Andrew: Hey there, freedom fighters. My name is Andrew Warner. I’m the founder of Mixergy.com, home of course of the ambitious upstart. This is the place where we dig into how entrepreneurs have built their businesses.
And here at Mixergy headquarters on 201 Mission Street–I always say that so that you guys feel comfortable coming here for scotch sometime–every ten days or so, I get a box of these delivered to the office. It’s Quest Protein bars. Actually, this one I just discovered recently, a chocolate version of the Quest bar.
Andrew: But I always get a box of them delivered over to the office. It’s such a good snack for me because it’s got high protein, not a lot of calories and at the end of eating it, I don’t feel like I’ve had the equivalent of a Snickers bar. I feel I’ve not eaten something horrible for myself and it does taste good.
For a long time, I just kind of assumed the company behind it was some big manufacturing company that was maybe a subsidiary of some other large company and somehow it gets made. Then I discovered it’s not that at all. It’s an entrepreneur, actually three entrepreneurs, who started the company in 2010 who grew it enormously fast who are killing it with revenues, with exposure, with customer fandom, literally on Facebook and other places.
They’ve got, of course, more than this. They’ve got chips that are my favorites, but I refuse to have them in the office because I know I’ll go through the whole pack, and powder, which I haven’t had because I’m not much of a powder guy, but someone from Quest Nutrition, the company that makes it is going to send me the powder to try. I’ve really gotten to admire the company the more I read about them in preparation for this interview.
Today, I’ve got the founder of the company. His name is Tom Bilyeu. Tom, it’s good to have you on here.
Tom: It’s really good to be here, man. Thank you so much for the invitation.
Andrew: And this interview is sponsored by two great companies. The first is Toptal. I’ll tell you more about how they can help you hire great developers later. The second is Acuity Scheduling. Later on I’ll tell you how they can help you actually get meetings with people on the phone, in person, etc.
But first, Tom, I asked you before the interview started how do I make this a win for you and I didn’t expect you to say, “Hey, Andrew, help us sell protein bars,” because you have high revenues. In fact, what are your revenues right now?
Tom: We don’t disclose our full revenues. But we’re hundreds and hundreds and hundreds of millions of dollars.
Andrew: Inc. Magazine back in 2014 said that you guys had $82 million in 2013, right? They were 2014 reporting on 2013 saying $82 million. My estimate is that you guys are at $300+ million right now, somewhere between $300 million and $400 million, does that sound right?
Tom: You’ve hurt me with your estimate, but sure.
Andrew: Really? So, it’s more than that?
Andrew: Wow, for a company that’s six years old, am I right?
Tom: Yeah, a little less, five and a half. Yeah.
Andrew: So, obviously you don’t need me to sell more protein bars here in the interview. So, when I asked you what a win for you was, you still surprised me when you said, “I want to pull people out of the Matrix.” What’s the Matrix? What are you pulling me out?
Tom: Yeah. To really ride with the movie analogy for a second, the Matrix is the sense that you could do more, you could be more, but something is holding you back and you don’t know what it is. I had that exact feeling when I was in my early to mid-20s, honestly. It took me a while to figure out what was going on.
Ultimately what I realized is that the Matrix is a mindset. If you have a fixed mindset, to use Carol Dweck’s verbiage from the book “Mindset,” you’ve either got a growth mindset or a fixed mindset. My goal, because it changed my life, is to get as many people over to the growth mindset as possible. I think the world would be so amazing if we had more and more people every day adopting the growth mindset. So, when I say that, that’s what I’m talking about.
Andrew: Fixed mindset meaning, “I’m smart,” so then if you can’t solve something, then you say, “I’m not smart enough to solve this,” and you move on. What was the other mindset?
Tom: A growth mindset.
Andrew: A growth mindset says, “I can learn how to do this and if I can’t solve this problem then I’ll figure out how to get there,” right?
Tom: Correct. Yes, perfect.
Andrew: So, how are most people living? They just think of themselves as smart and if something can’t be solved, then they move on? I don’t even think they think that way.
Tom: Yeah. It’s a little more insidious than that. People with a fixed mindset believe their intelligence and talents are fixed, so there’s nothing you can do. Whatever you were born with, that’s the hand that you have to play. So, they put themselves in situations where they can be the smartest person in the room, where they have the most right ideas.
They’re not looking for a challenge. They’re looking for something to reaffirm that they are smart, that they are worthy because that can’t be developed, right? When you get into that position, I find that people make a) really bad life choices, b) never accomplish their goals, c) spend a lot of time making excuses because of the psychological immune system.
So, if you really believe that this is as good as I’m ever going to be and I was born with it and life is one big test to show you where you fall in the pecking order but there’s nothing you can actually do about it, you’re going to put yourself in positions where you shine and only shine, but growth doesn’t happen when you’re already proving to people that you know something, it happens when you happen to dare out in places where you’re not yet good and you’re stretching and pushing yourself to grow and develop.
Andrew: Then let’s start out. Let’s get personal. When did you have that fixed mindset?
Tom: So, I think Carol Dweck is right. I think it’s a spectrum. So, every day I try to reinforce myself a growth mindset.
Andrew: Did you ever have a period in your life when you were more on the other side of the spectrum?
Tom: 100%. All the way, every single day of my life until I was probably about 26 I had a fixed mindset.
Andrew: So, give me an example of how that played out.
Tom: I’ll give you one from business. It was the moment that made me realize that something had to change. I was telling myself a narrative about wanting to get wealthy and wanting to create real wealth and wanting to do something incredible with my life and I found these two other entrepreneurs and we started the company together. They just happened to be smarter than I am. So, from a pure data processing standpoint, they just process data more quickly than I do.
So, they routinely had ideas that were better than mine. I didn’t know as much about business as they did. They were more than a decade ahead of me in terms of being an entrepreneur. So, to feel smart and to get that validation, I would try to argue with them even if I knew their idea was right. I’ll define right as it would move us towards our stated objective. So, my stated objective was to get wealthy. I knew their idea was more likely to make me wealthy than my idea. But it felt so shitty–I don’t know how you feel about swearing, sorry about that.
Andrew: Go ahead.
Tom: It feels so bad to acknowledge that you’re wrong that it was more important to me in that moment to prove to them that I was right than it was to actually move myself towards my goal. So, there was this voice in my head saying, “You’re wrong, you’re wrong, shut up.” But I just kept going trying to convince them that I was right. Finally I won.
Andrew: What’s one example that you won in?
Tom: I don’t remember the arguments, to be honest with you. But let’s say it was something around cost per click advertising and I was saying, “Hey, what we need to do is just really grind it out on an individual headline, try different demographics.” Their thing was, “No, let’s try multiple headlines, A/B split tests…” This wasn’t it but you get the kind of thing that it was. In my gut, I knew their answer was right, but I kept arguing for mine but they finally acquiesced and said, “Actually, maybe you are right.” And I was like, “Oh my god,” I went into a panic because I knew I was wrong. So, [inaudible 00:07:46]…
Andrew: Sorry, the connection is breaking up. You were saying you got the thing you wanted, but you were moving away from your real goal, which was to get rich.
Tom: One, I grew up in the 80s in a family that was not wealthy. Watching the movies in the 80s painting this amazing picture of what wealth looked like, it just seemed glamorous and amazing and powerful and would give me the ability to make all of my dreams come true. If you ever saw the movie with Richard Pryor, “Toy,” that kind of lifestyle where anything you can imagine now can be facilitated with money.
Andrew: Yeah. For me it was “The Secret of My Success” and all the other Michael J. Fox movies. He was always aspiring to some kind of wealth.
Tom: Absolutely. Definitely.
Andrew: So, that was your goal in life. You, at the same time, wanted to be a filmmaker. You thought that was going to help you become wealthy.
Tom: No question. Even today, making films is a path to wealth. I won’t say it’s a very sure path. I won’t say that the odds are stacked in your favor, but there is still a lot of wealth being created in the entertainment industry. It was maybe a little bit clearer of a path when I was younger. It wasn’t any easier.
It was probably harder when I was younger because there were so many things you could do for very little money to really grab people’s attention. But it was an artistic expression which spoke very, very powerfully to me that was coupled with the ability to get wealthy. So, it married the two sides of my interests, which are psychology and wealth creation and it just seemed like the perfect marriage.
Andrew: Meanwhile, speaking of marriage, you had so little that when you proposed to your wife, her dad told her something about you.
Tom: Yeah. Well, he actually said it right to me, which was–he was always very kind to me, that’s super important for me to say–but he definitely did not want me to marry his daughter. He was very okay with me dating her but did not want us to get married. That became a little uncomfortable. But now it’s been really incredible relationship.
Andrew: He didn’t want you to get married because you had no money at the time. Did he believe in your prospects?
Tom: Yeah. We weren’t quite that close. No. So, what he was saying was, “Look, I’m sure you’re a nice kid.” It’s important to note that he’s a very successful business man who came from nothing, but like the kind of nothing that you and I having grown up in Western society almost can’t imagine.
So, he grew up in a tiny village in Cypress, which I have been to the village that he grew up in and when I say it’s tiny, it is like a loose collection of houses. There aren’t even stores or anything like that. It is just unimaginably small. I’ve been to some small US towns, but they have nothing on like a real village. So, that’s where he grows up only to retire from one of the largest shipping companies in the world and he was running it and just had done well for himself.
So, he was saying, “Look, my daughter is used to a certain way of life. How are you going to take care of her?” That became the question that gave me a lot of juice but it also gave me an opportunity to give him an answer.
The answer was, “I know what you see right now is I’m undereducated,” at the time I was unemployed, “Unemployed broke kid, but I’m the most ambitious person you’ve ever met and I promise you one day I’ll make your daughter wealthy. I know you can’t see it right now, but if you give me time to become who I need to become, then I will deliver on that promise.”
The really cool part of that story is for years I make my wife destitute. She’s totally poor. She’s clipping coupons. It was never dark because we really enjoyed, even that time was a romantic time for us. But it was hard financially. It was very, very hard.
So, finally obviously I end up having tremendous success, even bigger than I had ever imagined. My father in law comes to visit. I’m showing him around the Quest facility. It’s like 600,000 square feet. It’s absolutely massive. I said, “Remember asking me how I was going to take care of your daughter?” He said, “Yes.” I said, “How am I doing?” And he just cried. It was really, really cool.
Tom: Because our relationship up to that point, he had been so amazing to me and so kind and so encouraging and while he feared we would never be successful, he obviously always wanted it.
Andrew: Wow. And that’s all willpower, it feels like, with you. The first thing that you started was a company that I’ve been looking up a little bit, Awareness Technologies.
Andrew: You were cofounder, right?
Tom: So, the two guys who are now my business partners, they hired me as a copywriter before the company had a product. So, I was part of the founding team but ultimately I earned my way to equity. The story that I told even back then was, “I’m one of the founders.” But in truth, kind of not.
Andrew: I see. How much equity did you end up in the business?
Tom: I ended up with 10% of that company.
Andrew: Ten percent. What did they do?
Tom: What they do?
Andrew: What did Awareness–actually, here’s what I saw Awareness Technology does. It lets you see what people are doing online. So, I can actually watch what my kid is doing on the internet by using Awareness Technologies. I can keep an eye on what my team is doing on the internet. That’s the kind of stuff, right?
Tom: Data loss prevention was our core business, which was stopping people from stealing things out of the company. So, if you have proprietary information you didn’t want to leave, we could lock it down so that they couldn’t email out or they couldn’t put it on USB device, things like that.
Andrew: Okay. Who created that software? I know the two cofounders there were Mike and Ron. Neither one of them as far as I know is an engineer.
Tom: No. That’s been a thing that’s always rung true for us. We don’t do things because we have some inordinate skill set based on background. It really comes down to what you were talking about which is willpower. Are you prepared to do the hustle to learn it? Our big thing is we can learn to do anything. So, we’ve never been held back by that.
So, obviously we hired very talented technologists and people that code and do the languages and all of that. For us, such a big part of entrepreneurship is team building. You don’t need to do everything yourself. In fact, if you’re trying to do everything yourself, you’re really setting yourself up for failure.
Andrew: So then who built this software?
Tom: We had a whole team of guys that was really a collective of young bright minds who coded like fiends and did a great job. It was actually the people is one thing that I enjoyed. We had some great people that worked really hard and were really trying to make it happen.
In that business, we were like the super underdogs. We were going to corporate security software, which you can imagine is a pretty buttoned up establishment and we were super young. I was in my mid-20s. My partners just cracked their early 30s. So, it was very interesting to come in and try to get people to take this group of kids seriously.
Andrew: Still you guys did well but you weren’t happy with it and that’s what set you off on this new path. Let me do a quick sponsorship break and then come back and talk about why you weren’t happy even though you guys were doing well and then how you started this brand that I thought was a mega giant company put together.
But first I should say to everybody that’s listening to me that if you want to have meetings with people, it doesn’t work to email people and say, “Hey, will you get on a call with me next Thursday at 5:00 p.m.?” That just doesn’t work anymore. If they’re not available Thursday at 5:00 p.m. they’re not going to respond. They’re not going to wait for you to come back with more options. It becomes really tedious and then you lose the opportunity to talk to someone and make a sale or create a partnership or get to know them in any way.
It’s even worse when you’re trying to meet somebody in person because there are so many logistics involved with that. I’ve actually had people who I sign up for their software and they say, “Hey, Andrew, thanks for signing up for the software. If you want, let’s get on a call and I’ll tell you why you should upgrade from trial to paid.” I just don’t follow up with that. I can’t find a time with them going back and forth.
So, that’s where Acuity Scheduling comes in. Let me say it again clearly. My sponsor is Acuity Scheduling. What they do is they let you connect your calendar to their system so that they know when you’re busy and when you’re not busy. Then they let you mark off the times that you want to have a conversation with people. For me, every Thursday from 10:00 to 11:00 on to the end of the day, I’m usually available, sometimes Mondays. I just paint it on the calendar the days that I’m available.
Then they create a link that you can send out to someone and make it easy to pick the time that’s convenient for them but also when you’re available to have a call. It’s really simple. You can even embed it on your site. I do. You can even embed it onto all kinds of tools including Zapier, your email system, whatever you want so that after they sign up for a call with you, you can also setup a sequence of emails to follow up.
All I do is use a simple one that sends a reminder the day before and sends one a few hours before the meeting so the person knows to get on a call. We also both get the call on our calendar. Really great system. Super simple and very effective. It’s so simple that anyone on my team can update it for me.
I urge you to go try it if you want to get people on a call with you. Go to AcuityScheduling.com/Mixergy. When you go to that special URL, they’re going to give you 45 days for free to use the software–AcuityScheduling.com/Mixergy. Good software, Tom. Really good guys.
Tom: Nice. Very cool.
Andrew: By the way, the connection is not super good for some reason. If for some reason it gets worse, we can just switch this from video to a phone call and I’ll keep recording.
Tom: Okay. Yeah. Whatever you want.
Andrew: So, why weren’t you happy? The business was doing well. You cracked this market that was really hard. You were working with two guys that you liked enough you were still working with them. What was wrong?
Tom: At the end of the day, we all have a limited number of units of energy that you can apply for something. Maybe for some people, passion and interest doesn’t matter, but for me, it really does. So, I’m hard-wired for empathy, connection, that all just really means something to me and delivering value is something that is so meaningful to me and is something I really think about all the time.
So, it was chasing money, going after it. We were succeeding, making money, winning awards, standing in a beautiful conference room overlooking the Pacific Ocean and I just realized in the core of my being that I’m not happy. If you ask–and I’ve done this now–I go through resumes and ask people, “What do you want out of life? What are you really trying to do with your life, not your career, your life?”
The almost universal and the answer is happiness. Now, I don’t think most people know the difference between momentary happiness and framework happiness and that’s problem number one. Or they do what I did, which is they understand framework happiness but they’re chasing something they think will give them framework happiness and in reality it doesn’t.
So, I really believed that money was like a pot of gold at the end of the rainbow. It was this thing where once you got to it and had it that everything would be different. You’d be more powerful. You’d be more amazing. You’d feel better. The truth is that’s not true, at least not for somebody who’s wired for connection and value and all that stuff.
So, I went to my partners and I said, “Look, this has been incredible. You guys have taught me so much.” I truly loved these guys like brothers, like for real, love. I just said, “Here is my equity.” I gave it back and I said, “If I don’t cross the finish line, I shouldn’t get anything, so I wish you guys all the best and I’m just miserable and I want to go do something that I’m passionate about, something that really fills me with a sense of wellbeing and joy and the feeling of being alive.”
I drive home and I’m pulling into my driveway and they call me on the phone and they’re like, “Hey, come have dinner with us.” And I thought, “I’d do anything with these guys, so for sure.” I go out to dinner and they say, “We could do this without you, but we don’t want to.”
In that moment, there was something about those words in particular that allowed me to finally confess that money isn’t my highest value. I’m not interested in chasing, which at that time, we had made a pact with each other that we would do whatever would make the business more profitable–late nights, weekends, missed anniversaries, don’t take vacations, none of it matters. It’s all about getting the business going, which would have worked if that had been the thing in life I was most passionate about. But because it wasn’t, it just ended up being a disaster.
So, I said, “The value for me that trumps everything, trumps money, trumps all of it is camaraderie. It’s that connection. It’s feeling like we’re brothers battling against the odds. But that’s mean that it’s about connection. It’s about delivering value. It’s about finding something that we can really believe in and give ourselves to this entity completely because it makes us feel alive.”
They said, “That’s perfect. We feel exactly the same. So, none of us had wanted to say because we’d had this agreement with the tree of us.” So, at the height of our success, we ended up selling that company and starting this thing at the time, which was a crazy dream. Everybody thought we were out of our minds.
But for three very different reasons, we knew we wanted to be in health and nutrition and we started Quest. It’s grown so much that people now look at it as self-evident, but one of the first sales that we went for, a guy said this is a real quote, “I need a another protein bar like I need another hole in the head.” He now sells, by the way, a ton of our product. But at first he said no and he said no for like a year and a half.
Andrew: Who is the guy?
Tom: I don’t remember his name. It wasn’t me that was doing the sale?
Andrew: Is it someone who was a major reseller?
Tom: Yeah and I don’t want to rat him out. But yes, he is a sub-distributor. He’s not one of our primary distributors.
Andrew: How much money did you guys sell that other business for?
Tom: We can’t disclose that because of the terms of the deal, but compared to what we’re doing now, it’s nothing.
Andrew: We’re talking millions though?
Andrew: So, you went off to found Quest. Why Quest, dude? Why come out with another protein bar? Why come out with another nutrition company? What was it about that that was so satisfying that you were willing to give up wealth?
Tom: Again, it’s for three very different reasons. For me it was very, very simple. I wanted to save my mom and my sister.
Andrew: Couldn’t you just go buy stuff for them and save them? They had a weight issue, right?
Tom: They did. I couldn’t. That was why we got in the business. Let’s just take protein bars, which is the easiest example. But this problem is so pervasive in food that our entire mission is predicated on the fact that somebody needs to do this and apparently it’s going to have to be us, which is to make food that people choose based on taste and it happens to be good for them, like by accident, it’s just great for them. So, they can eat it based on urge, impulse, desire and actually move themselves forward metabolically.
So, looking at the protein bar industry, there was such a hole in that market because you have all this pent-up demand. You have the physical culture lists, body builders, fitness, physique, competitors, hardcore athletes. All of them want the convenience and taste profile of a protein bar and they want the protein, but to get it, they’ve had to endure either something that tasted terrible or something that had a lot of sugar. Before we came on board, there was like in the average protein bar, like 20 grams of sugar. It’s so crazy.
So, there wasn’t a single bar on the market that we would eat and we knew the market backwards and forwards because we were all guys that lifted, super-focused on nutrition even when we were running the technology company and just realized, well, there’s at least a market of three. For me, I was thinking wow, if we could really make this thing–we were making bars that we were just bringing to work with us that weren’t shelf-stable or anything.
Andrew: You guys were making them at home?
Andrew: Before you started this business?
Andrew: Back when you were at Awareness you were making your own protein bars.
Andrew: That gives me a sense of the background I didn’t know.
Tom: My wife was making them for me. Ron’s wife was making them for him. His wife, Shannon, really started to get into it. Some of hers just started tasting amazing. So, that became, “Okay, well this can’t be that hard.” Little did we know, of course… But that was how we got the ball rolling and just went after it.
Andrew: One of the first things you did was you handwrote letters to influencers. How many and what was this about?
Tom: Most of them are emails. So, it was handcrafted, I think is what I would say. So, we would–and we did–it’s got to be close to 1,000. So, we went after people that were influential, everybody from I don’t know if you know Blogilates, who is Cassie Ho. She’s just an amazing, amazing influencer in whatever four or five years ago wasn’t as big as she is now. So, it was a little bit more realistic to be able to reach her.
People like Carl Lanore, who we are still involved with, Dave Palumbo, like just the big names in the hardcore fitness industry. We said, “Look, we understand what you’re doing from a nutritional perspective, what you recommend to your clients or your followers and we think we have something that will resonate with you and we want you to give it a try.”
Big and small–we went out to people that had 100 people that followed them. We went out to people that had 1 million people following them and just said, “We think we’ve done something special. All we’re asking you to do is try it. If you love it or hate it, it doesn’t matter, just tell somebody about it. Because we weren’t asking people to position it, we didn’t do like, “Hey, you might want to mention that it doesn’t have sugar…” We didn’t do any of that. It was just, “If you like it, tell people you like it. If you hate it, tell people you hate it.”
Andrew: I see. Why give it to somebody that has 100 followers? It’s still costing you money to make it.
Tom: It is. Here’s the really interesting thing, man. When you talk about changing someone’s life, if you’re really in it for that–if we were just in it for the cash flow, then I probably would have gone after people I could pay and try to get the buzz out there and buy my way to revenue. We had a totally different model, which was we’re going to lead with value. We’re going to do that which leads [inaudible 00:26:16]…
Andrew: Sorry, Tom. We just lost the–I think the connection was so bad that we’re just going to do audio only. You were starting to say that it made sense to reach out to people even if they had 100 people following them because…
Tom: Yeah. Our thing was the company was entirely predicated on delivering value. That’s what we wanted to do. We said, “Look, we’ve chased money. We’ve done that. We know where that ends. Instead of doing that, let’s build a business entirely around delivering value.” And look, we’re not fools.
We knew that there was a potential big business opportunity that a lot of people struggled the way that my family struggled with obesity, ill health, just getting good healthy foods that taste amazing. So, we were well aware that this all needed to be done in a business savvy way but we could actually lead with who we were as people, be totally authentic.
The funny thing is that all of this stuff has become buzzwords now. But these were not buzzwords in 2009 when we first started conceptualizing the company. I was just pissed. I was pissed that I spent so much time trying to make money and I was so unhappy that in many ways, Quest is a reaction to that, not every wanting to feel that way again, to want to actually care about the customers and feel connected to them and know their stories and to help them and to have people write in and say, “This has changed my life. You helped me lose 100 pounds.”
My favorite story ever–a woman whose son has brain cancer and every day had to take the weirdest foods into school because when he’s eating ketogenically, to eat a ketogenic diet his parents believe keeps the cancer at bay. To do that, you show up with weird foods. The kid was getting teased and made fun of. So, she said, “When your product came out,” even though a Quest bar is not by any stretch of the imagination typically considered ketogenic. She said, “I could send that with him. That was like the first thing he got that people didn’t tease him about.” I was like, “Oh my god.”
I get that this is a business podcast and I get right now I am turning off a huge portion of your audience, but that was so amazing to me to go, “Whoa, like what we’ve made has allowed this woman to feel like a better mom,” those are her words. She was like, “You made me feel like a better mom because I could give my son something that he could essentially show of.” That was so cool. That was the kind of thing that we wanted to do when we started the company.
I could never have told you that kind of story specifically. But to let people have a relationship with our products, with the company and actually get to know us as people so that they could now who we are, and back then, we were so small. That didn’t seem weird. It wasn’t like, “Hey, here I am, the cofounder of a billion dollar company.” It was like, “Hey, here I am, one of the only six people working in the company hustling my ass off every day like really wanting to do something cool for you. Here I am. Call me any time.” That’s how it started.
It’s just because of that and the collision with the world becoming more aware of what they eat and social media all at the same time allowed us to accidentally ride the wave of people finally demanding authenticity, demanding a connection, demanding companies be socially responsible and ask about how they can deliver value and we just happened to be right there coming out of this dark frustrating place as entrepreneurs wanting to do more than just make money.
Andrew: All right. So, let’s talk about how you then made the product. The first version was stuff that your wives made for you. That obviously isn’t what you could package and sell, especially since you were only getting three-day shelf life out of it. How’d you make the first version that you were actually able to package and put into stores?
Tom: This was a really fun time. So, we had so many learnings to do and we spent–Ron and his wife spent an ungodly, it must have been 18 months playing with the formula, meeting with people, trying to figure out, “How do we get this thing shelf stable?” Ron is just–look, take it for what it’s worth coming out of my mouth, but the man is the Steve Jobs of nutrition, that guy is just an amazing mind when it comes to metabolism. It’s utterly amazing to watch.
Andrew: Who was he talking to, to help understand how to make this?
Tom: Anyone and everyone. So, we’ve hired consultant after consultant. We have collected just an amazing brain trust of human beings right now here today, just today alone we have three different people–
Andrew: Sorry, Tom, but before you got to this level where you have so many people around you, you were still hiring consultants to make the first version?
Tom: We had to get consultants to help us deal with water activity, for sure.
Andrew: What’s water activity?
Tom: So, water activity is actually what makes things rot. You might think, “Hey, water, what could be safer?” But water contributes to microbial growth, which is why products go bad. So, you have to find a way to keep something shelf stable by somehow trapping or binding the water.
And all of that stuff was a lesson, but we were so excited to be learning that stuff and because we had sold the company but we still had jobs at the company. So for us, it was like this sort of beautiful moment where hey, we can just pursue what we love, somebody else is taking the day to day responsibility of that company.
I moved truly into just somewhat of an advisory role for them and was the first to come over to Quest full time and just really got to learn and play. That really became a big part of our ethos. What’s fun? What would you enjoy doing? My partners and I made a promise to each other that that would be one of the guiding principles, like you’re going to show up every day and you’re going to love what you’re doing, even if we’re failing. That sort of mindset has served us very well.
Andrew: Let me go back to the mechanics of the first version. So, it was all hired consultants and I’m assuming you were able to pay for them because you guys sold the company before and you rolled the money into this business. Am I right?
Tom: Yeah. But until we bought our first line of equipment, everything we spent was $10,000 or less, including consultants.
Andrew: How did you even know which consultants to go after? How would you even find the right consultants?
Tom: Ask around, forums, boards…
Andrew: You’d go to message boards to figure out how to create a protein bar you could put into a store?
Tom: It’s not quite like that. I’m now accidentally painting an untruth. The fact is you know somebody who knows somebody who knows somebody. We were in business long enough that we had a ton of connections. So, somebody would make an off-handed comment like, “I know this woman who actually consults for,” whoever, Kellogg or whatever. “You guys should reach out to her.” “Okay. We don’t know her from Adam, but cool. Let’s reach out.”
We had a few. Most are no longer associated with the company. Then you’ve got a few that are. You’ve developed a relationship over time and they’ve seen us grow from nothing to something and we had business advisors who also were random people we met back at our last company who liked us enough to give advice and lend a rolodex number or two as we went. But on top of that, from a nutritional standpoint, there’s some incredibly date that you can find. Research institutions publish so much of their work. So, we were reading deep into abstracts and all kinds of stuff to really get our minds wrapped around this.
Q I know that’s kind of detailed question to get into how did you even find the right consultants and what message board you go to for that. But I was just thinking about an email I got earlier today from one of my listeners who’s got clothing that he wants to start manufacturing and the question of, “Where do I go with this was what he sent me. I get it. I get that it’s challenging, but I also get that you’re willing to make more phone calls and explore more avenues and dig online and ask friends and friends of friends much more than this person who emailed me was.
Tom: Yeah. Here’s something that we say all the time, which is we’re collectors of high-caliber talent. So, we’ve been saying that. I’ve been with my partners for 14 years. We’ve been saying that for 14 years. You can imagine in 14 years, especially because we like to deliver value before we ask for anything return, you spend 14 years trying to do good things for as many people as you can, telling them the whole time, “I want you to be a part of my ecosystem. I didn’t know how or in what way this will eventually work out, but I like you as a person. We have an authentic connection. I want to keep you around. I value your ideas. I want to hear them.”
We listen. I think people that give advice, the most frustrating thing ever is when people don’t listen. But because my partners and I, we all celebrate a growth mindset, we talk about it, we go in on it every day trying to get better and better and better that when someone comes along from the outside and they have a great idea, not only do we implement that, but we celebrate that person for having contributed that. That’s just created this environment where there are a lot of people swirling around this company that want to help, that know their ideas will be heard and cherished and it just creates a cool vibe.
Andrew: You know what? I read an article about you guys at Food Navigator USA. I guess you did an interview with them at some point where you talked about how Ron had to–actually, it was Mike–who had to create the machinery that would produce that bars that you guys had in mind. Is that right?
Tom: That is right. That’s the thing, man. We are never going to get enough credit for that. Mike is the unsung hero of this company. He’s the least interested in ever being out front or celebrated.
Andrew: What did he do, exactly? What was the problem and how did he solve it?
Tom: Once you take the liquid sugar out of a product, which is what we did. That was our whole claim to fame, “Hey, this bar is not made with sugar.” You think of sugar as being added as a dry powder like you would have at your house. It’s normally introduced as a syrup. So, think of high fructose corn syrup, right? It’s the very nature of it being a syrup that makes it so useful in production. Since high fructose corn syrup has been used for so long, most of the equipment has also been developed to produce things that have massive amounts of high fructose corn syrup.
So, once you take that out, even if you replace it with something that seems similar from a textural perspective because that’s what we did. We swapped it with a liquid fiber, you would think, “Hey, the fiber looks the same,” but it’s obviously fundamentally different from a liquid sugar. So, as soon as you take that sugar out, the machinery just can’t handle it. So, we didn’t want to manufacture.
We had no interest being manufacturers. We go to all the contract manufacturers to do bars. They all tell us, “Guys, your bar just can’t be made.” We didn’t believe them. We have what we call the arrogance of belief. So, we thought, “Hey, they don’t have the willpower to do it, but we do.” We went out and bought our own line of protein bar equipment and thought through sheer force of will we will make this work. Low and behold, they were right. And it wouldn’t work. We were like, “Oh man, we’re really invested now.”
That was the first time we spent some real money. So, we had taken the vast majority of the proceeds from our last company and put it into buying all of this equipment. There we are with all of this equipment and it doesn’t work. Mike looks at it and he says, “I know what to do to this, but we’re going to have to reengineer it. You’re going to have to let me cut it apart and weld it back together. But if you let me do that, it will work.”
Now, until he does that, we can still sell it. But once he does that, now it either sinks or swims and everything goes along with it. We were kind of excited to do it. It was like, “Let’s do this. Let’s go all-in, dude. I believe in Mike Osbourne. That kid is for real. He’s an Iowa farm boy. He knows how to get stuff done. Let’s let him do it.”
He cuts it apart, puts it back together and it works. I literally couldn’t believe that it worked. It was amazing. The cool thing is I took pictures. So, we have pictures of him actually cutting it apart. So, it’s a pretty cool bit of memorabilia for us?
Andrew: Is that online somewhere?
Tom: Yeah. We have a video that we call the Quest Spirit video. There’s one brief moment where you see it on screen.
Andrew: Can I ask you for a photo?
Tom: Yeah, of course.
Andrew: I’d love to post it. Let me send an email to you after this interview asking for it.
Tom: No problem.
Andrew: So, he figures this out. Why? What’s his background that allowed him to do that?
Tom: Truly, he is an Iowa farm boy.
Andrew: Just a tinkerer because he’s an Iowa farm boy.
Tom: Absolutely. He said, “When we were kids, there was no buying to have something replaced. You had to fix it. And in my spare time, what I had to play with were tools and materials.” So, he used to build things and he would build crazy stuff. He once built, I think it was called a bolo. That thing with a piece of rope with two weights on the end that you throw and it trips something up. He said he told his brother to run and then the through the bolo and it caught his legs and took him down and he was very happy with himself.
Andrew: I see.
Tom: He used to just make stuff.
Andrew: All right. So, now you’ve got the vision. You’ve got the influencers. You’ve got the bar. It’s time to get customers. Where did you get your first customers?
Tom: Giving product away. So, those letters I was talking about, sending out free product. When something works, when it really delivers value, it’s not hard to get customers. It’s really not.
Andrew: So, they were saying they would write about it or tell a friend and then tell them to do what, go to your website to buy or at the time did you get into stores?
Tom: Entirely website.
Andrew: Just all go to your website and buying?
Andrew: How big did you get revenue-wise before you moved beyond the website?
Tom: I can’t remember if we crossed $10 million or not, but we were doing very well before we went to retail.
Andrew: Wow. And all these people telling their friends, telling their followers about this bar that had high protein, low sugar, low carbs–no sugar, actually, right?
Andrew: No sugar added. It’s 4 gram net carbs is the one I’ve got here at my desk. Then their followers and friends would go to your website and buy these bars without getting to taste them, without getting to see them in person.
Tom: No. We would give away bars to just about anybody. So, every marketing dollar that we spent was on shipping people product. And hey, here’s a great example. So, you want to know how did we figure out the cheapest way to ship two bars? This sounds super expensive. We were growing so fast off of our little web business that we were looking for another facility to take over, but we needed to move so fast we in essence had to find somebody that was in distress. So, we found a guy that had posted a Craigslist ad, if I remember correctly, saying, “Hey, I’ve got this popcorn company. I need somebody to come take it off my hands.”
So, we went and met him, told him what we were looking to do. We were looking to find–it was bigger than we needed–can we produce at the same time, you run your popcorn at night, we run it during the day. By the time we were ready to sign on the line and move in, we already needed all the space. That’s how fast we were growing. So, we had to convince him to pack up and leave and then there was actually another architect in the building and we ultimately had to ask him to leave because we needed so much room.
That guy who we happened to take the building from was just intrigued by what we were doing and we enjoyed being around him. So, he would pop in every now and then to be the sage wise old man and was like, “Hey, you guys should consider using bulk rate shipping.” He knew that there was like this area that used people with learning disabilities to like pack boxes, like as long as the order was simple enough.
So, in the beginning, it was this really cool thing where we doing this social thing where we were bringing revenue to this amazing group of people that were looking out for people that otherwise wouldn’t be able to have a job. They were helping us keep the cost down on the boxes. Then we negotiated the rate with the post office, all because this guy helped us out, just gave us a piece of advice that otherwise we would have had to learn the hard way.
Andrew: What would it have cost you roughly to send out two bars? That does seem like a very expensive thing to do relative to the cost of the bars.
Tom: It was very expensive. I think it cost about $5.
Andrew: Okay. And you were willing to sell two bars at a time or did you go more than that?
Tom: Those were free. We were giving them out. So, that was all in. We didn’t ask for anything. We didn’t ask for your credit card number. We just needed whatever we needed to get it to you. So, your address, sure, your name, sure. The one thing we did capture was email. Beyond that, we really believed people would fall in love with the product. So, our mission became get as many people to try it as humanly possible. So, as many bars as we could afford to give away and ship, we did.
Andrew: So, I discovered you guys at GNC Nutrition. I went in there one time on my way to the pool to swim and I wanted something, some kind of snack and I said, I see a GNC there. Let’s go in there. They’ll have something. I reach for something and then the guy in the store said, “Why not try Quest bars instead? They’re better and you get three for the price of two.” I gave it a shot and that’s the first time that I ever tried you guys in person.
Andrew: How did you get into stores? What’s the first store that you got into?
Tom: The first store started buying against our wishes. We were telling everybody, “We want to build this business online. We don’t want to be in retail. We know there could be price conflict in different channels.” We kept saying, “No, no, no.” GNC in particular was courting us so heavily that we actually hired somebody to more artfully tell them no. It was crazy to have somebody on staff whose job was to tell GNC no, to manage the relationship even though we weren’t ready to sell.
You create the demand, the stores are going to come to you. That’s exactly what happened. We had stores coming to us, stores buying off of our website as if they were a normal consumer. Then finally, we just had enough strength of brand that we could go to a GNC and a Vitamin Shoppe and negotiate what we would consider fair terms.
Andrew: I see because before then they had the upper hand, you’re saying?
Tom: For sure. The contracts reflected that.
Andrew: What’s the first big one you got into?
Tom: I think we hit shelves at Vitamin Shoppe first, though I can’t swear to that. GNC and Vitamin Shoppe both have been amazing partners for us.
Andrew: They came to you. Did you do anything to help increase sales to make sure you succeeded at those stores?
Tom: 100%, but not in the ways you would think. So, we don’t do traditional advertising. We don’t even do traditional marketing. All of our stuff is socially driven. It’s about experience. It’s about wanting people to touch and experience what this company is all about. That’s a really, really big deal for us.
So, I think we’re at our best when we’re high touch. So, we send people into stores to do demos. We go to any show that even remotely makes sense for people to get a chance in an appropriate context to try our product, to meet the people working the booth who if they’re true brand ambassadors are going to be very upbeat, are going to be very interested in how they can help. They want to know about your journey. They want to know whether or not Quest is going to be useful and that just created all of this demand that then we could drive into stores simply by telling them it’s now available in stores.
Andrew: What’s the deal with the ambassadors? I’ve heard a lot about them. How many do you have and what do they do?
Tom: At the height, because we have recently changed our strategy, in the beginning, we would just do an event anywhere and everywhere. We were in the smallest towns in America that you can imagine. At that time, we had almost 1,000 ambassadors. We’ve since scaled it back to a few hundred. The reason we do that is we’re focused on 10 core markets with a few flex markets. So, we’ll settle around 20 different cities essentially that we really cover and do a great job of trying to add value to the local population.
Andrew: An ambassador goes out and gives out the bars. Is that right?
Tom: They do. They support different events. Take a CrossFit event, they would go to that CrossFit event. Or if there’s a yoga event, they would go sample at both, really find unique and interesting ways to integrate with the community. One thing that’s really big for us is gaming, believe it or not. We have a whole division, Quest Gaming. We’re there at major e-sporting events to support the teams. We actually sponsor a League of Legends team called Team Liquid.
There are just other really cool ways where we found as a community of people who really want to be more health conscious. They want delicious food that happens to be good for them. Because our brand is fun. It’s upbeat. It’s very personable. We’ve had a lot of really neat people want to be associated with the brand and help us echo that farther.
Andrew: How did you know if the ambassadors were actually worth the money you were actually spending on them? If you sent someone out to the market, you were paying the ambassador. You’re also paying for the product.
Tom: Yeah. So, what we had to do was work out metrics for lifetime value of a customer. So, we had metrics for if I give out a bar it costs me this. X percent of people that try a bar become a customer and then the average lifetime value of a customer is Y.
Andrew: How did you know at the time? How did you know how many people who tried a bar would end up buying it again on their own?
Tom: The beautiful thing is when we started, it was all online. So, it was all trackable. I knew who I sent product to. I knew if they came back and ordered–if they ordered under a different name or something, there would be some leakage there where you wouldn’t be able to directly correlate it. But let’s say I gave away $100,000 worth of bars and I made $500,000. Okay. Well, that’s an amazing ROI. Let’s keep doing more of that. At what point do I start spending $100,000 and now I’m only making $110,000, like, “Okay, that’s starting to get a bit dicey.”
There was a time. We don’t sample nearly as much anymore. In the early days, it was about brand recognition. People didn’t know who we were. So, getting a bar in front of them was this experience. It was an end to one moment. We went from not existing in their world to existing.
Now it’s they’ve probably tried this before. They may buy regularly. So, now you’re sampling a lot of times to people who a) are already aware of your brand, b) may already be diehard customers. So, a lot of what we do from a sampling perspective now is just customer appreciation. We’re just giving out bars because we want to show the love. It’s not because I think that being at a fitness event is going to be me introducing you to the bar for the first time.
Andrew: That happened already.
Andrew: Going back to the time when you were handing them out and you were trying to figure out how profitable it was or how worthwhile, I understand that using online metrics can help. You’ve already given out some free online and you know how many of the people who got it for free came back and bought and what they were worth.
But someone who’s getting in person is not the same as someone who’s coming online and really going out of their way to seek you out. Were there more metrics than that? Was there a way to really be clear about how many people are taking these bars, what they cost you and what you’re making from them or am I being too anal about this?
Tom: No, no, this is great. So, I actually think that we were better off giving it to people in person. The reason we were better off giving it to people in person even though they had not sought us out is two-fold. One, we were incredibly diligent about context. So, I’m not going to show up at your kid’s baseball game. Your mind is on something else. While it’s sort of vaguely sports related, you’re not necessarily thinking about healthy living. I’m not going to show up at a UFC event.
People oddly enough–I actually think they should–but they don’t take nutritional cues from the world’s most elite martial fighters. Nonetheless they don’t. So, we don’t show up there. Where we show up is where people are raising their hand and saying, “I really, really care about my health or my physique or both.”
So, if you go to the Arnold Classic or go to the Olympia where it’s a bodybuilding show, the people that come to that show are hyper-aware of their nutrition. They are very concerned about nutrition’s impact on their body, both from a longevity standpoint and from a performance and aesthetic standpoint.
So, them encountering us there was just amazing. They’re looking or stuff like this even though they didn’t know we existed. Second, it’s powerful for us because our brand is really embodied through people. So, we have a sincere desire to connect, understand what your goals are, to cheer you on or just show our appreciation.
I hire for three things and you need all three if you want to be a Team Quest member. One, I’m looking for people grand ambition. Two, people with the drive to see that grand ambition through. And then three, compassion. It’s that third thing, compassion, that really makes us different and makes it so that people want to be around us because we’re people that like to win as a team.
So, for us, that’s why we in essence have branded this notion of Team Quest, which encompasses not only the people that work here, but anybody out here that supports the brand emotionally or through products. There are just some people that embody that can do spirit that we call the Quest mentality. So, when people encounter our people, I think that it speaks well for the brand.
Andrew: You told our producer that one of the big moments for you was when you made more revenue in one day with Quest than you did in a year with Awareness Technologies. Do you remember that day?
Tom: Very, very clearly. I don’t remember the date or anything, but I remember I was with Mike, my business partner, who handles the financial side of things. He was like, “You do realize that we just made more in one day than Awareness makes annually?” I was like, “Oh my god, that’s actually true.”
It just was utterly unbelievable and it was cool because there, back at Awareness, I was chasing money. That’s what I did from morning to night was think about what’s going to eke out another penny in profits. And then at Quest, I don’t think about that at all. I think about what’s going to bring more value. The cool thing is the more you hustle to bring people value, the more money you make. So, it’s just this incredibly cool cycle. People will pay for value.
Andrew: Yeah. So, what’s next for you?
Tom: Our company is really just blindly focused on one thing and that’s ending metabolic disease. Now, we have a very broad vision of what that means and the reason that we want to do it is to help people live a better life, which is, of course, why do Inside Quest, because I don’t believe taking care of the body and not taking care of the mind really helps.
Andrew: We should say what Inside Quest is. I had no idea that you guys were doing this. I actually should have because it’s on your Facebook page. But for some reason, the link just didn’t register in my mind. What is that?
Tom: Inside Quest is very similar to your show. It’s aimed at people who are entrepreneurial minded who are probably relatively early in their careers and they want to develop the mindset of somebody who’s going to succeed at anything they put their mind to. I don’t say entrepreneurs. I say entrepreneurial minded for a reason. You could want to be the best parent ever. You could want to be an Olympic athlete. In fact, we just had somebody who’s trying to compete in this year’s Olympics on the show. So, it’s about that mindset. It’s about getting a growth mindset, what I call pulling people out of the Matrix.
Andrew: Okay. And you want to end metabolic diseases. So, what’s next? The other thing you told our producer was that you want to make on making product changes in a way that includes the customer. Before we started, you told me about one way that you’re doing it. You’re creating new products that help people be healthier and eventually end metabolic diseases and you’ve got this Labs product that you–actually, you haven’t opened it up. You’re keeping it quiet. What’s that?
Tom: Quest Labs is our way of bringing products to market incredibly fast. The food industry to me is dying a death of having the wrong mindset. So, I believe that no matter what your business, the right mindset is the technology mindset. Tech companies, they move fast. They understand that you’ve got to be projecting out to the future.
You’ve got to go where the puck is going to be, not where the puck is right at this moment and really having to forecast about where the world is headed. When you look at nutrition, that’s so, so critical and people have this set and forget mentality now. We think just like a tech startup, you should be iterating.
So, we bring the best product to the market that we could possibly make at that moment, but we know that a week from then we’ll be able to make it better, a month from then even better than that. So, we’re constantly trying to iterate and improve these products. So, bringing them out into labs one, let’s us come to the market with a product that’s truly in beta, where we know it’s not ready for primetime.
We need people’s feedback. We want to know what they think. Is it on the money? Is it ready for primetime? Does it need some changes? If so what changes? And really just include them in that whole process. That and there are so many products that we have and it would take tens of millions of dollars that would by the equipment to do them all and some were going to be duds. Some are going to be things that people don’t care about.
So, rather than us just trying to guess at that, bring theme to market, let people try them, we’re producing among small scales, which is why it’s a very ultra-exclusive community right now because we just can’t supply all the demand that we have and then from that, we see what people buy, what they’re willing to pay for, what they reorder, what becomes an ongoing part of their life–
Andrew: Do you have an example of something going on there that succeeded or failed?
Tom: We just launched it. So, we’ve had–so far everything that we’ve put out has sold out. That’s a really good sign. It’s only been up for a couple weeks. So, we don’t have a sense of the reorder rate. The thing I’m most excited about right now, to go back to your earlier question of what’s next was ketogenics. So, if you’re going to end metabolic disease, one of the things you’re going to come across somewhat inevitably is cancer.
There’s a really powerful theory right now that cancer itself is a metabolic disease and we happen to think that’s almost certainly true. If it is true, then it’s going to be a food company that solves the problem, not a drug company. So, we’re looking heavily at ketogenics and its impact on cancer. We’ve been funding. We’ve spent millions of dollars of our own money funding research in cancer and what ketogenics’ impact is on it.
The early data that’s coming out–we don’t make claims, so I’m not going to say anything bold. I’m just going to say it’s intriguing. People should really look at it and start digging into the research and see something very interesting is happening. We’re just trying to make products for people that want to live a ketogenic diet but are having trouble with compliance, which is the most difficult thing with any diet, especially a ketogenic diet.
So, that’s where we come in. We’re totally agnostic to how people eat. We just want to make it metabolically advantageous. So, whether you want to eat cookies, cakes, pies, ice cream, pizza, pasta. We get it. We just want to give you healthy versions of all of that stuff that you can use to build the diet that you think is right for you.
Andrew: Yeah. I think I just saw on Quest Labs you guys are selling pasta. That’s one of the things you’re trying out.
Tom: Yeah. That one is straight up Quest Nutrition. We’ve had that now for almost four years.
Tom: Yeah. You want to talk about one that’s never taken off? That one. We can do better.
Andrew: Why do you think it hasn’t? I had no idea.
Tom: It’s very particular. Some people love it and they order a ton of it. Other people just think it’s weird. It’s made entirely from fiber.
Andrew: Interesting. I wonder what that tastes like. I’m going to buy it right now.
Tom: Give it a shot.
Andrew: It’s not on your website. I didn’t see it on Amazon recommended to me.
Tom: I don’t think it’s on Amazon, but it is on our website.
Andrew: Yeah. I was in the Labs and it took me to your website. What’s the URL for the Labs?
Tom: It’s QuestNutrititon.com/QuestLabs. You have to sign up and there’s a wait list right now, but we definitely encourage people to jump in. Obviously the more people we’ll have waiting, the more we’ll know we need to make an investment. So, all of this data helps move us forward.
Andrew: Okay. I see what happened. You guys just said you received my message and my request to be a part of this and I will be contacted, but now I can continue shopping and that took me into the store where I saw the pasta.
Tom: Yeah. That will take you to normal Quest Nutrition, the stuff we always have in stock. Then Labs is reserved for the exclusive stuff that’s all but handmade at this point.
Andrew: Oh wow. All right. Thanks so much for being on here.
Tom: What a pleasure, Andrew. Thank you so much for inviting me on the show. It was really a lot of fun. I appreciate it.
Andrew: Well, now I know the story behind the bars I eat every day. I think I only got to one of my sponsors because we had that tech issue today. So, Acuity Scheduling if you want to schedule a meeting easily with people. And the second sponsor I’ll just have to do a make-good at some point in the future, not a problem. But I’m grateful to you for doing this interview. Thank you all for being a part of it. Bye, everyone. Bye, Tom.