, “Look it’s a discount that’s available today only on our site?”
Jason: That was the principle action, of course. Why would I do that? Why would I advertise your site to sell my wine, which I’m already selling to the wine [??] at a lower price than if I had sold it at full retail.
Andrew: How do you get over that hump?
Jason: That objection was overcome with some finesse.
Andrew: How do you finesse that? What do you do? Do you pay the first . . . I don’t want to do multiple choice because I know that gets me the wrong answer. What did you do to get them to say yes? This is the place where we learn finesse.
We’re 40 minutes into our conversation. The dabbler is gone. This is the real entrepreneur who’s listening at this point. Let’s give him some meat. What did you do to finesse?
Jason: First of all, again, because we only sell wines that we love we tell a very complete story about wine. We did some testing with a couple of wineries with whom we were very close. We said let’s choose a wine that you put [??] offer three months ago.
Let’s put it on offer on the wine spice. Let’s do it exactly the same price. You tell your list. We’ll tell our list and we’ll compare. We’ll give the segment of your customers that came from your email. We’ll compare that offer against your previous offer.
In every case our offer sold appreciatively more wine than when they had put that same wine out to offer to their own list.
Andrew: The copyrighting of the site.
Jason: Yeah, I guess so. I guess it was good copyrighting. It was good story telling. We tried to tell a very in depth story about the winery, the wine, the wine maker. We used to do wine maker interviews. These were email interviews.
We just haven’t had the time to do them in these last couple of years. We’re so busy. We do it all with a very small team, as well, Andrew. We do. We have a team of five people.
Jason: Yeah. There’s an awful lot of moving partners.
Andrew: All right. Go to the winery. Say, I’m going to show you we can sell a lot of your product. You promote to your list. We promote it to our list. Never mind that we really don’t have a list, but fine. Oh, did you tell them that you had a list at first?
Jason: We did have a list, but I never answered when they asked me how big the list was.
Andrew: I see.
Jason: Almost no one asked, granted.
Andrew: Yeah. Hardly anyone says I’ll do your interview, Andrew, only if the audience is big enough. I’m surprised. In the early days I do see at the top of the site that there was a place, yeah, there it is. Sign up free. Enter your email address and we’ll use your email address to tell you about the wines. Only about the wines. No [??].
I don’t see that on the site anymore. I don’t see a place where people enter their email address. Why not?
Jason: There’s no obvious spot on that front page. Certainly, during check out we will ask people for their opt in to our email address. Again, one of our big challenges right now is how do we get more people into the top of the funnel? How do we attract new customers? This will be a great thing for us to follow up in our next interview.
Andrew: Well, you didn’t get to a million plus in revenue by just partnering up with the wineries and asking them to email, did you? Was there something else?
Jason: There’s a lot of word of mouth. [??]
Andrew: How do you encourage word of mouth?
Jason: We tried some programs. We tried some give to get programs. Send your friend $25 credit and you yourself will receive a $25 credit. It just didn’t work. I don’t know why. I don’t know what it was about our particular audience.
We know a lot about the demographic of our audience and the make-up of the audience. Maybe that had something to do with it. Maybe they’re not the right group of people to go out and share in that manner. I think what’s happening is people are bringing, Bolus, to a dinner party. They’re giving bottles to a friend. Hey, where did you get that great bottle of wine? I think that the word of mouth has been through our channel.
Andrew: I don’t know. I always feel like that’s not enough. You know why? Because people might want to remember, but they forget the name of the place. They forget how they ended there. They just remember there was a website and then Google gets the credit.
Jason: Google is actually a good source of traffic for us. If you Google any wine that we sell, today we’re selling . . . you might want to do this as we’re speaking, Saddleback Posse Red, P-O-S-S-E Red. If you Google that I don’t know where we come up in the search results, but often we will show up above the winery.
Andrew: I do see you there on the search page, first page. Interesting.
Jason: [??] Yeah. From an SEO perspective the content is so rich we have so much longevity that we do enjoy really good search engine ranking. People searching for wine deals, or wine . . .
Andrew: What was yesterday’s wine? Does that still rank?
Jason: Oh, boy. I’m going to have to move to a different screen. I can tell you what it is . . .
Andrew: Do you remember one from the last few days? Does that help too? I know that helps. We were introduced, I think, through Noah Kagan of Apps Zumo. It seems like he’s helped by the fact that he has so much SEO juice. If I do a search for a product that he used to offer I often end up on his site because he ranks so high for it. Does that happen to you too?
Jason: It does. It certainly does. We have almost 4,000 previous wine reviews in our database by now. That’s a lot of good search engine food.
Andrew: I can see here if I do a search for pages that are active…Does this make…Are we still friends after I push so much and say it’s not enough to hear about your…that I want to know more about how you got you customers?
Jason: Of course. You may ask me any question you can, and I will answer it to the extent that I can.
Andrew: I see it now. All right. All see all these pages. They’re organized on a page called, on a sales page. Each day has its own page. I see what you guys are up to, a little bit.
Jason: Yeah, if you can find your way to the archive.
Andrew: It looks like it.
Jason: At the bottom of the first page there’s an archive link and that’ll show you all the past sales that we did.
Andrew: I know. I went through Google. Agent White, though. What happened with you and Agent White?
Jason: Agent White and I have parted ways back in August of 2012. I give him a great deal of credit for teaching me a lot about business. I haven’t had many mentors. Your show is a great source of mentorship. You’ve had some amazing guests. Agent White was one of my very few mentors in life. He taught me a lot about the value of focus, the value of do one thing, do it really, really well before you decide to do more things. At the point at which I want to really start to grow the company, he was very comfortable with what we had built. It was more of a lifestyle than a company.
For him, he was very happy with collecting a really nice salary and growing by 10% year per year. I was not satisfied with that. We were in pretty big disagreement about where to take the company and how to grow it. I put my foot down and I said, “Look, if we’re going to remain partners, this is what I want to do with the company.” At the time, he actually lived in New Hampshire. We were running the company bi-coastally [SP]. I was here, so now I’m doing a lot of the heavy lifting. He was doing all the heavy lifting, granted, in terms of the back-office stuff. Stuff that he was great at doing.
Andrew: What kind of back-office stuff did he do?
Jason: Accounting, book-keeping, compliance and all that fun stuff that I just didn’t want anything to do with. It was a very good partnership.
Andrew: Who did the development work?
Jason: This was a contractor that we hired, a long-time friend of mine, a guy that I had taken with me through several companies, through the toy business and before that a couple of companies. We hired him as a contractor. He’s now sitting in the next room behind me. He’s a full-time programmer. We integrated very quickly. We are making changes to the platform all the time. A lot of process improvements to speed things up internally within the company.
We do it with a team of five. We need to find every efficiency we can at all times. Our director of covert operations, we call her Agent Flora. She whips us all into shape. We have a new system that we just put in place called Asona [sp]. Have you heard of this?
Andrew: I do know what Asona is. That’s pretty cool.
I think they would be a great interview. Really cool platform. Poor Agent Flora having to drag me into that, kicking and screaming somewhat. I realize that it’s to the ultimate benefit of the company. That’s one thing about hiring people. If you hire the right people, hire people that are better than you, that can take you along, as well.
Andrew: What do you do when there’s two founders, one of them says money and the other one say I want to stay in the company? How do you break that up?
Jason: We’ve looked at a couple of different ways to do that. There was a winery that had always taken an interest in me. Every time I visited with them, this other winery would ask me, “How’s it going? What are your challenges? What’s new?” Then this guy invited me to this new winery that he had just acquired. He said, “Come check out the winery.” I walked into the room. It was an obvious ambush.
There were five at this big, long boardroom table. He sat me down and asked me those same questions: “How’s it growing? What are your challenges?” I sunk in my chair and I said, “I’m really frustrated. I really want to grow the company. I really want to just go like hell. I know we’re at this wonderful point where we built a great foundation, where we have the supply resources are lined up, where know everyone in the industry, we have very loyal customers, but instead of this kind of growth, I want that.” He said, “Well, why don’t we talk to Agent White?” I stepped aside. I put them together. They worked out a deal. Agent White exited. They entered. They are our new partner.
Andrew: They bought him out? They’re our new partners.
Andrew: So you bought them out? They’re your new partner. And did they also inject cash?
Jason: They injected a little bit of cash, and they provided a lot of that same back office stuff that Agent White was doing. They’re motivated and interested in seeing the business grow and, you know, the new partnership like any partnership has also had its challenges.
Andrew: What is the challenge there?
Andrew: What’s the challenge?
Jason: Well, they’re a winery and they are a very innovative winery, but for all the innovation and forward thinking and sort of different position that they have as a winery there, they’re not as Internet savvy, I think, as we are. We are an Internet company that sells wine or we are a winery that is in the tech (?). We’re in this interesting crossroads ourselves, but they are very much a tradition but forward thinking winery. So we have to bring them along in some ways.
Andrew: How do you mean? What influence do they have on what you run your site?
Jason: So operationally I have total control of the website, but when it comes to when we want to take certain risks we have to think about their needs as a company and what sort of exposure to risk they may have if we do something.
Andrew: What kind of exposure?
Jason: That I can’t get into.
Jason: Yeah. Like I said, the regulatory environment makes things very difficult. It’s a difficult category to . . .
Andrew: I imagine.
Jason: It’s tough to be in.
Andrew: If someone is listening to us and says, “You know what? This whole facocka [sp] system of where you’re allowed and where you’re not allowed is beyond me. I can’t get into the winery business at all or touch wine in any way.”
Jason: I wouldn’t recommend it.
Andrew: Right. But if you said you know what? I think we can do a deal of the day site in something else in another topic. Do you think that idea has legs, that it would work?
Jason: Well, I don’t know. I think that things like Groupon and LivingSocial, they’ve got their work cut out for them, and I don’t think they have particularly sustainable models which is why you see them experimenting in other categories. I think that restaurants and hair salons and massage places, they’re not kind of getting the value long-term out of the relationship like a company like Groupon.
I don’t think their model is particularly sustainable whereas with us given that we’re in a category where we have a very highly desirable product, a consumable product, and one that needs to be replenished continuously, I think that sort of . . . if somebody could find a like product that has that sort of appeal where you constantly need to refresh and replenish people are very . . .
Andrew: Coffee, for example.
Jason: Coffee is a great category. Yeah.
Andrew: So do the same thing as you, put it up as coffee, go to the . . . Do the coffee shops, do the coffee makers have a mailing list? That’s the big question.
Jason: Nobody should get into coffee. Nobody should get into beer. Nobody should get into spirits because maybe somebody else will.
Andrew: [laughs] No, I mean, do the . . . The thing I learned from you about how you got your first customers was by partnering up with a winery. You sold their wine, and they helped promote you and your list by emailing.
Jason: That was the scrappy way to do it. That was the free way to grow the business where now we’re starting to look at the business is how can we spend money to get people into the top of the funnel.
Andrew: I see.
Jason: How can we put . . .
Andrew: You know what, though? I have talked to other entrepreneurs who I’ve interviewed here, and I will respect if someone says I can’t talk about it before the interview. And so I know that one of the ways that they got traffic was by doing what you are talking about which is go to the people whose part of the selling, get that person to email. No one did it actually, frankly.
I think he talked publicly about it where he went to the app makers and said, “You promote for my site, and I’ll also promote it” and he got some early customers out of it. I’ve seen other people do it. I’ve seen it work.
Jason: Yeah, it can work. I think it’s a great way to do it. If your interests with our suppliers are aligned as they were with us, or in this case, it can be a great thing.
Andrew: You know what? I forgot to mention . . .
Jason: Again, it’s one of those virtuous things.
Andrew: Yeah, exactly.
Jason: It’s let’s set each other up for a win.
Jason: So when we engaged with a new winery we give them all the tools that we can to have a successful experience with us.
Andrew: I forgot to do a spot for Scott Edward Walker of Walker Corporate Law, but you brought up an interesting point. Partners get together and at some point you decide to separate, and you want to separate without ripping the heart out of the company. You want it to be mutually beneficial, but also to allow you both to go on with your lives. Do you have any advice for someone who is listening to us and says, “I want to start my company with my co-founder. I like the guy, but I want to protect myself. I’ll call Scott Edward Walker, but what do I tell him.”
What advice can we give them based on your experience for setting up a relationship, bright and early on so that legally when they want to separate they could do it without much trouble?
Jason: Yeah, number one, hire Scott Edward Walker. I talked to Scott a while back, and I talked to him during the period where . . .
Andrew: Were you going through this?
Jason: Yeah, when I was considering this break-up. We didn’t engage at that point. Scott would have been a great attorney, but it turns out that we just didn’t need additional outside counsel.
Jason: But Scott was very generous with his time. He spent . . . I know initially his time is really valuable.
Andrew: Yes. I’m surprised when he’s willing to do that. He feels . . .
Jason: I’ve heard this story over and over again, and I think here’s the reason. When I start my next company, if and when I do, I think I’m in for the long haul for this particular company. We have a long way to go as a company. This, to me, is another five to ten year business, but guess who I would call if I need someone?
Andrew: So he’s built that up.
Jason: Absolutely. That one 15 minute phone call that he gave very freely, I know I sound like a Scott Edward Walker commercial, but this is because he’s a good guy. And it’s actually gotten me to recommend him more than a couple of times.
Andrew: All right. There you go, Scott Edward Walker of Walker Corporate Law. Please if you’re . . . don’t want free advice from him because we told you.
Andrew: Look to have a good conversation with him and you’ll get good stuff, like free advice from him. WalkerCorporateLaw.com, guys, check it out.
Jason: Just to put a bell on that, I think that it’s really important, your formation documents. You start your company. Even though you’re entering with a friend, with a partner, with the best of intentions you need to very clearly spell out what happens if. So the expectation is set early on and that way if you hit a little bump in the road you can go back to that document, this is what we do if we want to break up. This is the process and procedure. This . . .
Andrew: Yeah. You know what? When I started my company with my brother, I didn’t read. I love my brother. We’re still friends to this day. He just helped me out with something earlier today, but when we started the company or soon afterwards we created a buy/sell agreement so that if we ever need to separate we knew exactly what needed to get done. And that helps.
Jason Buy/sell is critical. So did you identify with Bradford or Reed and . . .
Andrew: No, you know what? It wasn’t like a fun kind of name like yours. So we really couldn’t say, “Hey, I’m Bradford” or it feels like a fun thing to do.
Jason: I’ve been pondering an agent name for you. I haven’t quite figured it out yet.
Andrew: Jeremy Weisz got a quick one. Hey, I’m still hunting down as we’re talking. I’m still doing research because I’ve got to see where you guys are getting your customers. Are sites like CouponChief.com because I see that they’re listing you with 12 coupons, including $10 off purchase with six bottles of wine or more? Does that help?
Jason: They do help, and this is another example of something we’re not doing very well. And we have quantities, and they’re exciting to figure out. These are little problems that we have there. But we had an affiliate program. The last time I looked at it for the period of the 12 months previous the affiliate program which has been on auto-pilot made us something like $25,000 for doing zero. So gosh, if I only put more attention on that . . . Again, we’re doing it . . .
Andrew: Sounds like you need an agent marketer.
Andrew: Like an agent. I don’t know what we’d call them.
Jason: Yeah. Most people on the site are great because they sign up as affiliates, and then if you spend the time with these affiliates to generate either custom ads or custom coupons for them, that can go a long way. So . . .
Andrew: (?) .com for your affiliate program?
Jason: No, we use LinkConnector.
Andrew: LinkConnector. I see.
Jason: Although I am shopping for a new affiliate management program because we realized doing nothing gets us $25,000. Well, what if we did a little bit, or a little bit more than that.
Andrew: And the company is still profitable?
Jason: Oh yeah.
Andrew: Well, well, impressive success story here and one that’s still in the making. I’ve got to thank my buddy, Noah Kagan, for making the introduction. And thank you all for . . . Oh, here’s something. I would like to come see you in person some time. I was thinking of going to Sonoma this weekend. I’m not sure yet what we’re doing even though we’re coming up on the weekend soon. What’s a good way for me or someone else who’s an entrepreneur, especially one that’s especially killer when it comes to marketing apparently to connect with you personally when we’re in Sonoma?
Jason: The best way is to find me on Twitter or by email. I’m AgentRed@WineSupplies.com. You know, I extend the same offer to all of our customers who we call operatives. Sorry to digress for a moment but, you know, we have a culture here. I am Agent Red in the wine trade. Our customers are our operatives. When I’m answering the phone it’s always, “Hi, this is Agent Red.” But I invite our operatives, customers, to contact me before they make a trip out here and whenever I can I like to get them a little either free tastings or a VIP (?) or sometimes I’ll even conduct a tour of some of the wineries that we’re really very close with.
And so I invite you to do that.
Andrew: I should just shoot you an email and say, “Hey, Agent Red, I’m in Sonoma. Do you want to get together, or do you have any recommendation for what I should do? That’s it.”
Jason: That’s it.
Andrew: All right.
Jason: I extend that same offer to your listening audience. I may be opening up myself to a . . .
Andrew: I wonder what’s going to happen.
Jason: It’s a great way for me to work and meet people, and it’s just a great way to share the love of wine.
Andrew: I just love Sonoma because San Francisco is very cold, especially in the summer. It’s awful, at least, temperature-wise. And Sonoma is just a short ride away. I think actually my friend, Ian Hunter, flew us to Sonoma.
Andrew: It’s very close.
Jason: Pretty idyllic.
Andrew: So it’s unbelievable.
Andrew: All right. So I’m looking forward to seeing you in person.
Jason: I will see you.
Andrew: I will send you an email if Olivia and I are going to be there this weekend. And if not I’d like to come out there at some point in the future and see you. In fact, I know I will. I’d love to see you in person.
Jason: Any time.
Andrew: All right. Thank you all for being a part of it. The company name is TheWineSpies. Check them out, and frankly look, if you’re going to connect with them, apparently talking to him about marketing is going to be the exciting thing. So if you’re marketers, I would email. I was going to say Jason. I would email Agent Red right now. Thank you so much for doing this interview.
Jason: Thank you. Cheers.
Andrew: You’re welcome. Thanks for being a part of it. Bye, guys.