Case Study: NatureBox and the viability of the subscription model

One of the big milestones for me was actually able to charge a subscription service for Mixergy. Before that point, I was doing these interviews for free and I was breaking my back doing it.
All because there’s an idea out there that information wants to be free.

But I saw that newspapers like The New York Times were charging.

That’s why I’m excited about today’s interview. I think it will validate what I’ve always believed, which is everything should be on a subscription basis.

But as you’ll hear in this interview, it doesn’t always work as well as I thought.

Gautam Gupta is the co-founder of NatureBox, a subscription service for high quality, delicious snacks.

I want to find out what happened to the business, how he started, how he’s growing it, how he’s got sales that really are amazing before and after he made this change from subscription.

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Gautam Gupta

Gautam Gupta

NatureBox

Gautam Gupta is the co-founder of NatureBox, a subscription service for high quality, delicious snacks.

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Full Interview Transcript

Andrew: Hey there, freedom fighters. My name is Andrew Warner. I’m the founder of Mixergy where I interview entrepreneurs about how they built their businesses. One of the big milestones for me with Mixergy was actually charging my audience, having a subscription service, and the reason it was a milestone is for a couple of reasons. Before then everybody loved me, like really, they loved me. I was doing these interviews for free. I was breaking my back really doing it. Not making any money. They loved it. And then once I started charging and especially on a subscription basis people were really frustrated and the comments all over the place were pretty mean. And the whole idea was information wants to be free.

And then suddenly I saw that newspapers were charging. Like the New York Times I think came after me for charging their audience. And then now every publication decided that they need to charge for something and good on them, caught on to it a little bit late but I’m glad they’re doing it.

So when I came to today’s interview I was super excited. This is going to validate what I always believed, which is everything should be on a subscription basis or every business should at least have it. And I was so prepared to like drive that point home through my guest. And then I started researching and I saw an article where he’s basically had to lay off a bunch of people from his company where he said, “You know, this whole subscription thing that we’ve been going for it’s actually not, it’s not getting us to the finish line. Investors aren’t crazy for it. We’re not able to make the killing that Andrew Warner thinks we’re making. We’re going to sell individual products.” And I go, “Why? What happened? And then why did you still have a subscription? How’s it working?” So I’m fascinated.

All right, I should actually introduce the guest before I introduce the concept, shouldn’t I? Gautam Gupta is the founder of NatureBox. NatureBox is healthy and delicious snacks delivered right to your door. I’ve referenced them I’m sure a bunch of times here at Mixergy interviews because I’ve thought of them as a subscription service that does it. I’m so glad that they’re doing healthy snacks. I want to find out what happened to the business, how he started, how he’s growing it, how he’s got sales that really are amazing before and after he made this change.

I’m going to do it all thanks to two phenomenal companies. The first hates when I call them an email marketing company but I need to introduce them somehow and let you know that they do even more than this. If you want to do an email marketing, I’m going to tell you later why you should sign up for ActiveCampaign. And the second is a company that’s been doing so much work with me that you people are saying “Why is Andrew talking about them so much?” Because it works for my audience, my guests, it’s called Toptal. I’ll tell you about them later too.

First, Gautam, good to have you here.

Gautam: Thanks for having me, appreciate it.

Andrew: What’s your . . . look at how I just cut you off as you’re like being nice. What’s your revenue, sir? What’s your revenue at NatureBox?

Gautam: So, Andrew, I mean what I can tell you is tens of millions of dollars in revenue. You know, the business has gone through a lot of ups and downs, but, you know, we’re a real brand, millions of customers across the country. Those are sort of the metrics that I can disclose.

Andrew: When I saw a Recode interview with you from March 2018 after you did a little bit of layoffs, I could have sworn that they . . . oh, I see what it is, it’s 60 million in funding not 60 million in revenue. But at that time weren’t you doing $40 million, $50 million in subscription?

Gautam: Yeah. It was a very healthy business. It is a healthy business, you know.

Andrew: Okay.

Gautam: We’re kind of proud where we’ve been, so.

Andrew: Just to be clear the yeah, that you just said to me it’s not, “Yeah, Andrew, I’m confirming the number you just spit out,” but it’s like, yeah, right? I’m not trying to trap you into giving something that you don’t want but I don’t want my audience to think, Andrew, just got him. He gave the number when that’s not what happened, right? I asked you was is around 50, 60 [million 00:03:35] range . . .

Gautam: That’s right.

Andrew: . . . and you said, “Yeah, I’m not going to tell you, right? Not yeah, that’s right.”

Gautam: That’s right.

Andrew: Okay. I’m okay with it. I think I’ve got a good sense of where the business is. Are you guys profitable now?

Gautam: Not profitable yet, have made a ton of progress towards profitability.

Andrew: Okay. And is my characterization of what happened right, that you started out as a healthy snack company that focused on subscriptions and now you’ve changed to selling individual products with a healthy subscription component, am I right?

Gautam: Yeah. I think, you know, look, Andrew, what we started out wanting to build great products and sell them to the consumer. When we started we thought the right way to do that was via subscription. I think what we realized was consumers didn’t care that it was subscription. That wasn’t a value proposition to the consumer. I t was great for the business. The reality was consumers when they buy snacks it’s an impulse-driven decision. Right? You don’t sit around thinking about what you’re going to snack next and, you know, how many snacks you have in the pantry. And so what we realized is we had to start selling the product the way the consumer wanted to buy the product, right?

Andrew: Wait, I’m sorry to interrupt but I’m kind of caught up in your business because I do buy a lot of impulse snacks but I never go online to buy impulse snacks.

Gautam: Exactly.

Andrew: What I buy online is healthy snacks saying to myself, “Next, I just had chips this morning. I had chips or some other snack from Starbucks in my building earlier today.” I now think next week the same issue is going to happen. I better get some healthy snacks in the office and when it comes to healthy snacks that’s the way I think ahead of time not the other way. Am I unique in that way?

Gautam: I think you would be super unique.

Andrew: Oh, really? Okay.

Gautam: Think about the majority of Americans when they think about a snack it’s because they’re hungry and they’re trying to satisfy an immediate need. And so, you know, the online component what we decided was subscription ended up, you know, we’d send this box to you, you get the product but it would just start piling up. Right? Because a lot of your snack consumption happens outside of the home, you might have already purchased snacks but the time the box got there, etc. And so we thought look, subscription isn’t really a value proposition to the consumer. They’re not buying it because it’s subscription. They’re buying it because it’s a unique product. Could we just take away the subscription barrier and make it easy for the consumer to purchase and could that work as a business, right? And that was really the thesis around moving away from subscription.

Andrew: Let’s get an understanding of how you came up with this idea. One of the things that I read a few times and I think you talked to our produce about was that you were obese as a kid. I’ve seen photos of you a lot. You don’t strike me as someone who was ever overweight. How big were you?

Gautam: Yeah. I know, I appreciate that. So I was about 70 pounds heavier than I am today and throughout really growing up, so throughout high school and even earlier I had terrible nutrition and eating habits. I ate a lot of junk food, did all the things that people tell you not to do, right? I drank sugary drinks, ate a lot of junk foods, candy, etc. And then a light bulb turned on and I said, “I’ve really got to change my life. I started learning about nutrition, cut all of the sugary drinks out, all the junk food, all the candy,” and in six months lost 70 pounds and I have pretty much maintained that weight ever since.

Andrew: Six months. You’re also working at a venture firm, General Catalyst, and you threw them, saw how business is like The Honest Company were doing.

Gautam: Yeah.

Andrew: What did you learn from watching them that helped inform your founding of NatureBox?

Gautam: Well, you know, the eye-opening thing for me about The Honest Company was the way brands are being built today is so different than 10 or 20 years ago. Right? If you think about what the consumer wants they want things that speak to their values, right? So they want things that are natural, healthy, you know, just things that are more sustainable, right? Speak to the sort of values that consumers have these days. The second is the way you reach that consumer is dramatically different, right? It’s not as much TV advertising as it is online and, you know, through SEM, Facebook advertising, etc. And third is the way that you really build reputation with the consumer has changed. It’s through influencers now, through online reviews, things like that.

And so I kind of looked at that and said, “Wow, like every brand is going to have to deal with the fact that the way you build a brand today is so much different and so new brands can sprout up and compete with every brand that you see on the retail store shelf. And I had this passion around food and I sort of combined those two things to come up with the idea for NatureBox.

Andrew: General Catalyst I think backed The Honest Company in 2012 right at the end of your time with them. You are there already for about 8 years. What were you doing there?

Gautam: So, you know, I was really lucky. I joined General Catalyst as an undergrad while I was in college. I spent a couple of years interning for the firm, and then I joined them full time after graduation. And I was the youngest guy on the team, so I attend, you know, kind of anything that needed to get done. But primarily, the job was to talk to a thousand entrepreneurs a year and surface the most interesting ones so that we could go and find an investment opportunity.

Andrew: How did you go find and talk to them?

Gautam: Yes. So, you know, all kinds of different things, listening to at the time there wasn’t as much in terms of podcasts but reading the news, right, and seeing what companies were getting talked about on the news, going to conferences, seeing what companies were presenting at conferences, all kinds of different ways. And it was really kind of a sales job. Right? Getting in front of the entrepreneur, telling our story of what General Catalyst was all about, hearing their needs and trying to figure out sort of a way that we could add value.

And so it was an amazing job. I talked to probably 6000 or 7000 entrepreneurs over the course of 8 years there which was just an incredible education. Like I don’t know anywhere else you can get that education.

Andrew: What did I you learn? I feel like I’d be really good at that because I love talking to people. But I . . .

Gautam: I think you’d be great at it.

Andrew: I love it. The downside is I love talking to people so much that I don’t think that I processed like I’m not evaluating, I’m more in the moment. I admire Venture Capitalist like Mark Suster, I’ve seen him. He is so good. He’s from Upfront Ventures. He’s so good as he’s talking to you really understanding you but also being able to articulate to other people what he’s understood about you and your business. I’m guessing that just comes naturally to him but also from talking and learning from so many businesses. You’ve had both of those. What did you learn from talking to people that you can share with us about how to process and analyze?

Gautam: Yeah. I mean I think probably the biggest thing was you go into these conversations and I try to do this today when I talk to an entrepreneur. You got to go into these conversations assuming that you know nothing, right? Because I think if you have a belief in your mind of how the business should work or what the right strategy is in this market, you end up just turning off what ends up being really creative, novel ideas. Right?

And so I tried to go into conversations not assuming anything, right? I assume that I know nothing about the category and I really just ask a lot of questions, right? Everything from, “Hey, how did you come up with this idea like what drew you into this? Why is this strategy the right strategy and not this? You know, why is this competitor doing it differently?” So I think probably the one thing that I, you know, I took away a lot from General Catalyst, I was there for a long time, the one thing is you ask a lot of questions and sort of assume that you know nothing, right? Like . . .

Andrew: So I can do that, I do do that, but then, and really, frankly, the assume that you know nothing and be okay talking and asking questions that you should know the answer to it seems so easy. I watched so many conversations here in San Francisco. There are a bunch of people who don’t know what they’re talking about, they’re too afraid to admit that and as a result the conversation is a bozo conversation.

It takes a little bit of guts to say, “I actually don’t understand what you mean by blockchain. I don’t understand how this fits in.” And even if you know a little bit, to admit the part that you don’t know instead of trying to force in the part that you know. So I don’t want to overlook that but when you’re analyzing them, what are you looking for when you come into this with like this tourist mind? How do you know what to analyze to tell you who’s going somewhere and what idea make sense?

Gautam: Yeah, I think you’re looking at first principles, right? Your reasoning from first principles. You’re looking for ideas and strategies that make sense, right? You’re putting yourself in the shoes of the customer and saying, “Hey, if I was going to pitch this idea as a potential customer, does this all make sense? Like does is it line up?” Right? I think you’re looking for clarity and value prop. Right? Can the entrepreneur explain what they’re doing and why it’s important, right?

You’re looking for sort of also the ability for that entrepreneur to take people who might not have the exposure to that idea or to that market and explain to them, right, like get them excited about the company. Because at the end of the day, what that entrepreneur has to go out and do is not just sell investors but sell customers, sell employees, etc., etc. And so I think those are some of the things that you’re looking for when you have those conversations, you know?

Andrew: Are you also looking to see, does it make sense in the world as I imagine it in five years?

Gautam: I, you know, from my perspective, I think nobody has a crystal ball. What I look for is the value proposition crystal clear, right? And even though I might not be the target demographic, could I put myself in the shoes of the customer and understand why they would want to buy this?

Andrew: Okay. So you had an opportunity to see people do it well, do it poorly, people get invested, people not. When it was time for you to pitch NatureBox, you didn’t just go out there and start to pitch it and talk about it. I don’t think. What I saw in my research was a bunch of articles about you talking about how you tested it.

Gautam: Yeah.

Andrew: Did you test it before you even talk to people at General Catalyst?

Gautam: Absolutely. So my cofounder and I came up with this idea in the fall of 2011. And we thought, “Hey, we think this is a cool idea.” But we don’t know if anyone else is going to buy this or is going to think this is as cool of an idea as we do. And so we thought, “Okay, how do we go and test this?” Not knowing anything about food, how to create a product, anything like that. We said, “Well, the easiest thing we can do is put a landing page up, hook it up to PayPal, see if people will go to the landing page, click on PayPal, and from there actually give us money, right? And so, you know, we did that and new started driving traffic to the landing page. Within a weekend we had 100 people actually sign up and pay for their first NatureBox.

And this was a big moment for us because within a weekend we felt like we have validation that other people liked the idea, number one. But number two and probably the scariest part of this is like 100 people had bought a product that didn’t exist and we didn’t know how to make the product. And so that was really the scary moment where we said, “Oh, shit, we better like figure this out. We either need to refund their money or we got to send them something.”

Andrew: What did you do?

Gautam: Yeah. So being two kids like grew up in suburbs, we sat around thinking where can we get bulk food? And we looked at each other and we said, “Well, Costco.” So we drove to Costco, filled up two shopping carts of Kirkland brand snacks, went back to my apartment, repackaged them into bags that said NatureBox on them, and that was the first shipment.

Andrew: How did you get the NatureBox bags?

Gautam: We actually printed out stickers that we stuck on bags. It was a very janky, you know, like sort of . . . the first box I feel very bad for the people that bought that first box because the experience . . .

Andrew: Because?

Gautam: . . . well, you know, they could have purchased these snacks at Costco. Like it wasn’t anything unique. It probably took too long to get to them and, you know, because we’re literally packing these things nights and weekends. Every night we came home from work I’d just be packing bags.

Andrew: And it was a subscription service? They were committing to 20 bucks a month to get this healthy subscription. How did you get 100 people? Where did you buy the ads? What was so amazing about your ads that worked where most people’s ad suck?

Gautam: Yeah. So my cofounder’s background was in online advertising and so he actually kind of took the lead on basically creating Facebook ads. At that time there was no news feed, so these were right-rail ads. And, you know . . .

Andrew: There was a news feed. There were no news feed ads?

Gautam: That’s right, there was no news feed ads.

Andrew: Right.

Gautam: There was a news feed but there’s no ads in the news feed. And so he took the lead of creating right-rail ads that had some catchy message about, you know, healthy snacks delivered to your door, nutritionist approved, a lot of the messaging that we used to kind of communicate with the idea.

Andrew: That wouldn’t make people click. I remember I was friends with Gabriel Weinberg, the founder of DuckDuckGo, and he bought some ads, right-rail ads on Facebook targeting his wife with a message that was directly appealing to his wife and she wouldn’t click it and he said, “You know, this right-rail ads are just working.”

Gautam: Yeah, yeah, yeah.

Andrew: Right. So what did you do?

Gautam: Yes. So to be clear, the CAC on those initial customers, I don’t remember exactly what it was but it wasn’t profitable customer acquisition, right?

Andrew: Got it.

Gautam: The point was to get people, to see if people would buy.

Andrew: Okay.

Gautam: And it wasn’t like crazy. We weren’t spending like thousands of dollars per customer anything like that but the point was not that you know the customer acquisition stuff would be figured out on day one. It was more just to kind of validate the idea and see if people found this idea interesting enough to actually put their credit card down.

Andrew: Okay. And your cofounder, Kenneth Chen, he is still the chief marketing officer to this day, right?

Gautam: Actually, Ken stepped down a few years ago, but Ken is . . .

Andrew: Come on Crunchbase.

Gautam: You know, Ken and I talked after, and he’s still a big supporter to the business, so.

Andrew: I see. He is now Native [sic] Ads, that’s the company that he’s with.

Gautam: That’s right.

Andrew: Okay. Let me talk about my first sponsor. Since we’re talking about advertising, I think it’s a perfect spot to talk about it. Do you know ActiveCampaign?

Gautam: I don’t.

Andrew: You don’t even have like old memories of them. Here’s what I remember about ActiveCampaign, they were just around forever. Like even in the early days before all these like modern email systems, they were just around. And for a long time, I just didn’t pay attention to them when it came to email marketing. Because I said, “These are old folks, guys who’ve been around.”

And then I’ll be honest with you, they bought ads and I started looking into them and I said they really have updated themselves. In fact, not only there’s stuff like more modern and I could think if a few that didn’t update even though they were making good money. But what they did was they took all those email marketing automation tools that work for the bigger guys and they simplified it and they just stayed the course, just kept on adding simplicity but stealing, maybe not stealing, taking ideas from other people.

And so right now they honestly do not like for me to call them an email marketing company because they said, “Look, dude, we do other marketing techniques too.” Like, for example, if somebody is on your website and they keep clicking on a specific section of your site, like let’s say if you guys at NatureBox had a section of your site that was just geared towards corporations, you need to know that and not start messaging them with emails about how they could get 50% off or 50 cents off if they buy one pack today or something for Valentine’s Day but instead here’s what offices love, right?

You don’t have to have them check off the box to tell you that’s what they want. If you see they keep going over to the corporate side, send them an email for the corporate side. So that’s why I keep talking about email. It will do that but ActiveCampaign will do other stuff too like there’s text messaging, we’ll do that, whatever works. We’re not saying we have to get locked into email. I just think it’s too complicated of the message.

Here’s what I’m going to say, for anyone who’s listening to me, if you’re doing email marketing and you’re not getting to target people the way that I’ve been describing, you could do. The old software, even the modern software is way too complicated. You’re never going to get to do it by yourself, so you’ll either not use it or you’ll pay literally. I bet you, there are people who I’ve interviewed here who are paying . . . they’re entrepreneurs who admire, paying $5,000, $10,000 a month to have somebody just manage their email marketing because they want that smart automation. You will not have to do it with ActiveCampaign and here’s how I know it.

When you go to activecampaign.com/mixergy they will actually give you two free one-on-one sessions with their experts so you get on the call with them, tell them what you want to do and then they will tell you, “Here’s how to get it done with ActiveCampaign.” They’ll get you going. And then you come back. They hold themselves accountable. They’ll [say okay 00:20:10], he’s is paying, if he doesn’t use it, it’s on them. They said, “No, all right, come back again, did you use this? Where are you stuck? We’ll help you out.” Second conversation also included for free. They will, of course, let you try it for free. I shouldn’t say of course. Most email marketing companies don’t do that anymore. But they’ll let you try it for free and if you decide to sign up, they’ll even give you a second month free and if you’re with an email marketing company that you hate, they will shift you over.

And if you promise not to tell them . . . I was going to say if you promise not to tell them that I called them an email marketing company. But that’s just the BS. There’s nothing that I care. I don’t care about that. Here’s the deal, go to activecampaign.com/mixergy. I’m telling you you’re going to love them. And if you don’t, tell me, email me, my whole company, contact@mixergy.com or frankly, come to my office, 201 Mission Street on the 12th floor, say, “Andrew, that advertiser of yours, ActiveCampaign is not great.” My guess is you’re going to want to buy me a bottle of scotch after you sign up for them because your sales are going to go up by targeting people properly. All right, ActiveCampaign, good company.

Hey, it Gautam like a common name in India?

Gautam: Yeah, it is actually, believe it or not

Andrew: The reason I say it is because Gotham Chopra, I know him because my wife worked for Deepak Chopra’s daughter. Gotham is her brother and so I kind of got to know the family a little bit. He spells it like Gotham like in Gotham City.

Gautam: You know, that spelling probably isn’t as common but the name is super common. My last name is super common as well. So it’s kind of like John Smith of India, if you will. So, you know, there’s actually a Bollywood star with the same first . . .
Andrew: Yes, I know.

Gautam: Yeah, yeah.

Andrew: It frustrates me.

Gautam: Same first and last name, I know.

Andrew: Very handsome guy, lot of hair.

Gautam: I know. I know. I wish I could be him, you know?

Andrew: You know what, it makes it a little bit harder for me because I can’t find you. Are you at all connected to Uber?

Gautam: No, no, no, no.

Andrew: There’s another one.

Gautam: There’s another one connected to Uber, man. That’s it, it’s like John Smith of India. I’m telling you.

Andrew: Oh, man. You know, speaking of you grew up in the U.S. Have you been to India?

Gautam: I have, yeah.

Andrew: I know you’re a family of entrepreneurs there.

Gautam: Yeah.

Andrew: You were. What was life like there?

Gautam: Yeah. Well, so I grew up here so I’ve never lived in India but, you know, we would spend the summer trips, like if you have friends that kind of did this. Every summer we would go to India and spend like two months in the, you know, middle of the summer, which was just agonizing but, and we just, you know, as kids kind of grow up with our cousins and spend time with, you know, family. And it’s great. Like, I mean, I was just there, you know, December. You know, India is a world of opportunity, right? Like there’s a ton of corruption, a lot of infrastructure that needs improving but it’s an incredible world of opportunity today. And, you know, billion people on smartphones and it’s just, I mean it’s incredible to things that . . . how fast apps or game scale there, it’s incredible.

Andrew: I could see that. I love that when you talked about it you didn’t say, it’s also beautiful and they’re really good people, which all of it is true, but you were thinking here’s the commerce, the opportunity, the . . .

Gautam: Yeah.

Andrew: And it kind of makes me remember what I guess you told our producer that as a kid you use to sell candy out of your backpack that you . . . [right there 00:23:14].

Gautam: Yeah. I would get in trouble a lot as a kid for selling stuff. You know, I sold candy out of my backpack. I sold mixed CDs when like Napster was a big thing. I ran an eBay business in high school. So I would just get in trouble for all kinds of like selling all kinds of random stuff.

Andrew: Literally like, when you say trouble, what do you mean? It’s like, “Oh, Gautam, please [quit 00:23:34]”?

Gautam: Yes, some teachers are just saying like “What are you doing? Like you can’t do this on school property,” you know, but it was fun. I mean I had always, I feel like I had that kind of entrepreneurial gene from birth. You know, I think you mentioned that my two grandfathers, grandfathers on both sides, had been entrepreneurs in India and so, you know, we just we kind of were always had the dinner table conversation was around business, right, from a very young age.

Andrew: And my family was like that too. I think that it helps a lot for kids to hear about business and to see it. All right, I see where you are. I’ve been also looking at an interview where you explained that you spent less than $10,000 on those early ads. That’s what gave you the validation to continue. I understand now how you sourced it. Now it’s time that the idea is validated to actually run with it. Is it at that point that you went out and you raise money?

Gautam: Yeah. So we were really fortunate that the guys at General Catalyst put in some initial capital. Actually, before I’d even left my day job so I was still an employee of General Catalyst and, you know, kind of we had, they had invested in NatureBox. So we were very, very fortunate and then once General Catalyst invested, a bunch of other angel investors were interested in investing. So January 2012 I quit my job, went fulltime on NatureBox, so did my cofounder and we basically had this goal of let’s get from a hundred customers to a thousand customers over the next two to three months, and if we did that, then we could go talk to all these angel investors and kind of finish raising our round, you know, raise like a proper seed round.

And that’s what we did like we kind of like just put our heads down, spent the first three months of the year getting to a thousand customers which was about a quarter of a million dollar revenue run rate, and then once we had that, I went and took this slide deck out that sort of said, “Hey, we’re at a quarter of million run rate. General Catalyst is leading our seed round. Do you want in?” And about a month and a half later we’re closed a $2 million seed round.

Andrew: This was before Brian Lee, he’s the guy from . . .

Gautam: Honest Company.

Andrew: From Honest Company but also from LegalZoom, right?

Gautam: Yup.

Andrew: We talked about him here on Mixergy. He’s amazing with the cofounder of Honest Company. So he was in Plug and Play ventures, I get that, General Catalyst, Redpoint . . . I’m looking at AngelList. So you’re saying even before raise the 2 million, you raised a little bit of money. How much money do you raise? That’s not on AngelList.

Gautam: Yeah. So the initial funding was probably about $400,000 that we raised from General Catalyst but it all was, it was all part of that seed round so it closed as part of that $2 million seed round.

Andrew: So they brought a little bit early and then when they do that how does that work? Did they do it as a loan? Do they do it as something else?

Gautam: Yeah. It was just a convertible note. So it was a, you know, effectively what you would call a SAFE note today.

Andrew: Okay.

Gautam: It was kind of the same thing and every, you know, everyone that we raised from was on that same note.

Andrew: Got it, all right. SAFE note, that was created by Y Combinator I think, right?

Gautam: Yeah, that’s the Y Combinator thing. So ours was a little different because it kind of predates the Y Combinator sort of thing, but for all intents and purposes it’s the same. Right? They were very similar.

Andrew: You know what, one of things I listen to Kara Swisher’s interviews a lot, do you listen to her?

Gautam: Yeah, once in a while.

Andrew: One of the things that she does is she jumps in and she’ll like anticipate what the truth is that you’re going to say and then I noticed even when people disagree she goes, “Yeah, right.” Like she’s like, “Yes, you’re right,” so it might be something like so General Catalyst didn’t invest in your first round and you might say, “No, they did,” and you go, “Right, they did.” And I’m noticing that now I’m starting to parrot her back because I listened to her.

Gautam: Yeah. Well, you know that will keep me on my toes, so it’s good.

Andrew: You know, there’s this old statement you’re like the five people you’re around . . . that you’re the average of the five people you’re around.

Gautam: Yes.

Andrew: I think that’s BS. Like I’m around my kids like five hours a day. I’m not pooping in my diaper, in my pants, I’m not. I feel like we are the average of the five people in our heads and if they come in from podcasts, great, if they come in from the same TV show you listen to every night, great, if they come in from friends, that’s what it is. Kara Swisher this week made it into the top five. Now, it’s like everything [you say 00:27:49] it’s, “Yeah, right. You’re right.”

Gautam: All right, I’m going to be careful now.

Andrew: No. I need to be careful because what she’ll do is she’ll like whatever you say it’s like, “Yes, I’m confirming it.” And you’re right, you did raised 20 million, you did raise 2 million, whatever it is. Okay, I also heard that there was an issue actually sourcing the food, that the first time you could go into Costco but eventually you had to say to yourself, “We need some good food here that we can get on an ongoing basis.” How did you solve that problem?

Gautam: So we got again like the sort of team of luck, right? So we go lucky, a friend of mine knew that I was running this project on the side, NatureBox, and told me about a conference in Chicago where I could go meet food manufacturers and this conference is called the “The Private Label Show” right? So Private Label is kind of the term that everyone uses to describe kind of, you know, manufacturers that produce something for on behalf of another brand, right?

And so I said, “Wow, this is perfect like we should go and attend the show. Maybe we’ll find a bunch of manufacturers.” So we get out to the show in Chicago, we probably paid a few thousand bucks just to be there, right, between the ticket to the conference, the airline ticket, the hotel, etc. And my co-founder and I are in the line to pick up our badge. The person in front of us is from Whole Foods and the person behind us is from like Walmart. And so we’re like, “Okay, we’re in the right place,” Right? I mean like if those guys are coming to the show, then we’re probably, you know, money good.

So we start walking to the show floor and every person we meet we start asking, “Hey, do you do private label?” And after the third person that we talked to, the third vendor, they’re like, “Do you guys know that you’re at the Private Label Show?” Right? So you should stop asking if people do private label, right?” And we were like, “Yeah, you’re right, we’re kind of idiots. Yeah, you’re right.”

And then we would talk to these vendors and we’re like, “Okay, great like we want to buy this product. How much will it cost us?” And they would quote some price. They would say, “You know $10 FOB.” And after hearing that a couple of times, we’re like, “My god, like what are these guys saying?” I mean, you know, my cofounder is Chinese, I’m Indian, are they saying like FOB like fresh off the boat as like a joke or something or, you know. And it wasn’t until later that we figure out, no, they were actually quoting us on freight, right? So it was freight on board or whatever the terms were.

Andrew: Okay.

Gautam: So we were like, no, its 10 bucks plus you got to pay the freight, right? So anyway, that conference was great. We met a couple of the early manufacturers, some manufacturers that we still work with today. And we started buying product directly from the manufacturer and then over time we actually started developing our own product. Right? Like a few months later we’d actually go to these manufacturers and say, “Hey, make me this.” And so that was a great evolution.

Andrew: So I’ve got from the Internet Archive the first version of your site. I think you’ve been giving our producer screenshots of it.

Gautam: Yeah, I may have. Yeah, that’s right.

Andrew: No, actually Internet Archives goes back further than I think what you get . . . no, at one point you were charging $19 a month.

Gautam: $19.95 or something, right?

Andrew: $19.95 is that what it is?

Gautam: Yeah.

Andrew: And so all of these guys from the beginning . . . well, no, they didn’t. It seems like on one of the versions which you’ve got is like a Clif Bar in addition to other stuff like nuts, right?

Gautam: Yeah. I mean honestly, the very early days because keep in mind this was all Photoshop until that first box that we sent out. So the very early days it was sort of like what can we have Photoshopped the easiest and fastest, right? And so if that was using some other people’s brands, that was sort of the solution, right, like, “Hey, get it up there, put it up on the site, you know, if it works great if it doesn’t change it, right?” And so the first couple images that we may have were probably other people’s brands and other people’s food, but actually, the first box that we sent and ever since then it’s always in the NatureBox brand. You know, obviously, the food within the bag was Kirkland at that time but that’s obviously changed.

Andrew: Sorry, so there was never a Clif Bar or something else. It was always yours, got it, labeled with your stuff on it. You know what else stands up for me as I go back in time. It took you a while to have an order form on your site and when you finally did the first one was kind of ugly.

Gautam: Yeah.

Andrew: But until then you used to send people directly to Recurly. It was like thankyoubox@recurly.com.

Gautam: Yeah, it’s so bad. You know, my cofounder and I neither of us were technical. And so we did whatever we could, whatever the easiest thing was and I think the lesson learned for entrepreneurs out there is you don’t have to be technical or you don’t have to find the technical cofounder just start somewhere. It might not be perfect, right, and as you are looking at, it wasn’t perfect.

Andrew: It was not perfect.

Gautam: It’s far from perfect. But I think that’s the lesson for entrepreneurs, right, it’s like it just not have to be perfect, don’t aspire to be perfect just get out there, start getting data. And that’s certainly how we thought about it.

Andrew: So let’s talk about the data in the first customers, you kept going back to . . . did you go back to Facebook or is that the time when you said “Look, I learned about influencers . . . ”

Gautam: Yes.

Andrew: Which one? What did you do?

Gautam: We went mostly towards influencers so we started basically going after mommy bloggers and sending them samples asking them to write about the product. You know, that was almost our entire focus for the first year was like let’s go in front of these bloggers, get them to write about us, that way if you search NatureBox, you’ll get all these like nice articles about us and that sort of thing.

Andrew: You would actually put together listed them and you would send them free stuff.

Gautam: Yeah, absolutely. No, we’d reached out to them and just say, “Hey, you know, I’m Gautam Gupta. I’m trying to do this company. Here’s what it’s all about. Like I’ve read your blog. I think you’d love it. Can I send you a box and, you know, I’d love to get your feedback.”

Andrew: Yeah, I see one of them right here. I went to soapboxesandsubboxes.wordpress.com and there’s a whole category on Nature Box spelled two words, you guys spell your company name with one word.

Gautam: That’s right.

Andrew: And I could see this mommy blogger, I guess she’s a mommy blogger who wrote all about you and that’s what you were going for.

Gautam: Yeah.

Andrew: You just would have like a database and it was you, Gautam, sending it out?

Gautam: It was, you know, I would send some but actually we had hired our first employee, was a woman that we had hired from the Navy actually. And she like just a wonderful person, super energetic and passionate about food. And so like she just loved, you know, interacting with the bloggers. She was totally the right person to do that as well because the passion was genuine. Right? So when a blogger would say, “Oh, you know, but I see that has this ingredient. Like why does it have that ingredient,” right? Like she could actually get into it with the blogger and sort of like explain and it was completely genuine like she had both the interest as well as the knowledge, so she did most of it actually.

Andrew: One of the issues that I always have with this type of approach is it’s so hard to tell whether it’s working and it takes a while to pay off. Did you have any issues with that? Because you weren’t giving them discount codes and you weren’t tracking them. In fact, if anything this mommy blogger who did sometimes write it as NatureBox one word, sometimes two words, which are kind of like. It makes it feel authentic. She said, “Before you buy it, click over to retailmenot.com/view/naturebox.com, right?

Gautam: Great, yeah.

Andrew: She was sending people over that way. And then she said, “The offer I used today was DailyCandy but I grabbed it from RetailMeNot. So there’s no way for you to track it. “If anything if you’re tracking, it’s DailyCandy that’s going to get it. How did you know this was working for you?

Gautam: Yeah. So in the very early days, our marketing activities were super limited, right, and so it was really focused on influencers and driving these blog posts. And so we knew that it was working because we weren’t really doing anything else, right? Like I mean, so we kind of knew that hey, somebody is hearing about the product some way and the only thing that we’re doing primarily are the blogs, right? So although it wasn’t direct attribution we had pretty high level of confidence that was working.

The other thing that we wanted to do was we wanted to make sure that if you typed NatureBox into search, you’d get something about the company, right? Like it wasn’t just naturebox.com, you’d get a couple of other things and you’d be able to read a positive review about the service. And so it definitely satisfied that as well. So even if there was no attribution at all, we probably still would have done it because it made the future paid acquisition much more effective.

Andrew: All right, I do see that even to these days, searches bring up a bunch, wow, including Amazon which we’ll get to.

Gautam: Yes.

Andrew: But the one weird thing that stands out for me is Google shows your address as being in San Carlos and there’s a picture of someone’s house. Are they showing your house here? San Carlos is like a place where people live.

Gautam: No. You know what, it’s over the years that Google local information has been kind of messed up. The company’s office actually Redwood Shores. So it’s not in San Carlos anymore, but, you know, someone there . . .

Andrew: So it was there, on Commercial Street. Got it.

Gautam: Yeah, it was and so we may have just edited the profile or something, I don’t know.

Andrew: Tam Pham who I worked with here at Mixergy for a long time lived in San Carlos. It’s so close to San Francisco but there are freaking deer outside of his window at times. It’s such a . . .

Gautam: Yeah, I know. I know. Yeah, I live in San Carlos for a little while too and it’s a beautiful place.

Andrew: It’s unexpected but it’s great. It’s wonderful.

Gautam: It’s a hidden gem. It’s a hidden gem in the peninsula.

Andrew: And then you started to shift to . . . so you talked about raising money. I interrupted you as you were talking about putting the deck together. What happened there?

Gautam: Yeah. So, you know, my belief on putting a deck together is basically you want to emphasize where you’re really strong, right? So in our case, it was the growth, so the first slide of the deck was our growth rate, and sort of how quickly we had gotten from zero to a thousand subscribers, a quarter a million dollar run rate. And then I think in the deck you want to hit the main concerns, right? Why an investor wouldn’t invest in this company head on, right? So you don’t want to shy away from it. If you think like, food, for example, one of the big questions that we would get is the unit economics around food suck. Webvan, you know, went out of business. Why do you think you can make it work?

And we literally had a slide that talked about like here’s why a business like Webvan didn’t work. Here’s why we think our business will. Here’s what the unit economics look like. Like that was an explicit slide that we made and so like my belief whenever, you know, fundraising is there’s always going to be those two or three questions that are the showstoppers, right, like the reason why someone is not going to mess. And rather than wait for the question to come up, I think you have to hit it head on.

Andrew: So what’s your answer to those issues? There’s not much money in food, food companies have failed.

Gautam: Yeah. So for us, you know the answer was, so first part of it was the market is finally growing right after long time and part of that is because food and beverage is the last frontier for eCommerce. But if you look inside of the business like the reason why Webvan really didn’t work as well was they had both the complexity of warehousing the product, right, buying the product, warehousing the product, as well as the last mile delivery, right? And so the complexity of being good at doing both is really hard. Right? Few businesses have been able to do both. And so we said, “Okay.” The first thing, first decision that we made is we’re not going to do the last mile delivery. We’re going to let other people do that. We don’t want anything to do with last mile delivery.

Then if you look at warehousing, if you actually broke out, you know, the perishable products from the nonperishable products, what you realized is you spend a lot of money satisfying perishability, right? Because you need to build CapEx to house perishable products, right, refrigeration and things like that. And you need to turn that inventory really fast. And so we said, “Okay, we’re going to start with nonperishable products and if we can build a good business in nonperishable products, then maybe someday we’ll think about adding perishable products.”

Andrew: Meaning like nuts are considered nonperishable in this?

Gautam: Exactly.

Andrew: Got it. Okay. All right, I get it. There’s also a period there where investors were excited about subscription boxes. That even subscription boxes were unclear about what they were about we’re doing hot and I feel like you kind of rode that, right?

Gautam: It went in waves, right? There were times where subscription was really hot and there were times where subscription was nobody wanted to touch subscription and it largely came down to what the big companies in subscription, how they were doing, right? So if there was a big company like at that time ShoeDazzle, right, was really struggling and, you know, that made it really hard for us to finance, right, because everyone, we come into a meeting and people would say, “Ah, subscription doesn’t work. ShoeDazzle, you know, got rid of subscription. They don’t believe in it. This model doesn’t work.”

And then you’re left kind of sitting there like, “Okay, well no, like, actually we think it does work and here’s the reasons why we think it works.” So it went in waves. I think we benefited from subscription at times. We were also hurt but the fact that this subscription kind of bubble was bursting at times as well.

Andrew: It seemed like that round went well. SoftBank Capital came in, General Catalyst came in, you raised another 8.5., let’s jump into a couple of issues and then talk about how you got through them and then also what happened with subscriptions?

First, we got to tell people about a company called Toptal. Gautam, you got to know about this company. Toptal is an Andreessen Horowitz-funded company they are now doing so well. I don’t think they need more funding. The idea, actually, I forget the idea. Here’s a guest that I had on, this guy Nathan Latka said, “I really like this Chrome plugin that will tell me when people are opening up my email and just like all the stuff that Gmail doesn’t do. It’s a plug in that does it and it’s free, and they’re not charging anything for it.” So he bought the company and he said, “The one innovation that I want to add immediately is a paid thing, a paid component. That’s how I could make my money back.”

So he went to Toptal and he said, “Here’s what I need. I need you guys to help me charge.” And just like you did in the early days, he said, “Let’s not restrict anyone but if they’re using it more than X number of times, just bring up a popup that says, “Pay if you’re using this a lot,” or a link underneath that says, “As a courtesy, keep using it for free one more time.” You know?

So he went to Toptal, they added that on, suddenly he had a revenue stream from this plugin that he bought for Chrome that you know attaches to Gmail. And the reason that I bring this up in a Toptal ad is he said that he heard toptal.com/mixergy here in the Mixergy interview and said, “All right, let’s give them a shot.” And he went with them. He is one of many people who I’ve interviewed who have done exactly that. If you’re out there listening to me and you want a great developer or if you’re just, Gautam, listening to me right now and you ever need a great developer, you know, the usual path is asking friends, friends of friends, go to your network, that’s phenomenal. If you could do that and get a good person, go for it.

The next one is put ads all over the internet and use software to help you place it everywhere and cull all the responses. That is a pain in the neck, it takes up a lot of time. You don’t have to do it that way. The better alternative is go to toptal.com/mixergy, no obligation, Gautam, they already have a list of people that they have screened. They put them through the ringer. Go read Medium articles by developers who got turned down by Toptal who said, “I promise I’m going to work harder and I’ll get back in the system.” I love that those things happen.

And so you get on a call with someone at Toptal, they call them a matcher at Toptal. They will talk to you. They will help you understand what your problem is by shaping like an understanding, an explanation of what it is and then they’ll introduce you to one or two people in their database. And if you love them, you could get started often right away. If not, nothing lost.

And I’ll tell you this. If you go to this URL that I’m about to give you and you’re not happy with it even after getting started, they will not charge you but they will still pay the developer. Go get details about that offer at toptal.com/mixergy. I love them. They’ve been sponsoring us a lot. Here’s what I’ve learned over the years, I do not pronounced Toptal right so I’m going to say top as in top of your head, tal as in talent, that’s toptal.com/mixergy.

By the way that is why they want to talk to people, Gautam. They want to talk to you before to make sure they could actually take care of you and if they can’t, they don’t want you signing up just to use somebody’s time and then get a refund. So go check them out.

All right, you’re going really well, you started buying ads, you moved on to like television ads and podcast ads.

Gautam: Yeah.

Andrew: Right? And that was doing well for you. How did you know that TV ads were going to do well? I’m always amazed that people can track that well better than I expect.

Gautam: Yeah. So, you know, the TV ads, by the way, there is kind of a system of attribution that people use now, right? So they, you know, you do it in a couple of small markets and you kind of have a baseline that you compare basically traffic from those markets [relative 00:44:56] to kind of baseline. And when we did that test we saw that it was working really well. The downside though of TV was to produce a spot was costing us a lot of money. Right? Like tens of thousands of dollars to produce a TV spot. And so we sort of looked at it and we said, “Well, you know, TV as a medium seems to be working but we don’t necessarily have a budget to kind of keep this thing going because of the amount of, you know, spend on just ad copy, right, creative.

And so we, you know, it was working but we kind of decided, “Hey, it’s better for us to focus.” You know, spend our dollars where they’re going to have this sort of maximum return. And we just couldn’t afford frankly to put the dollars towards creative. You know, when most of what we’re doing was kind of more digital, so . . .

Andrew: And even though it was working and you could attribute direct orders to the ads I’m seeing you guys are using ispot.tv.

Gautam: Yeah.

Andrew: Their service, right, that creates the ads, helps you place it. I remember when they first came out in TechCrunch I think would write about them. It makes sense you’re saying it work but I don’t understand the part that did not work.

Gautam: Yes. So the part, well, it’s not necessarily a part that didn’t work it’s more that the budget to create the TV ad, the commercial, was so much, right, that we didn’t feel like we could keep going on TV given that we had limited dollars to spend in that channel, right?

Andrew: Okay. Do you think you would have made money, this would have taken you a lot longer to get that money back from each subscriber to pay for it?

Gautam: Well, and what we’re finding is just the digital channels were just as efficient, right?

Andrew: Okay.

Gautam: So why not kind of spend the focus and time there versus, you know, have spread, you know, kind of spread yourself too thin, right? And so we tested it and we said, “You know, look, we’re just not at a stage where we have enough cash and enough runway to say this is going to be a sustainable part of our marketing mix going forward.

Andrew: I now see where I understood what your revenues were. You must have talked to out producer and it came out and since it was a private conversation with you and the producer, I’m not going to reveal it. It doesn’t seem like it’s something that you meant to say, but I love that they put it down here in my notes. So I get a sense of what the revenue was at that point. It was strong. And you said to our producer, “I think we needed to spend more time dealing with why people cancel, why did they sign up, and understand our customers better instead of trying to understand televise better.” What did you understand about why people cancel and how to undo churn or reduce it at least.

Gautam: Some of it goes back to this kind of . . .

Andrew: I’m standing up, can you still hear me?

Gautam: Yeah, yeah. I can. There’s a little ringing, kind of in the back, so. No, so some of it just goes back to like why we moved away from subscription. We felt like we had put customers on the subscription model even though many of them just didn’t want to be on subscription, right? And so that probably the biggest churn reason for us was, you know, I just, the stuff is stacking up. I don’t have room in the pantry to like keep all these boxes of snacks. I just don’t want this . . . I’ll order when I want it but I don’t want you to keep sending it to me. Right? And so that goes back to kind of this reason of why we pivoted away from subscription.

The other things that we were hearing kind of loud and clear from our subscribers was they like the uniqueness of the product but the value equation wasn’t there. When we started to dig into that what we realized was that the amount of value you could get out of NatureBox was pretty, there is a wide spectrum, right? Like if you bought five bags of plantain chips, you know, arguably, for 20 bucks, arguably that wasn’t a great value, right? But if you buy five bags of our Sriracha cashews, like that was a phenomenal value, right, just by how consumers think of what they would pay for these products in the grocery store.

And so what we realized is we have this huge spectrum of products that each have their own perceived value and, you know, that further kind of fed into this desire to move away from subscription because we thought, “Hey, what if we could just price these things at value? You know, could we actually then instead of consumers being pissed at us because they don’t think they’re getting the value that they deserve, they could actually just buy what they want, right? And, you know, if our price on plantain chips was like more than you’re willing to pay, don’t buy the plantain chips, right, like buy other stuff.

Andrew: But how did you know that was it and not we need to change the mix of stuff that we send them? Because I think about if I don’t want to eat potato chips, if it’s in the house, I’m going to finish it. I don’t want to eat the pretzel peanuts, the pretzel stuff with peanuts that my wife gets for the kids’ snacks for school. If it’s open, I’m going to tear right into it. There’s some snacks that are like that. How do you know it wasn’t changing the mix of food?

Gautam: Well, you know, we experimented overtime with different types of products as well as just making it really easy to filter, the catalog, based on whatever your needs were, right? Like if it was more of a health need or if it was a dietary need, so we experimented a lot with that and what we found was the product, people really liked food. Right? Like they liked the food, it taste great, it was unique, but they hated the way that we were selling the food. Right? And so that’s what kind of took us away from subscription and kind of why we started to really extend the brand, you know, towards ala carte shopping online as well as some of the retail stuff that we ended doing.

Andrew: You had mentioned the Recode article. Who was that? Jason Del Rey, okay, I like Jason’s stuff.

Gautam: Yeah, I have a lot of respect for Jason. Good writer.

Andrew: I thought it was someone else there. I do too. I actually feel like Recode has had some really good writers there and they care about their stuff. None of their writers were ever going to get rich. They’re just like in the old writing mode where they spend a lot of time doing research and nobody gets the credit. Well, I guess they get a little bit, but I don’t know why I brought that up. I kind of feel like, I know what it is, I feel bad when somebody does the hard work that Recode does and they still are not going to like get further ahead in some of the . . . some of the people online who are doing jack and anyway getting a lot of attention.

So Recode does do good work. I love that you laid off 20 of your 60 people, you still talk to Jason at Recode and you went through the issue and I think one of the issues that you brought up was raising money as an issue. Right? That you had trouble raising money and you said, “We need to cut costs.” What was the issue with raising money at that point?

Gautam: Yeah. And let me just one-half step back. You know, we did this layoff which was by far the most painful moment of my career. But one thing and for any entrepreneur that is dealing with this sort of issue not a lot of people talk about layoffs and even how you do them. I found that there was this Andreessen Horowitz blog or podcast that talked about it and that was like a huge win for me like just having something, right, to, and it talked about, you know, how you do this, right? Like what, you know, how you treat people when you’re going through a layoff because I think it’s obviously the worst thing that you’re going to have to do as a CEO or an entrepreneur.

Andrew: You know, there’s the right way to lay people off on a16z’s blog by Ben Horowitz.

Gautam: That was like such an eye-opener for me and anyway, for any entrepreneurs that’s going through this I’d highly recommend reading that article and, you know, I just think like layoffs can be done in really terrible ways. And I wanted to, you know, as much as possible try to treat people with respect and dignity. But, yeah, we got to this point where we had to lay off people and, you know, actually Jason kind of actually pinged me while I was getting married. Unfortunately, these things like happened all at the same time. You don’t plan the stuff. But I was actually away getting married and he was like, “Hey, can we talk about this?”

And, you know, so we talked as soon as I get back. You know, what I told him was, you know, I think the unfortunate reality is, you know, the venture model is built for rapid scale, right? And, you know, we got to this place where we raised a lot of capital and we were kind of on it a bit of a hamster wheel where in order to raise the next round of funding we had to grow at a certain level. And in order to grow at that level, we needed to invest a certain amount of capital into marketing, paid acquisition, right?

And so it was just circular, right, because you end up like you raise money to spend the money to raise more money. Right? And we just found ourselves on this hamster wheel that we couldn’t get off. And so that was what I was kind of telling Jason is that you know that’s the unfortunate reality of when you take big venture money. You know, you’re kind of on that like growth curve that if to decide to slow down or if things aren’t working out quite as the way that you would hope, it’s really hard to kind of get yourself off.

Andrew: You also told our producer the problem with food companies in like this techie commerce world is that it’s kind of confusing for investors. Here’s what I’ve got from the notes. What they meaning the investors realized was that they were investing in a high growth e-commerce businesses. They saw that most of the investors in the food, I guess it’s you, most of the investors in the food space were more traditional CPG, consumer-based goods companies, right? And tech investors were more into the high growth revenue that comes from software. Am I summing that up right?

Gautam: Yeah. So I think what I was saying there is, you know, there at least for us when we would go out and raise capital there were tech investors and there were CPG investors. The tech investors wanted you to grow the way a tech company does, right? So they want you to grow fast, spend money to grow, you know, do all those things. The CPG investors really wanted to see profitability. And so the challenge for us was we got to a size where we started talking to these CPG investors and to those guys we weren’t even speaking the same language, right? Because the CPG guys were wondering, “Hey, where’s your EBITDA? What’s your gross margin?” You know, all these different things. And we had always been used to the conversation about growth. Right? Like “Hey, how fast can you grow or how much do you need to grow?” Fifty percent faster than what you have planned and kind of all those things.

And so that’s kind of the discussion I was having with the producer there is that you know there’s just too different, very, very, different types of investors that invest in these companies and what they look for is very different. And so, you know, you can get kind of caught in between that, right?

Andrew: And it seems like you’re shifting towards the consumer-based good world now, right?

Gautam: Definitely.

Andrew: Because that’s where the business is taking you. It’s not like you’re making a strategic bet on those investors coming in next.

Gautam: No. Yeah, that’s just where the business is taking us. That’s where we feel like when we started the company it was to be a brand of healthy snacks. It wasn’t to be a big e-commerce company or it wasn’t to be a big subscription company. It was to be a brand of healthy snacks, right? And so what we’ve realized is, you know, we kind of got to get back to the basics of winning on product and it doesn’t matter how we sell that product, right. Like that’s not what we’re selling, right? We’re not selling a subscription model. We’re selling great product. And so that’s been the evolution of the strategy.

Andrew: I didn’t talk about the layoffs and how you recover from that but that’s one of the things that you said to our producer, “Look you guys if you want to focus on something that you hadn’t thought about, that’s something.” How do you recover from that? What have you learned that we can take from that?

Gautam: Yeah. So probably the biggest thing is when you do it the day of a big layoff I think you really have to kind of map out like hour by hour your game plan for that day. I think you want to treat people with respect and dignity. We sat down with every single person in the company whether you’re being affected by the layoff or not. And I think that that’s the right way to do it, right, is you sit down with everyone and you kind of . . .

Andrew: You first talked to the whole company?

Gautam: Yes.

Andrew: First. And let people know, okay.

Gautam: Yeah. In our case, we got everyone together. It was very quick. I said, “Hey, we’re doing a reduction in force today, you know, because of these reasons and, you know, we’re going to be sitting down with everyone one on one, you know, so please like . . . and then the folks that are remaining we’re going to come together at the end of the day and talk about our plan forward.

Andrew: And then that means that there are some people that are coming into your office knowing . . . did they know beforehand that they’re leaving or is it they come to your office and then they walk away and people see them clear their stuff out?

Gautam: Unfortunately, yeah, I mean, nobody knows beforehand, right? So it’s kind of all done on one day. And so, you know, my advice is like just to plan it out right, have like an hour by hour kind of schedule, be really aligned with the rest of the folks that are kind of helping you coordinate this. And then I think afterwards just try to be helpful to the people that were affected. You know, introducing them to other companies or, you know, just trying to be you know a reference, things like that. I think that you know probably the best thing you can do is then, you know, get everyone kinds of motivated by what you want the business to be going forward and just, you know, be real with people. Right? Like that this wasn’t in the cards, this wasn’t planned, but it’s an unfortunate reality of ruining a business and, you know, we’re going to try and do the best that we can.

Andrew: How do you get motivated after going . . . we were in a world where everyone needs to do better tomorrow than they did yesterday.

Gautam: Yeah.

Andrew: You’re now, it seems like you’re going down. How do you get motivated?

Gautam: Yeah. I mean it’s definitely, it’s really tough. I would say probably the biggest thing, the biggest good thing that comes out of layoff is it’s a wakeup call, right, that you got to change something that you’re doing. And so for us, it was about narrowing the focus of the company. And instead of trying to do 10 different things and doing all these projects, like let’s just focus on the one or two things that we really need to do to be a successful company. Right?

And so I think what you motivate people, the way that you kind of get people motivated is you just narrow the focus of what you’re trying to do, make it really clear that like we’re not operating the business the way we used to. Like this is a wakeup call to change and you know we’ve kind of heard the feedback, right, that we got to get better at doing fewer things.

Andrew: I do feel like it’s so much more exciting to be in a subscription business where you see month-to-month revenue growth where you could predict your revenue, where you could work on churn instead of working on getting new customers. Do you see any like hope for that if you were a smaller company, could you have sustained that? Or are we like . . .

Gautam: Potentially, yeah. Potentially, I mean I think subscription is not evil, right, I’m not, you know trying to, you know, kind of tell people don’t start a subscription business. I just think that for us we started subscription because it was good for us it wasn’t good for the consumer. Right? And so what we had to do is really go back to focusing on what the consumer cares about which for us was like great product, right? And so that’s not to say that we couldn’t still be selling product subscription and, you know, it’d be great. It’s just to say that we had to get focused on like what was the core reason that people come in and buy.

Andrew: You know what I do like is it seems like you shifted a little bit also towards office subscriptions?

Gautam: Yeah.

Andrew: You added that how’s that going for you?

Gautam: Really well. Yes, so the office program is unlimited snacks where you pay per employee per month, so you pay $20 per employee per month and you get unlimited snacks. It’s a phenomenal value . . .

Andrew: What does that mean unlimited snacks.

Gautam: Yeah. So you get to actually pick from our catalog, you know, the exact snacks that you want and then any time you run out we send you more.

Andrew: Really?

Gautam: Yeah.

Andrew: How do you know that they actually have the number of employees that they have and that they’re not just saying we have 10 people and ordering for 50?

Gautam: Yeah. At the end of the day, obviously, there’s a big trust component, right? Like we’re looking at databases like Crunchbase like LinkedIn, Dun & Bradstreet, etc. right, so we’re looking at those database and kind of triangulating but at the same time like it’s trust based like, you know, if you really wanted to scam us, you know, on 10 employees or something like that like, yeah, you know, you could do that and, you know, would we ever find out? Maybe, maybe not, right? But . . .

Andrew: I do find that the bigger companies, tell me if I’m wrong, companies that can actually do snacks like this for their people are at a place where it’s genuinely not the person who’s going to screw around who’s going to be in charge of that. It’s the HR person who’s in charge and not screwing around, or the office manager.

Gautam: Yeah. And the other thing I’d say is I mean it’s not like that money like the office manager who’s purchasing it, it’s like putting that money in her pocket, you know. So I think, look there’s definitely a trust component to it, but it’s a phenomenal value proposition for companies.

Andrew: I really wish more companies would do this. I am now in San Francisco. I’ve seen a lot of offices here. They’re so proud of their ice cream and snack. I think every one of the . . . I’ve got to talk to someone orders this junk food for their office to understand why they do it, maybe that you get more productivity by giving people comfort food. But what I’m finding us people feel more guilty after they eat it. So you’re sending people into an office where they feel shitty when they come home because they eat junk food and they didn’t mean to but, you know, they were stressed and so they gave in.

I wish that every office would just say, “You know what, here’s our attitude, we’re only doing healthy food. We’re going to give you enough healthy food that you’ll feel good about at the end of the day. I know that’s going to suck for some of you who have comfort food needs. Guess what, walk downstairs. I think you’ll be okay.”

Gautam: Yeah.

Andrew: That’s my [inaudible 01:02:56].

Gautam: Yeah, I mean we, you know, for us, we think you’re not going to eat, even if it’s healthier or it’s good for you, you’re not going to eat it unless it tastes great. So for us, it’s always about how do you make a product that tastes great but, you know, it doesn’t have a lot of, you know, added junk that a lot of other snacks might have. That said we’re also just trying to make life easier for the office manager. Right? Like do you really want to have to go to Costco every week and like pick the snacks that you’re getting and, you know, pay per item and all that stuff? Or, you know, do you want to just never have to think about it, right, like all you have to do is send us an email and say send me more.

Andrew: All right, here’s what I got out of this interview, number one, teachers should just really encourage kids to sell candy and if they’re doing it, don’t stop them. Make them feel good about it. Congratulate them for doing it, number one. Number two, subscription models are not the cure-all for everything. Number three, we do have to stop and pay attention and not just say what’s the best business model for us but also what makes sense for our customer. Number three or whatever number I’m on, it does pay for more businesses to think about how do I go B2B? How do I sell this stuff to businesses? Businesses are more rational, businesses have more money to spend, businesses can make bigger purchases, so that’s all great.

Next, I’m going to say that laying people off is really painful. I think Ben Horowitz, I can’t find that article. In his first point, he said, “Do it fast, don’t put it off.” It’s really hard not to. I think we really need somebody on the outside to look at stuff and say, “I told you, you got to do this. Now, I’m going to push you to do it right now before it’s too painful for you.” Right?

I think that’s everything . . . Oh, then finally, if you don’t know something even if you know a little bit of it don’t pretend you know, just ask. I feel like that’s going to make you a smarter person even though in the moment you’re going to feel stupid. Right? Is there anything that I should highlight?

Gautam: No, it’s great. Well said.

Andrew: All right, to Gautam Gupta, apparently Gautam is a real name. That’s such a freakin’ cool name. I thought Deepak Chopra had like a cool side. Apparently, he’s not a cool . . . he has no cool side to him.

Gautam: He’s a John Chopra over there.

Andrew: Yeah. He’s just like a regular Indian dude who happened to just gone more traditional. All right, anyone who wants to go checkout the business, go check them out at any mommy blogger because they’re back to now like working with their network and getting people to talk about it or just go to naturebox.com. I want to thank my two sponsors who made this interview happen . . . oh, by the way, I should say, yes, there are discount codes for your site all over the place.

Gautam: Yeah. There are, there are.

Andrew: Yeah, maybe I should people to go checkout RetailMeNot if they want to buy from NatureBox.

Gautam: Well, apparently the bloggers are doing that already, so, you know, they’ll end up there one way or the other.

Andrew: Go check it out at naturebox.com or anywhere else that you like. And I want to thank my two sponsors who made this interview happen. The first will do email marketing even though that they prefer that I highlight that they do other stuff, it’s called activecampaign.com/mixergy, and the second will help you hire phenomenal developers, it’s toptal.com/mixergy. And I’m going to be running marathons all over the world if you want to follow along and see how I’m doing. Go check me out at runwithandrew.com. Thanks. Thanks, Gautam.

Gautam: Of course, thank you.

Andrew: Cool. Bye. Bye, everyone.

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