Andrew: Hey, there, freedom fighters. My name is Andrew Warner. I am the founder of mixergy.com, and the guy who wrestles with technology. Today, after about an hour of working with today’s guest, I’m proud to tell you that I’ve got Joseph Winke on. He is the founder of Healthy Surprise.
Get this. Here’s the idea behind the business: You help the healthy person who cares about the ingredients in food. You sign up for a subscription on his site and he ships you healthy food as a surprise each… I was going to say each month, but you can pick the interval.
In addition to that, he also has another group of customers who are corporate buyers who just buy it and give out those boxes as gifts. I invited him here to tell the story of how he did, to find out where exactly in the world he is. I think the background is beautiful and I want to talk about that, and hopefully he will tell us about the revenue and lots of little details like that.
Joseph: You’re welcome. Thank you for having me. It’s an honor.
Andrew: Thank you.
We are going to talk in a bit about how you’re working for your dad. Before you were working for your dad, what was your relationship with him growing up?
Joseph: It was really good. I would say I was definitely closer with my mom. She was really active and taking me to [origami] class and dancing class and kind of being a really engaged mother. My dad worked most of the time, but I had a [heck of a] relationship. What was interesting is that how that ended up flipping in my [??] where I grew real close to my mom and spending most of time with her and then for seven years worked with my dad on a daily basis.
Andrew: Were you the kind of kid who would go to his dad’s office and work with him and fantasize about being like him?
Joseph: Fantasize is strong work. My dad had a cool job. He was the publisher of the newspaper in the town I grew up in. As a field trip we would go to the newspaper and the whole class would go and he’d give a tour. That was cool and it was cool to see him in that capacity as the leader of his organization, but I don’t really think emulating a lot [??] just a little that I wanted to be like him, but may be on a [Freudian] level subconsciously or when I look at myself now and try to study my own behaviors, I find myself repeating a lot of the same things my father does.
Andrew: What did you do when you were growing that now you’re finding yourself repeating?
Joseph: The things that [??] in this example aren’t so much as when I was growing up, but even when someone… If I’m working and someone comes into my office space to interrupt me and says, “Hey, Joe,” my dad would always lean back and grab the arms of the chair and then put his hands back and talk to the person, and I do the same thing. It’s a weird thing to realize I’m moving through that series of behaviors. I’m just mimicking my father directly. That’s just a weird… I don’t know if that’s me wanting to be like him or me just [??] my brain or this is how we handle this situation: When someone walks in, I’m parroting his behavior?
Andrew: I’m asking for a reason, and I think the audience will see it. There was a pivotal moment in your career that your dad factored into, and I’ll get to that in a moment, but I had one other question about your background. In college, you started a business, right?
Joseph: Yeah, I did.
Andrew: What was that company?
Joseph: Snap Imaging.
Andrew: What does that mean, Snap Imaging?
Joseph: What we did was, I went to the University of Florida which is a big Greek school. There is a large fraternity [??] population and they have a… I heard of them at these [??] parties that occur… There was a service that would come. They were called Flash Photo. They would come to the parties and if you were there and you could just say, “Hey, flash” and the photograph would take a picture of you. This was back right when digital cameras were coming… No one even really had heard of them at that time. They would take these photos and then at the end of … the next day or…
Actually not the next day, but a week or two later in the mess hall they would have these big composite sheets with all the photos that were like little thumbnail strips and you could sign up underneath it. It’s like ordering the ones that you liked. So that’s what Flash Photo did.
Andrew: I see. So you built this company up and how did it do?
Joseph: What happened was they didn’t really provide a really good service. The idea was great of what they would do, but their execution really was lacking. I was the vice president of my fraternity at that time and the guy who liaised between them and us one day just came to see me and was just complaining about these guys that they [??]. I was just thinking that it was a cool thing that they did.
They went to all these parties and they took all these photos of people, and all these cute girls and I said, “Well, we could do a better job of that,” and he’s like, “Yeah, I mean. It wouldn’t be hard. They’re not really doing a good job,” and I was like, “Well there are these things called digital cameras where we don’t need to get all this film and we could — it could be cheap to do this. We could just do it with our parties and then see if it works,” and so that’s kind of how it started.
It wasn’t like this grand plan to start a business. It was just us having a beer griping about the universe and then thinking we could change it. We could make it better and then we did, and we started the business, ended up getting close to half the fraternities and sororities to start letting us do their parties, and then the company kind of got hip to us and they had signed service agreements with the fraternities and sororities that said, “Hey, if you have a party, we will show up with the camera, but the obligation is that you have to have us show up every time,” and they’re like, “We’ll provide this service. We’ll always show up if you always invite us over there. So that was the service agreement.
Andrew: So they locked themselves in, even though they were crappy.
Joseph: Yeah, exactly. And then, what happened was once we started having a business, they went to the fraternity and sorority presidents and basically threatened to sue them, and he said, “Hey, if you don’t honor this agreement, we’re going to sue you, da, da, da, da,” and these kids are like, “It’s enough to be managing school and then their house and the whole thing and then to get a lawsuit involved,” they’re like, “Look, Joe, I love you, but you know, you’re good but you’re not worth me getting involved in a lawsuit out of if.”
So that was — another pivotal moment in my life, I remember being on the phone with my dad and my mom and kind of talking to them about this and saying, “Hey, I got this business. It’s hot. It’s happening. It’s growing. It’s fun, but there’s this lawsuit thing, and they kind of said, “Hey, you know, you’re not in school to be a photographer and go to parties all day. You’re studying building construction, so what do you really want to do?” And I made the decision to kind of tread it down, not goo into lawsuits and
Andrew: Building construction is what you went to school to study. Why that?
Joseph: Yeah, that’s a good question. And if I had to look back, I would point it to a conversation I had with my parents when my dad switched over from being a publisher of the newspaper, he ended up buying a construction company — a plumbing company, and his partner, the guy that he bought into with was really big into kind of construction associations and he told him about this really great program that the University of Florida had.
I had always liked construction and the idea of what structures meant to humanity and how it kind of symbolized the Zeitgeist of the times through buildings, so I was interested in it, but it wasn’t like I grew up my whole life thinking that I wanted to go into construction; and that kind of conversation nudged me into that trajectory, and it was very [INAUDIBLE] because I try to be very thoughtful, mindful, conscious of my decisions now because that wasn’t a very — I don’t think it was a very conscious decision of me to go into that program. It was more of my parents kind of shifting the target in that direction. Does that make sense?
Andrew: Yeah, it totally does because everything that I see about you and that I read about you just tells me that what you studied in school just doesn’t fit, and now I understand how that happened and then you went to work for your dad. Was that a conscious decision or also something that you just got carried away and did?
Joseph: Well, so, out of school I got recruited to go work for a large [INAUDIBLE] company in Washington DC, so I went and did that for about a year and worked for a big, giant corporation. They were the third largest construction manager, I think, in the world at the time and that was really, really valuable to go see what the cubicle life kind of is and how the big corporations —
Andrew: That’s so different from the background we have now on camera.
Joseph: Yeah, it’s not banzai pipeline, you know.
Andrew: We’ll talk about that later, why you’re there and what you’re doing. And then you went to work for your dad?
Joseph: Yeah, so what happened was, and this is actually a good anecdote, was I was working at this construction company and I was probably more qualified than my boss in a lot of different ways and all I did in this construction company is [INAUDIBLE] website in a trailer with my boss, who was 45. He drove three-hours in every day from West Virginia and he’d come in with a big dip in his mouth and a coffee and he’d go have his morning constitutional which is he’d go into the bathroom for half an hour first thing every morning and I had an admin who was a middle aged woman who really didn’t take care of herself and wasn’t very happy. And then a job superintendent, and he was probably late thirties.
So, there were these three older people and then me in this trailer, and I ended up doing most of my boss’s job for him because I was trying to learn it and do everything. I didn’t really respect my boss, which was one of the biggest things for anybody, and he started kissing up, and kicking down on me when things would go wrong. I just kind of looked at the trajectory I was on and I’m on the trajectory to become this guy. I was going to be working . . .
Andrew: You were going to become him with your cup of coffee in the morning and your thirty minutes.
Joseph: . . . yeah, at a job site, you know what I’m saying, but I was going to be, you know, having some whippersnapper kid underneath me being the engineer. I was just thinking there’s more to life than being on some construction site in a trailer, and this didn’t really work, and I really didn’t like the weather in D.C. So, I talked to my parents and they said, ‘well, the business that we bought is growing, we really could use a general contracting license.’ And I was qualified at the time to get my license. So, it just seemed like a big win to go work with my parents who I love, to get out of the winter, and to go build something and not be in a trailer.
Andrew: And then how was to work for your parents because I know what was coming up.
Joseph: I loved it, man. It was really, really great. My parents are fantastic, very, very supportive. I learned a lot, so I really have nothing bad to say in that regard.
Andrew: Okay. But then when you went to your dad and said, “Hey, it’s time for me to be a partner.”
Joseph: Yeah. So, we started a new division of the business. After these big hurricanes Wilma and, I forget the other names, but 2006 or so, these big hurricanes came through and were knocking out the power. So, one of the sales guys had an idea to start my new division where we sold these standby generators, which are these big car sized things that power up your house if the power goes out. He went to my dad and said, “Hey, let’s start this business”, and my Dad was like, ‘well, why don’t you come Joe and just sit along and take notes at these meetings.’
So, after like three or four meetings of taking notes, I started helping out and I was organizing the papers, and then after three or four months, I was kind of doing all the work. I was the one managing all the projects, the other guy was making the sales, and just kind of I realized that I was building this business for these two other guys. I mean, one of them happened to be my Dad, and the other guy happened to be this really cool guy, but I was the helper there and I wasn’t getting paid for it.
So, I had this epiphany moment where I realized that even though it was my dad and my father loved me, and would never want to do anything wrong, and is always looking out for me, I had to look out for me. It was a big, big, kind of, epiphany in my life. I realized even though they’re people that love you, they aren’t always going to do the best for you. You have to do that for yourself. I realized I really needed to step up, and take control of my own life, and go to these two other guys and say, “Hey, you know what, I started this with you guys, I’m doing the work, and I need an equal seat at the table, and if that’s not going to work then I got to go.” This seems to be a recurring theme in my life.
Andrew: You’ve had that happen before? Or since?
Joseph: Well, no, it’s what happens down the road with my father later.
Andrew: What do you mean? With your dad after . . .
Joseph: Well, that means that’s eventually what happens. So, that happened with the generator company and that ended up working out. I ended up getting ownership in that business, but as far as working with him for the seven year duration, eventually what caused him to leave was me wanting to have equity in the company, and me wanting to not be sitting at the kiddie table, and just being his child, as opposed to being his business partner. When i tried to assert that for myself and realizing he wasn’t going to do it for me, when he couldn’t come to terms, he ended finally ended up leaving.
Andrew: I see, and then you talked to him. Here’s what I heard from the pre- interview with April, you came to him and said, hey Dad, I’ve been working here for seven years it’s time for me to step up to the adult table from the kiddie table’, and you asked for equity and he laughed. He said . . .
Andrew: He did?
Joseph: So, yeah, that’s pretty much, well him and my mom laughed together it was kind of a . . .
Andrew: Did it hurt at the time? I mean, now were looking back and we’re seeing it as an opportunity to fire you up and it’s something that got you to go in this direction that is so phenomenal I can’t wait for people to hear what you did with this business, but at the time did it hurt?
Joseph: No. It didn’t really hurt.
Andrew: Why not?
Joseph: I mean, well-
Joseph: What was your question? What hurt?
Andrew: Why didn’t it hurt?
Joseph: Why didn’t it hurt? Well okay. So to tell you why it didn’t hurt, I got to tell you how it ended. So, and when they kind of laughed at me, when they laughed at me the first time I got down with them, I just got back from Africa. I had had some soul searching, and we had been talking about how do an ownership thing, and it just didn’t seem like it was a fair deal to me. And when I was away in Africa, I kind of meditated on this, and I said “well what would make sense for me?” Throw out all the stuff that we talked about before.
“What is the deal that I want?” because people bracket things and I was being bracketed as far as what they thought I deserved. And I said “well, I probably should go do my own thing, but if I were to stay, what would it take for me to stay?” And I kind of threw out everything, all the rules, and I wrote that down, and then when I got back to the states and I had dinner with them, I said “look, this is what I want.”
And it was kind of ridiculous to them compared to what they thought where I should be. So they laughed. And I kind of expected it, so that didn’t really hurt that much. And then over the next couple weeks, we talked about it a lot, and I remember there was this one day I’ll never forget, I was sitting at the kitchen with my mom and she’s is going to watch this interview so this will be funny, but as we were going back and forth, I thought there was like this little gauge in my head about her like understanding my point and her point.
And she was kind of like slowly-I could see it like she was kind of getting what I was-you know she was picking up what I was putting down, and it got to the point where I was just about to tip her over to my side, and time did this really weird thing where it slows down really really, really slow, and I had this whole conversation with myself. And it hit me like a ton of bricks, like boom!
You’re going to get what you want, [inaudible], you’re going to become an owner in this company and you’re going to be working in construction and living in your hometown for at least the next ten years. At that moment, that was like the scariest possible thing that could happen. And it was a weird thing too because it was what I wanted.
I mean I was sitting here arguing for it, and in the middle of arguing for it my brain just kind of like was like “Wait a minute! Hold up! This is not what you want. You need to go out and do your own thing and do something great and be your own man.” And immediately as soon as that happened, I mean I just kind of switched the conversation and just slowly started backpedaling away. It was like, you know what? I think you guys are right. I think I’m being unreasonable. I think I got to go.
Andrew: Wow. I wonder if now your mom is listening to this and she does remember and saw that moment in your eyes?
Joseph: I think she probably will know that conversation. It was a pivotal, and it was the one where I ended totally ending a wonderful seven year career and packing up all my stuff and just kind of heading out west, and not knowing where I was going to go.
Andrew: So I want to get to healthy surprise. But I think there was a stop along the way that we should talk about. This is backpacking.com, is that the first thing that you did?
Joseph: Yeah, that was the first idea.
Andrew: I went to that site and it’s not up anymore. What was it?
Joseph: Yeah. I just took it down because I’m not running it and it was just costing money to keep it going. But I wish you’d seen it because it was beautiful and it all worked. The idea was. You know what? I’ve constantly between my different businesses have tried to solve problems that I’ve experienced and I think would help other people have good experiences. And I had done a bunch of world traveling. I’ve been to over 30 countries, I think.
And throughout the different trips, I kind of wanted to share it with people, and I looked at what were the big obstacles for people to go on one of these trips, and the first one is just the cost. So the cost in money and in time, and as I say, I’m going to take two months off and I’m going to go Hawaii, or I’m going to go to Kenya and do a safari. I’m going to buy the airfare and that’s expensive. But once you do that, you still have to do a couple of other things. You got to get visas if you are going anywhere that isn’t part of the Shenzhen zone.
You’ve got to get vaccinated if you’re going into kind of some exotic locals, and then you got to find someone that’s going to take you on this trip if you are going to do like a safari or something, and they usually have like a 50 to 70 packing list they’ll email it to you and say “Okay, by the way, go pick up the travel, the electrical adapter for Europe, and the mosquito net and the backpack and a sleeping bag” and all these different items, and it really can be overwhelming for someone to have to do all that stuff and decide I’m going to go on this big trip, I’m going to go get the vaccinations, it’s overwhelming.
So I looked at those three, and I said, where could I help? And there’s a lot of visa express services that will help you do that. And I’m not a doctor, and I didn’t want to plan to become one. But I liked the idea of being able to use the expertise I had, after traveling so much, and knowing what’s good quality for someone to bring, to go curate all those items, put it together into a great package, and then sell that. And basically sell the convenience to the customer. So when the travel broker said, “Hey, here’s the 50-page, 50-item thing you’ve got to go get, all this stuff. Or go to ThisIsBackpacking.com, and in five minutes, you can have it overnighted to you.”
Andrew: Actually, seven minutes, to be more accurate. I see the site. It does look beautiful. I can see why you’d be proud of it. “All the gear you need for the next adventure. Seven steps, seven minutes, 100% guarantee.” And then there’s a big beautiful button underneath it that says “equip yourself.” And so why didn’t that one work?
Joseph: The timing was bad, I think would be the ultimate conclusion. Because it didn’t really not work, as much as it never was born. So I ended up building my company, and we got really far. So you’re probably looking in some archive. But the technology in the back that did the decision- making worked.
But while I was in the process of birthing that company, Healthy Surprise happened. And once Healthy Surprise happened, I kind of had to look at these two different companies and say, which one… you know, I can only be married to one of these right now.
Joseph: I’ve either got to go in… starting a company is a full-time job to get this thing off the ground. And I kind of looked at it like I had these two rocket ships I had built, and I had spent a lot more time on the ThisIsBackpacking.com one, and it was more advanced. But we never turned it on. We didn’t know if it would… the rocket would turn on when we said “let’s go,” and people would buy anything.
Versus Healthy Surprise, that once I launched it, at the start-up weekend event, we had customers.
Andrew: Had customers within hours, right?
Joseph: Yeah. Yeah, withing hours.
Andrew: And not only that, but I looked at it. I did my research on this, and it said… I discovered you were… basically, it was a simple WordPress site. You used the Mercury theme from Friendly Themes. So it was just… got a theme off the shelf, used WordPress, which is free, and you just got going, and it took off.
Joseph: Yeah. Yeah. What I did, which was really cool, looking back, and I highly recommend this to anybody who’s looking to start a company, was I figured out how to take a couple different kind of best of class services and get them to talk to each other using web hooks. So it’s a way…
Andrew: Using web hooks.
Joseph: Yeah. So, I mean, everybody… not everybody, but a lot of services have APIs. And it’s very technical to get an API to talk to another one. I mean, you can do it, but, you know…
Andrew: What kind of web hooks did you need for this? So I, like you said, I use an archiving service to see what the site used to look like, and I can see the design. I can see some of the functionality. But I couldn’t really see what happened beyond the click to buy, or beyond the click to select the size package you wanted.
Joseph: Yeah. Well, so when we first signed… it’s been an evolution. The WordPress site, in the beginning, really just kicked the customer over to a Recurly-hosted credit card page that would take their payment details and create a Recurly record for them. And it worked. I mean, we got credit card numbers, we got paid, we had the money. I was able to connect it to my authorized dot net account for This Is Backpacking, so I already had a kind of credit card thing that could take the money. Now a new entrepreneur could use Stripe. You can get that up and running really quickly.
But then, what happened was, after we had about 20 people sign up, somebody said, “Well, you know, the billing address for my credit card isn’t where I want this to be shipped.” And Recurly didn’t support shipping addresses. So then I had to go and solve that problem, and I ended up getting it going with Charify.com, who I’m with today, and I love them. They’re a great team. And I had to kind of migrate everybody over to that, which was a good lesson about payment migration. Thankfully it was only, like, 20, 30 customers at the time.
And then, when someone submitted that, it would create the record [??] with all the information. So that allowed me to kind of have this whole [flow]. That was sophisticated in a way. I mean we are using [payments] and recording all the information. It was all PCI compliant. But I didn’t know anything about encoding. I wasn’t [a developer].
So that was a really cool way to kind of get that [??] and use some really sophisticated software but [do not] need a developer at $10,000 a month or have to do anything myself.
Andrew: Yeah. The way you’re describing it sound really sophisticated. And it was even smarter I think than you described. Because with Wufoo, you can have, if then, decisions. If someone wants it small, then you can also offer them something else. Even upgrades [??] [big base] on that. You can charge. But Wufoo makes it dead simple. They just say connect your payment process or [??] form. They ask you what you want the form to [do in]. It’s dead simple, but it’s smart. You’re looking at me kind of funny. Why?
Joseph: No. I was [just] checking [something on] my computer. I’m not sure if the connection was good.
Andrew: Okay. [??] moment here for a second. Just let me do this. I want to thank Scott Edward Walker of Walker Corporate Law. He is my sponsor here at Mixergy, one and only. I cut back from sponsorship at the top of the interview and decided I’m just going to do one in the middle. And people in the past have asked what makes Scott so special? I think what’s great about Scott is that he focuses on [techs’] startups. That means he understand our world. He understands who we’re going to get funding from. He understands what our investors are going to need from us. He understands where we’re going to sell and how and what we need to set up today for the day when we want to sell in the future or build our business in the future or higher, et cetera.
So if you’re a tech entrepreneur and you need a lawyer, check out Walker Corporate Law. And Scott even has his e-mail address that you could use. It’s just firstname.lastname@example.org. I’m not sure why he wants to give out his e-mail address, but he’s a man. It’s up to him. Walkercorporatelaw.com. By the way, at what point did you incorporate?
Joseph: I was incorporated from ThisIsBackpacking from before.
Andrew: I see. And it’s one of the first things that you did there.
Joseph: Let me just plug Scott. Scott actually came in to the [??], which is where I was, the co-working space in Santa Monica, that I was working at. I [??] use a sponsor at the Startup Weekend that I launch [??] surprise, but I ended up meeting him and actually had a [??] of him. We didn’t end up working. But I mean the guy was great. And he was always super available. I was actually pleased when I saw that he was sponsoring your show.
Andrew: Cool, thanks. That’s why I met him. I was just trying to figure out what to do with Mixergy. I saw he’s sponsored something. This is back when I was doing events. I said, “Can I please ask you some questions about why you sponsor events? Where I could get sponsors?” The whole thing. This is years before I asked him to sponsor. And he took me to lunch. He paid. Usually, I paid it. He paid, and he just walked me through how to get sponsors, why he sponsors, what makes it work. Great guy.
You started at Startup Weekend. Why did you launch at Startup Weekend when it seems like you had your idea before you even got there?
Joseph: Yeah. I came out to California after [thing with] my parents. And I didn’t really know what I was going to do. I had the idea for this backpacking site. And I fell in love with this co-working space, CoLoft. And I started working there. So I’m in CoLoft. And it was a great, great place. I highly recommend it to anybody that wants to just get involved in kind of entrepreneurship or [lifestyle] design to go to a co-working space. I just went to the one in Honolulu, the [Box Jellyfish]. They’re fantastic. And it’s just a great place to get motivated – to meet people that are doing cool stuff.
And one of the cool stuffs that was happening was Startup Weekend. They would do this every six months. I think it was kind of the interval. And I did two of them and kind of got a model in my head what’s [reasonable] to accomplish at the time and what I could get out of it.
So I was working on ThisIsBackpacking.com. I was really into it. And this third startup, weekend came up. And I had some friends that invited me to join one of their projects. I was checking if I can [??] the name of it because it was really funny.
Joseph: It was some kind of [dating] joke techs website. And I said, “You know what? That sounds great, but I wanted to kind of do something. Or I might make some money.” I have this idea for this subscription service for healthy snacks. And I thought I could pull it off in the weekend. Then, it would just be this little site thing that would provide some passive income. And then, it became an all-consuming dream.
Andrew: I see. So even though the idea was yours, and you probably could have launched it on your own in private, there’s something about doing it with a group of other people, kind of like anyone can go and run the Five K, pretty much. But running with a group, running in an organized race, makes you more likely to do it and more likely to finish. Is that what we’re talking about?
Joseph: Yeah. You know, that’s part of it. And I know you’re a runner. I run too. I’m a big Yoga guy, and Yoga is the type of thing that’s really easy to have a teacher walk you through. But if you try to do it yourself, not the same result. And then, the other part is the deadline. Having this hard, pencils down, you’ve got to get it done. It really abstracts, like “Ooh, is that the right shade of blue for the [inaudible] do you know what I mean? That just isn’t part of the discussion, because you’ve got all the other things. It makes the brain really kind of curate what decisions have to be made, and it just can get you to do things really, really fast and effectively.
Andrew: How long did it take you to code up the site?
Joseph: Well, you know we started I think, around 8:00 PM on Friday. And the first credit card rang through I think, at 11:04 AM on Saturday morning. So, we weren’t done with the entire site and we still aren’t, to this day. I mean, I’m constantly improving it and testing stuff. But we got it up pretty quickly.
Andrew: And you had your first customer the following morning. Before we get into how you got some sales at the event, here’s my thinking on where this idea came from. Subscriptions just make so much sense, because you get dependable revenue, right? And you were seeing maybe things like Blissmo, and some of the other boxes out there. And you said, “I like health food. There isn’t a good one for me. I like the model, I like health food. I like these customers. I’m just going to put it together, and take it to an area that I like.”
Joseph: Yeah, that’s kind of it. I don’t remember at the time having heard of Blissmo, or really any of the subscription companies. I think it was a kind of a mutual…I forget the scientific term when things kind of spontaneously are kind of invented at the same time.
Andrew: When the environment is just so good for idea, that many people have that idea at once?
Joseph: Yeah, I mean, kind of. Healthy Surprise was one of the first or if not the first healthy snack company. Then I found out there was another one that started almost simultaneously, called LollyHop.com which went out of business. But I kind of discovered them after we launched, and they were kind of doing a similar thing. So, it seemed to be the time for these subscription services to come out. I don’t want to say it was purely my idea. Maybe I’d heard about it in passing and someone discussed and I was kind of there, but it was more of like, “Yeah, the subscription model seemed to be really good.”
And it also fit into this kind of thing, I’ve seen in my life repeating, where I’m curating products for other people which is kind of the same thing that the backpacking was. If you think about it, I knew what was kind of good, so I went and found all that for you and just presented that at value for you. So, that was the recurring theme. And then also I was really conscious about trying to design my life. I thought this could be a business that would be relatively passive, and kind of run itself. That ended up not being the case, and we can talk about that. But at the time, it was a good into my life.
Andrew: I see. It does seem like the ideal passive income, that you get people to sign up and their money comes in every month. And you have someone ship it out, and you can travel the world, and not have to do much work. I wrote a note to come back to passive, and find out why. I also have a note to come back to sales, and how you got them. But since you brought up that so many other competitors went out of business, both in this health foods space and in other related businesses that were subscription-based boxes, you are in it. Why do you think others didn’t do well, where you’re still around and growing?
Joseph: I think it’s two reasons. One – I don’t think they were priced right. Most companies in the subscription box realm are about under $20. And I don’t know really how you make money doing that. I mean, there’s just real costs involved with shipping a product, having a cardboard box, putting things in the box. And then you’ve got to acquire the customer, and keep them.
So, after making $2 or $3 a box, on a percentage basis it’s good. To make real money, you need to have tens of thousands of boxes. And that’s a lot of work. So, I think it was not being priced right, and that’s also true of the fact that most other companies do sample stuff, and they get their product for free. So, they can’t really charge a lot. We pay for stuff. And I think a lot of the other companies raise money and build up these big things, and that allowed them to be a little more [floaty?] than me.
I run a really, really, really [??] ship and we’ve been hungry for a long time. I learned how to do a lot of stuff very effectively without a big team. The [??] is real small, we go for the high end market and we have profit in there so we can make some money and I’m not trying to be a billion dollar business. I don’t think that Healthy Surprise will be a billion dollar business in the next couple years. But it’s making money and I’m having the time of my life and I’m being interviewed by one of my heroes and I’m in Hawaii. Things are working out pretty well.
Andrew: The first sale-, why thank you. Actually you listen to Mixergy?
Andrew: Why? I’m asking not because I’m so surprised that you would, I want to know what you got out of it. Because you obviously built something incredible here, I want more viewers like you and I want to understand what you get out of it so I can understand more of that.
Joseph: To be honest, I don’t listen to it as much as I used to. I had these phases in my life and it’s nothing about you-that the product is not good, I just move through different phases in my life where I done deep dives into areas. I got really into personal development, health and wellness is now the thing. Business entrepreneurship was a really big focus of my life when I was trying to figure this out. I just wanted to learn from people who did it. I read so many books about business and leadership and all this stuff and I find that in a lot of these domains, personal development included, once you read so many of the books, the same themes and means start to repeat themselves.
And it’s kind of like platitudes and people write 300 pages to say, “Do these five things.” When you are actually, when you are interviewing an entrepreneur you’re getting the real deal, “How we did it and here’s the problems,” and it’s more implicable and it’s more real. It’s not just like these high Google principles. Your podcast is very influential at being exposed to entrepreneurs and how it worked and what they thought and how they dealt with the problems.
And then another podcast I really like was, ‘Stanford’s ETL Education Thought Leaders,’ I listened to, maybe a hundred of those as well and– it’s a little bit different format because they’re not as interviewee as you are. But I would say that was the take away. Just hearing the smartest people that succeeded or failed, but usually if they were on your show they did something that you could learn from and just downloading that into my brain.
Andrew: I love that story format and I tried to get people from Stanford to help me out because I loved that podcast before I ever started Mixergy and I just couldn’t connect with them, but I always admired their work. I’m glad that you did too and that you’re recommending them here.
Joseph: Yeah, but their loss because it would have been great for them to have–
Andrew: It’s too bad, it would have been great to partner with them and I think I was even talking to, or tried to connect with one of the students there and it’s too bad, for both of us, but I still admire their work.
Joseph: Yeah, you know what, maybe it was the best thing to happen because now you’re this force and you’re your own independent thing and had you been with them, you might have been overshadowed a little bit.
Andrew: Kind of like what you were saying about your parents, there was a period there where I was thinking, “I should do Mixergy type-, these interviews for other sites.” And I tried to get Tech Crunch to pay attention and I tried to work with other people and it just was such a pain in the butt that I said, “I’ll just stick with my own site”‘ It made it harder in the beginning, but it’s better now.
Joseph: Yeah, that’s the story of life. [chuckles]
Andrew: Let’s get back to your story and how you got customers. When you walked out of that start-up weekend, do you remember how much revenue or how many customers you had?
Joseph: Yeah, I actually went around L A and bought boxes and I bought snacks and I got some stencils and some spray paint and I literally spray painted a stencil of a little Healthy Surprise logo on these boxes and it’s almost embarrassing now to look back at them. I have pictures, it actually kind of funny and I actually sold out. I had, like $700 worth of boxes worth of product and at the time was a big, it was a big, you know, it was just a little start-up weekend thing. I spent $100 bucks to go do it and then I’m buying all these snacks, I cleared out whole foods and all these little ravaloution [sp] and all these little cafes in L A, thinking I was going to sale it, but it seemed to be the right amount. We sold out, which was kind of a cool thing to say. I don’t know, we probably had 20-30 customers by the end of the event.
Andrew: From the event itself?
Joseph: Yeah. About 100 participants plus the audience there, so I mean it was, I would love to say [??] is the greatest thing on the planet. It’s really good. There is also this energy where everyone wants you to succeed, everyone is helping, and everyone is all, “Yeah [??]. And then, that’s part of the magic of startup weekend. You get that, and press, you get a little bit of [??]. You kind of get a little shove. They throw you out of the nest a little bit. I was able to flap wings and start to float. Most people don’t. But it’s more than if you and I just sat down on a Friday and said, “Hey, let’s build a website over the weekend.” You know, at the end of the weekend we’d be looking at each other like, “Okay, now what?”
Andrew: So then now what? How did you get the next group of customers?
Joseph: Oh man, that’s a good question. The next group of customers was friends and family still because it kind of like, “Okay everybody; I just kind of did this thing.” And then the start up weekend buzz that happened I’d say came with the next wave of 20 to 50 people. And from that, we started getting bloggers that wanted to review the product. The subscription thing was still very, very new and we were getting some write ups about that; about being one of the first companies in this new space: subcom [sp]. And then blogger reviews, which is still to this day, great for us.
Andrew: Subcom [sp], meaning subscription commerce?
Andrew: Bloggers, do they usually just want to review it just so they can try it themselves?
Joseph: Oh yeah, sure. I mean, if they hear that a site gives out a free box [???] going to review it. You get a lot more people interested in it.
Andrew: So how do you know who to give it to?
Joseph: You know there is not like a really good way to… there is no black and white litmus test, really. We evaluate the site, look at the interconnection, look at the engagement, and look at the metrics and how many fans they have. And it’s ironic, because you know; I know you can buy fans. But if someone has them, if they care enough to buy them or have them. There are ways to kind of gage that. You look at previous reviews, of what they’ve done, see if they have had any interaction. A lot of it is throwing a lot of stuff at the wall knowing that one of them is going to hit and a lot of them are going to fall short.
There is also the mom in Louisiana who has 300 people who go to her site, but they really go to her site and the really read it. She might have more of an impact then someone who has 10,000 or 100,000 people, but it’s just the wrong mix or the wrong match. My product doesn’t resonate with them. So we evaluate, but I tent to err more on the side of let’s get the product out. I believe in the product. I believe it’s really good. The more that it’s out there, the more that people are talking about it, the more Google sees it, which is really a win for us.
Andrew: Here is what I’ve seen from some sites who have talked about you. “Greatest dot-com ran by Derek Fangs [sp] – former mixergy interviewee.” They did a post about you that seems to have sent traffic to you. Subscription box tops, hello foxy, vegan news, even like a little site that, thescienceofhappy.blogspot.co.uk. Even that seems to have sent over some traffic and some meaningful business. The other thing that I’ve seen that does well for you is Facebook.
Joseph: Yeah, Facebook has been really good.
Andrew: What are you doing on Facebook that is actually sending you considerable traffic?
Joseph: We create a lot of original content. People like it and share it a lot. It’s a moving target, figuring out what works and what doesn’t. We tried all kinds of different things. That works. So every now and again we get a hit from Facebook working. We do Facebook ads which can be effective. Again, that’s… all kinds of online ads are a mixture of art and science. And then we will do promotions or offers on Facebook. And that does have a big impact as well.
Andrew: What kind?
Joseph: It was Veterans Day, and we did any $10 off a gift box. Black Friday, we will probably have a great special, which is coming up. Something like that. Last year, we did something for New Years. I think pretty much the Facebook posts had over 100 sign ups, which for a year ago that was really big for us. And so 100 signed up for one event would be great for us today. So…
Andrew: 100 sign ups, meaning 100 people signed up for subscriptions or for individual boxes?
Joseph: Subscriptions, yeah.
Andrew: Subscriptions, wow! Veterans Day, here, I see a post on your Facebook. Happy Veteran’s Day, just like you said. $10 off. But I also see four soldiers, each with a box. Did they take the photo and send it over to you?
Joseph: Yeah, the guy did, actually. He wrote me an email. This is really, I mean, kind of the big thing that I love about this business, is that I got this email from this guy, and he basically said, you know, “I’m here in Afghanistan. It’s a hellhole. People are trying to kill me. It’s a million degrees out here. But my wife set up this subscription, and I get this box every month, just like it’s… I literally look forward to it, and there’s not a lot of things that I look forward to over here.” And it was kind of like…
Joseph: [inaudible]. And I said, “Well, that’s so cool. Could you take a picture of the box in Afghanistan?” And he sent me that photo. And I’m really proud of that photo, because there’s a lot of things going there. I mean, the business is real. It worked. It’s helping people. It’s international. And it’s helping the people that I think need it the most, you know? We have a lot of soldiers that are on bases that say the food is bad at the base. It’s really expensive or unavailable off the base.
And because of the APO system, which is the US government basically gives every soldier a local PO box in Virginia, and we mail… anyone can do this. You mail the product to that address, and then they put it on the cargo jets and take it [inaudible]…
Andrew: So you don’t have to pay to get it all the way out there.
Joseph: Yeah. So it’s, like, $7 to ship this guy his box to Afghanistan, you know?
Andrew: So here’s… so that one got 225 likes and 11 shares. Another thing that you did really well is win a free box. Like and share this post for a chance to win a free box. A free month. And that got 560 shares, 373 people liked it.
Joseph: The idea…
Andrew: So I get a sense of what you’re doing on Facebook.
Joseph: Yeah. Win a free box is always a winner. People like free stuff.
Andrew: Yeah, especially when it’s tangible.
Joseph: Yeah. And when it’s delicious, man. I mean, you know, my dad once told me, if you want to take… anybody will let you buy them lunch, you know? I mean, you can always get [inaudible 02:18] stomach.
Andrew: What about finding the product? Is that an easy thing to do? Is that something we should spend some time on?
Joseph: Well, you know, that kind of ties into it being passive. Because the whole idea sounds great as far as lifestyle design, and I have this business. And while we’re talking, someone will probably give me money over the internet, you know?
Joseph: And that’s still kind of magical to me, that that works, and I’ve got this thing set up, and I’ve got people in LA that will ship the box tomorrow morning, and it will go out.
But, you know, finding the product is not passive. In a way, I kind of feel like… I wouldn’t put myself in his company, but I’ve got to kind of be like a Jay-Z, and I’ve got to keep turning out hits every month. You know what I mean? The box has to be good, because if you don’t…
Andrew: Because if I don’t like it this month, I’m just done with it.
Joseph: Yeah. You cancel, right?
Andrew: I could.
Joseph: Everybody’s voting. It’s like a referendum every month. Like, did we like it? Are we going to stay? Are we going to renew or not?
So my girlfriend has a product, [inaudible].com, and it’s this tooth powder that’s really unique, in that it’s a real special thing. But she can make 1,000 of them, and then she’s got 1,000 of them. And if 1,000 orders come in, she sends out 1,000 of these tooth powders. But that’s it. I mean, she’s invented it. It’s great. It works. She can make a million of them and it just sits there. Every month, we’ve got to come up with a new box.
So I’ve gotten really creative about how to kind of pacify… not in a peace way, but in a non-active… you know, make it passive, the process. And it involves a lot of planning and very careful logistics, and some cool software. But, you know, until you get to that point, which has taken me a long time and a lot of thinking and learning, every month, you’ve got to do it all over again. It’s…
Andrew: What do you mean? What’s the software do that helps you figure out ahead of time if what you’re going to send out is a hit?
Joseph: No, no. We… not as much as figuring out as far as figuring out whether it’s going to be a hit. But in terms of doing the logistics so that we can surprise everybody every month, but not have to keep making the same one over and over again.
Andrew: I see.
Joseph: So the basic idea is, if we generate enough unique SKUs, and we tag everyone by what box number they’re on. So, like, this is your third box, and we have 20 different SKUs. We can cycle you through. So, say, at the top of the 20th month, you’d fall back to number one again, and you probably won’t even remember what was in the first box after, you know, 20 months of this.
Joseph: But to manage the inventory, and deal with spoilage, and then the cash flow problems of ordering all this product and then warehousing it and predicting growth and demand and turn, there’s a lot going on there to do that in a way especially when we don’t have any venture money. And it’s like okay, you know–
Andrew: So how did you get to build that considering you’re a guy who, when I kept saying coded this, coded that, you used Wufoo basically. You used Wufoo’s ability to plugin other software. So you’re not a developer. How did you code up this process that allowed you to keep things from spoiling, allow you to manage who gets what?
Andrew: The new what, sorry?
Joseph: It’s a whole new back-end.
Joseph: That does all this stuff. After two years of running the business the thing was pretty smooth and runs really, really well, but there was still this loose ends of annoyances that required a person to do things. So, I built a total [??] book, Ruby on rails application that kind of does everything I want it to do and it handles all these logistical problems. I don’t do,- I can’t code in rail in Ruby.
I actually have a team that I manage and I kind of work as the project manager now. It’s a pivotal tracker. We’re really writing the stories and doing the bug testing and moving the product forward in that way. I had the vision of what I wanted to do and that’s almost a full time job, managing the designers and developers to get them to move the ball down the field.
Andrew: Who ships the boxes?
Andrew: Who ships the boxes?
Joseph: I have my chief of operations, is in our fulfillment center in LA and he ships the boxes every day.
Andrew: And you have an actual performance center, does that mean someone’s house or are we now at a place where there’s warehouse space?
Joseph: I’m rented a loft down in L A where I converted a third of it to my apartment, a third of it is a warehouse and a third of it is the office.
Andrew: I see.
Joseph: It was always a dream of mine to kind of have this compound, where I lived and smart people would come in a hang out with me and I could kind of run my little business from there. [??] I did that.
Andrew: You know what, I was at the office of Voice Bunny and I thought it was going to be at this big office because the company is so big, it’s right out of his house and he has the whole stand up desks for multiple people. He’s got the big screen up on the wall, very similar to what you’re talking about. And when you’re in there, the energy is just exciting. Makes you want to do something as soon as you get up. But now you’re not there.
Joseph: Well see it’s the energy of wanting [??] traffic that makes you not what to go anywhere. And like I mean I didn’t want to have a office and have to deal with that every day. The home office high road really didn’t work. But you’re right, I’m not in Los Angeles, I’m in–
Andrew: So tell me where you are right now.
Joseph: I’m in the north shore of Oahu, just outside of Honolulu in Hawaii. I’m in a tree house and actually just stepped out of the tree house because we had technical problems.
Andrew: Yeah, at the top of the interview when I said I was dealing with all sorts of tech issues, it was actually you who was dealing with it because of the bad internet connection there. I asked you to install software and that got all crazy. Thanks for doing all that. Sorry, you were in a tree house.
Joseph: Yeah, and this actually brings up a good point, because I was moving to try and get a good signal, I didn’t bring the charger and–
Andrew: And we’re about to run out of battery?
Joseph: Can I just run in and get it, for two seconds?
Andrew: Yeah, go for it. Actually how much time do you have, I think we’re almost done anyway.
Joseph: I got seven percent.
Andrew: Oh we’re totally good.
Joseph: We’re good?
Andrew: Yeah, yeah, we’re fine. So, can you really actually travel and move, I’m always suspicious when people say, “Andrew, you can do Mixergy from anywhere.” Because frankly, I have set up, you know it doesn’t seem like it, but every business ends up having extra stuff that you need to do and we’re much more productive- I got now Ann Marie here, working right across from me. I think we’re more productive because we’re working from the same room than if we were working remotely.
Joseph: Yeah, I think about that a lot. I have people in my office every single day and we don’t have, like, offices, so it’s open seating kind of floor plan and I can just roll my chair over and look at the screen and say, “Hey, look at this,” and you have that, you have this momentum where I’m with the person every day and doing it and we’re working and we’re grinding out and that’s real.
And in my command center I have two giant 27 inch screens and I have it all set up when I’m doing my stuff. Now I’m on an 11 inch Macbook Gear, which is not ideal for coding all this stuff. Can it be done, yes, you know, I can’t spin the flywheel as fast when I’m in Hawaii than when I’m in L A, but then I’m in Hawaii and that’s the decision you have to make. So that’s kind of the decision you have to make for yourself. What you want from your life and your business. If you have investors, I think that’s really important, too. Like, what is the expectation they’re going to have as far as what you can deliver.
Andrew: What kind of revenues are you guys doing now?
Joseph: I’d say we’re probably doing around $50,000 a month.
Andrew: How much?
Andrew: $50,000 a month.
Andrew: And is it profitable?
Andrew: How profitable?
Joseph: Well, in our business, I’ve got a big fixed expense, which is, you know, the warehouse, the people, the rent, internet. And then we have the variable cost of each box. So once we hit kind of the nut, it all drops down to the bottom, which is great. I’ve actually [inaudible 00:52]. So that being said, I’ve covered the nut. We’re making money, which is great. And as we grow, I mean, it just gets better.
Andrew: Maybe this is another reason why the funded companies didn’t do well. That for them, $100,000, even $200,000 a month isn’t enough. They need millions a month, or else they’ve got to give it up because they’re not going to get more funding. They’re not going to be able to continue.
Joseph: Yeah. I mean, I looked at… a competitor went out of business, and I went and looked. I thought I could maybe hire some other people. So I went on LinkedIn and I did a search for them. And there was, like, 40 matches, and it was like, “Head of Product Design,” “Photographer,” “Social Media Expert,” like, “Vice President of Marketing.” Da da da da da. “Sales.” You know, “Interior Designer,” ba da ba, it was, like, 10 to 1 revenue generation versus expense.
And that makes sense. I mean, if you raise $5 million, you’re not raising that $5 million to gain interest on it. They want you to spend it so you’ll grow and you can return $50 million on it. That requires a big team. You know, a big bloat to kind of do that. It’s just a different approach.
So I think for a lot of these companies, I know for a fact that their intention was, “I don’t really care if we’re making any money on the first boxes. Let’s just sign up a lot of people, show this big month over month growth, and then go flip it and make a couple million bucks.”
But then the fundamentals weren’t there. They might have signed up a bunch of people by giving away the first three month, and they had all these subscribers.
Joseph: They weren’t making any money. They burned out. No one wanted [inaudible]. No one wanted to give them another $1 million. And then they’re gone, and we’re still here. We’re not making millions of dollars yet, but we’re making money and having fun.
Andrew: One last thing.
Joseph: The biggest thing. Yeah.
Andrew: You were on Olark, which is that chat box that pops up where you get to talk to people who are on your site. And someone from Abu Dhabi was on. Can you tell people what happened there? Because I think that’s another opportunity that I think a big part of your business came from that.
Joseph: Yeah. So I installed Olark at start-up weekends, and it would tell you if someone was on your site, where they were, and where they came from. And there was this guy from Abu Dhabi. I said, you know, “What are you doing on Healthy Surprise from Abu Dhabi.” The site was about two weeks old. It was not that impressive.
And he said, “Oh, I went on this blog, and I clicked here, da da da, and I got to your site.” And it was like, the magic of the internet worked. [inaudible] proved that to me, that it could work. And that was a big thing for me to realize. That wow, people can just come from 10,000 miles away and come onto your website.
And while I was chatting with this guy, he ended up buying our largest box, the $99 a month combo box. And it just kind of hit me that night that, wow, like, this guy from as far away in the world just bought the most expensive product on this website that isn’t really that impressive. I’ve got a thing here.
And that was really the event that led me to shut down This Is Backpacking and go full force on Healthy Surprise.
Andrew: So we lost the connection, but we’re back. And that’s why, Joe, you’re in a different place, and I might be looking a little bit different.
Oh, so I thought, actually, that this guy from Abu Dhabi led you to start doing corporate sales. How did you get into corporate sales? Because apparently that’s a big part of your business.
Joseph: Yeah. So it kind of happened with one of our vendors, actually. The first time they came to us was they said they were having a board meeting, and they really loved… we had done a promotion with them, and they were really proud of it, and they wanted to give one of the boxes to everyone on their board when they came and sat at the meeting. One of the boxes would be there. So they ordered, like, 23 boxes.
And then we started getting more and more. Someone wrote in saying, “Hey, I’ve got 100 boxes I want to send out to people on this project. Can I send you a spreadsheet of this?”
Joseph: And that’s been a growing part of the business. And it’s good, because the [??] customer tends to be less price sensitive and more service orientated. I like to think about it as a when customer, who has an abundance of money and a shortage of time versus a how much customer, who’s got more time than money.
Andrew: I like the way you do it, too. When I click the button it says, “Send a Gift,” I could see the options pop up nicely, and everything I need’s right there. Congratulations on the success with this business. I hope I get to see you in person at some point, or someone in my audience will get to meet you in person. I always say this to the audience. If there’s an interview that you got a lot out of, that you benefited from that you enjoyed – find a way to tell the guest.
Tomorrow, I’m going to have dinner with Justin [SP] Mayors, who heard me say something like that in an interview with founder of DuckDuckGo. He contacted him, and the two of them ended up writing a book together. It’s that kind of stuff that happens. If there’s something that you got out of this interview, just say thank you and you’ll see where it goes. It’s magical, almost. Just thank you. And I’m going to do it right now.
Joseph: Can I echo that, at that point? So, one of the biggest things when I started with this business was it wasn’t just, could I make a lot of money? But it was really like, what would it mean for my lifestyle? And who would respect me, because of what I’ve done. Being in this interview with you is a big accomplishment for myself. I’d like to encourage…
I don’t think we get a lot of that in our culture, thinking about how it’s going to impact your life versus is it going to just make money? So, one of the aspects of that, the reason I’m living this lifestyle is not just for the money, as much as the awesome experiences and great people. I really love meeting great people, and if somebody wanted to ask me a question, JoeWinke@gmail.com. I’d love to hear from you.
Andrew: Cool. Thanks for doing that. Thanks for doing this interview, too. Thank you all for watching. Bye.