Exit Strategy S1:E2 // Andrew Dubum: Bold Strategies That Propelled Hims & Hers Into Unicorn Status

Moiz Ali

Alright Andrew, thanks so much for being on the back-end episode of Exit Strategy podcast. Super excited to have a conversation with you. I feel like you and I are both in the e-commerce space and we've never met, although I've met Jack before. So excited to meet you!

Andrew Dudum

it's a pleasure thank you so much for having me on

Moiz Ali

And so, a little bit about your background. You were the co-founder and a partner at Atomic, and the CEO of Hims and Hers, right? Okay, looking forward to this conversation because I think that every company I talk to today wants to be the new Atomic. Can you tell me first how you would describe Atomic? Is it like an accelerator? Is it like an incubator? How do you describe Atomic?

Andrew Dudum

Yeah, so Atomic is something pretty special. It's neither a venture fund nor a studio model. Essentially, Atomic is a company whose sole purpose is to build other companies. We have a group of 20 or 30 individuals there who are all operators and entrepreneurs. We diligence between 20 to 30 businesses per year and end up spinning out and evaluating the ones that we see the highest potential in. Then, we go and fund and found those companies with other co-founders that we bring into the fold. So, it's really a team of operators that have a phenomenal access to a pool of capital and great LPs like Peter Thiel and Marc Andreessen. We use that capital to build the companies that we have seen have the best promise and the most signal from all of our tests internally.

Moiz Ali

Okay, so Tom tries to test out 20 to 30 different business ideas per year. One of those business ideas was Hims and Hers, is that correct?

Andrew Dudum

that's right

Moiz Ali

And how much money does Atomic spend in order to test a business idea? So, you've like Atomic has raised money independently of Hims and Hers, and Hims and Hers has really raised money independently of Atomic.

Andrew Dudum

that's right

Moiz Ali

how much money does atomic spend to to test a business idea

Andrew Dudum

So traditionally, we'll start with something like **$50,000 to $75,000** to get a little bit of signal. Then it might expand up to **$100,000 or $200,000**. But you're talking about relatively small checks necessary for one or two individuals to build prototypes, gather data, call people, try to sell things, and understand product-market fit, positioning, price points, offers, etc. When we get that data, we're able to actually look at it relative to **10 or 15 other companies** that are in that incubation process. We can compare metrics side by side to see where outliers exist. For example, with **Hims and Hers**, the crazy part about that company was we used about **$50,000** to get it started. With that **$50,000**, we built a prototype over the weekend. This was in **2016**. The prototype allowed men to download a mobile app, answer questions about their health, and then sign up for a package related to different types of medical conditions they were worried about. That prototype was called **Club Room** at the time. This name came from an old deodorant bottle in my gym called Club Room. I thought, "Okay, that seems like a good test name. Let's run with that." We literally got this thing up and running with two or three people over a weekend. In the first **five weeks** of that prototype, we did **$1,000,000** in sales, signing up for the offer. Again, nothing was built yet; it was just signing up for a waitlist. They put in their credit card, and then I would manually email them and say, "Hey, you've been added to the list." It was total early testing, right? Kind of a **0 to 1 phase**. But that cost just **$50,000**.

Andrew Dudum

That we're able to look back, look at the customers that had come in, look at their profiles, look at their willingness to pay, and decide that there is real demand to go and build that company.

Moiz Ali

And so, how much... you spent $50,000 to build a mobile app. How much, like Clubhouse, how much of that is done internally versus externally? Are your operators sort of developing the apps and putting them on the App Store, or do you do that externally?

Andrew Dudum

so all of that is internally so we we

Moiz Ali

I have spent money on Facebook ads to try and get people to download the app and sign up.

Andrew Dudum

That's right. Depending on the company, whether it's a consumer app, you might try traditional distribution methods like Instagram, Facebook, Google, direct mail, radio, or whatever it is. If it's a B2B company, it might involve sales tests like sales calls, automated calls, understanding price points, and offerings. But essentially, that capital is used to build the prototype and find what I like to call some type of proprietary distribution channel. This gives us confidence that we can scale this business successfully. Not only do we know how to build something that's amazing, but we also know how to get it in front of people in an efficient manner. This gives us confidence that we can grow this company in a unique way.

Moiz Ali

and so aside from him and hers what are some of the other ideas that you guys have launched

Andrew Dudum

Yeah, there are quite a few. One company is **Bungalow**, which is a co-living company based in the [United States]. They've raised quite a lot of capital from Khosla Ventures, Founders Fund, and a lot of big names. Another company is **Homebound**, which is a construction company helping families during natural disasters around the country to rebuild. They have a supply-demand model that makes the process much more efficient, allowing people to build homes quicker, easier, and more capital-efficiently. This company has raised maybe $40 to $50 million from Google Ventures and Thrive Capital. There's also a company called **Terminal**, which is a remote education company that combines recruiting and engineering into one hub. You can imagine this company going around the world, building amazing hubs for engineers to come, learn, and work with Silicon Valley startups. For example, **HIMSS** has been a client of this company for many years. Most of our engineering team is scattered throughout Mexico and Canada, and they all live in different Terminal offices. So those are a few of the most recent companies that have broken out and raised maybe $40 to $50 million in the last...

Moiz Ali

Can you give us an idea of like three companies that you thought would break out but didn't? You know, what I really love about Bessemer Ventures is that they have this thing on their website where they showcase their anti-portfolio. They're like, "You know, we missed the opportunity to invest in Airbnb, FedEx, and seven times in Apple." I feel like all VC funds should do that. Whenever I was trying to raise money, I was like, "Bessemer should be the first company I go to." They are humble about their origins.

Andrew Dudum

nobody else is that's great

Moiz Ali

What if... what are a few of the companies that you guys tried to incubate and didn't work out? Particularly the ones that got past phase 1, past the $50,000, and got to the $150,000?

Andrew Dudum

Yeah, you know, there are a lot of them, right? I think that "Best of Our Page" is one of my favorite pages on the internet, frankly. I think it's incredible. You know, there was a sleep apnea company. We have family members that have suffered from sleep apnea. There are about 30 to 40 million people in the United States that have sleep apnea. The process of getting diagnosed, tested, and actually getting the equipment for CPAP machines is excruciatingly painful and expensive. So the idea was, could we make that easier for people to do diagnosis and treatment and actually get the equipment? We couldn't make that business work, and that was a really unfortunate one that we tried. There was a business in pet insurance. This was years ago, and I was really passionate about this. Everyone loves their dogs. The willingness to pay for your animal is, in many situations, higher than the willingness to pay for yourself or your partner. We couldn't get the economics of the business to work, so we're...

Moiz Ali

a pet life insurance or pet health insurance

Andrew Dudum

A pet... pet life actually was pet health insurance. I'm sorry, not life insurance. Okay, yeah. So, you know, there's been a lot of them, and most of the ideas at Hims and Hers are really internal ideas. It's things that we, as partners, are really passionate about and really want to exist in the world. Hims and Hers was one that I was very passionate about wanting to exist. Terminal allows any company to hire dozens of incredibly talented engineers from anywhere in the world very quickly. That was something that we, as founders, have always wanted. So, we like building businesses that we can really resonate with. I think that's where we've had a lot of success. There's that instinct in building something you're passionate about.

Moiz Ali

And then we're like, as these ideas sort of are born and grow up, how do you staff them? So, you know, for Hims and Hers it's easy - you're the cofounder and a partner at Atomic. As with Simple, with Bungalow, with Terminal... do you hire internally to find CEOs or do you look externally?

Andrew Dudum

Yeah, so what we do is something called the **Founder in Residence** program. At any given time at Atomic, there might be 5 or 10 individuals who are internal founders working with the partners and the operating teams to prototype and test ideas. They are really the leaders taking charge of bringing those tests to market. For example, in Bungalow, Andrew and Justin are the two co-founders of that company. They were founders in residence with us for many months, exploring a vast range of ideas. We prototyped many ideas as a group and saw incredible signal around the co-living space. There was a strong desire to live in a city, a desire for a more affordable life, and a desire to live with people in a community. They were really excited about it, and we were excited about it too. So, we jointly decided to found that business together. In almost all circumstances, the founders of those companies started as founder in residence operators internally, helping us evaluate ideas. Then, they choose a path once they get that passion and conviction for an idea.

Moiz Ali

And so that happens, and that happened with you with Hims and Hers. Then what is the next step? So you've got conviction around it. Well, I guess first you do Clubroom. This app is Clubroom... As it's just available for when you're pitching Clubroom and running ads for it, are you running ads for like certain types of things? Are you saying, "Hey, we're going to provide you with the generic version of Propecia, we're going to provide you with generic version of Viagra"? Or is it one or the other, or is it all of them at this point?

Andrew Dudum

Yeah, when we were pitching Club Room, there was a range of all of those. So when we were exploring what conditions for men really resonated most at an efficient Customer Acquisition Cost (CAC) worthy of building a business, right? At the end of the day, these companies are really successful when you can build a recurring engine. There’s a willingness to pay, there’s a margin structure, and there’s a proprietary set of distribution channels that allows you to pour an amount of capital into that and grow the company. So, we looked at a range of different medical conditions that had different margin profiles and different medication offerings. Then, we went to market and tested those to get a good sense of what men would be willing to pay for each of them.

Moiz Ali

so you test price. Right out of the gate as as

Andrew Dudum

well price. Offering yeah the whole thing

Moiz Ali

And so, after you've spent $50,000 or $100,000 proving the business model, you need to raise money, right? You're going to need a team. You're going to need to build a much better app, one where you're not manually emailing customers. Do you raise money from Atomic, or do you go to VCs at that point?

Andrew Dudum

Yes, so at that... It's a mix of both. Atomic has a large fund that's able to contribute to rounds. What I did, and I think what most of our founders have done, is bring in other great partners into the round. This way, you get even smarter people who are experts in different areas depending on your business. For my company, when I decided to found this, we partnered with Kirsten Green at Forerunner and Josh Kushner at Thrive. The two of them are incredible human beings—some of the best investors I've ever worked with. To this day, they are exceptionally valuable and involved in the business, even on a week-to-week basis. They are truly experts in how to revolutionize old industries with new behavior, new business models, and new brands. They've proven this with companies like Harry's, Warby Parker, Dollar Shave Club, Chet, Glossier, Bonobos, and the list goes on and on. So, when we decided to build Hims, we raised from those two funds, and Atomic also participated in that round. That was really our seed financing.

Moiz Ali

and how much did you raise raise in that seed financing

Andrew Dudum

You know, don't quote me on this, but it's somewhere... I want to say between 56 million. I'm not really sure.

Moiz Ali

Yeah, and what's been the total funds raised to date? Can you talk about valuation? I've certainly seen that you're a unicorn, so we gotta be at 9 figures that you've raised. How much have you raised with that valuation?

Andrew Dudum

Yeah, we've raised over **$200,000,000** to date. The last public valuation was over **$1,000,000,000**. So that's kind of where we're at today.

Moiz Ali

Gotcha. Can you talk a little bit about structure? Look, I'm curious because, you know, when you're building a business, generally the founder controls the entire business until they start raising money. Then VCs start owning a share of the business. At some point, either the founder still has majority share or doesn't have majority share. But there's really like two parties: founders and VCs. Here, there's a third party, which is Atomic. So, who sits on the board? Who controls the board? What does that structure look like?

Andrew Dudum

Yeah, so the way we think about it at Atomic is essentially that you're co-founding your company with Atomic. Atomic is a group of operators that are highly incentivized to make sure that all of the companies we found are wildly successful. There are a number of partners at Atomic. Each of those partners will take the lead with different companies and different founders, and be essentially the operational lead for Atomic with that company. So, the way you think about it is, as you join Atomic, you're going to be co-founding your business with a huge group of individuals. This group of individuals, from strategic finance, distribution, marketing, sales strategy, accounting, legal, and HR, are all available to you. And not on a kind of as-needed service basis, but truly as a part of your team. It's a pretty incredible advantage that allows me as a founder, or anybody else as a founder, to focus on the one or two things that actually matter for your business. That might be building the brand, finding the distribution channel, or sourcing the product. But it allows you to co-found the business at scale. So structurally, that's what the business looks like. You're co-founding it and you're splitting equity depending on the situation. Then, when you raise external capital, we are all equally diluted by that external capital.

Moiz Ali

And so, who decides to raise external capital? Like, do you need the... like, let's say, you know, I was a member of the... I was an entrepreneur in residence at Atomic. I was like, "Okay, great, this business is working." We all sort of agreed to that. I go out and pitch funds. Am I making the call? Is Atomic making the call? Or like, what's happening there?

Andrew Dudum

No, the CEO that gets put in place and is taking charge of that effort has complete autonomy to make the decision of who they want to work with, what partners, what VCs, you know, at this point. Atomic and us, as partners, have worked with the vast majority of GPs at the funds in the Valley. We can give guidance based on expertise, specialty, or past experience with a certain fund or a certain set of individuals. But it is always that individual who finds that kind of personal connection with the board members and the new investors that they want to be bringing in.

Moiz Ali

Gotcha. Okay, so it sounds like the CEO has a lot more autonomy. Can you talk about who sits on the board of Him and Hers, or is that confidential?

Andrew Dudum

The board is confidential at this point, but it's fairly reflective of the major investors in the company. Just like any other structured startup board, your primary investors are the ones that are taking board seats for the company. Gotcha, okay.

Moiz Ali

Okay, I want to dig into Hims and Hers a little bit more. I think where I can start is by explaining what it does, and you can correct me if I'm wrong since you're actually running the business. Perfect. You know, it's a men's wellness brand. Hims is a men's wellness brand, and Hers is a women's wellness brand. Basically, you're trying to make medicine available that has been scientifically proven to do what it does, without the headaches and inconvenience of having to walk into a doctor's office, get a prescription, and do a bunch of... well, you know, before you get your medicine.

Andrew Dudum

I think that's a good way to put it. You know, the way I put it is that Hims and Hers is a healthcare company that makes it easier for you to get access to experts, as well as the medicine and treatments you need for a range of dozens of different conditions you're worried about.

Moiz Ali

That's a great way. So, you know, like when I was doing research about Him and Hers, I saw... I read a bunch of other interviews that you've done. You said you did $1,000,000 in sales the first week that you launched the brand, and that was the worst week you've ever had.

Andrew Dudum

that's right

Moiz Ali

That's absolutely bananas! You know, in 2013, Casper, which at the time was certainly the DTC [Direct-to-Consumer] darling of the world, did $1,000,000 their first month and everyone was like, "How is that humanly possible?" And you've moved the bar much, much higher... to do $1,000,000 in your first week!

Andrew Dudum

I'm sure there's a little bit out there somewhere that's gonna do a 1,000,000 in their 1st day in the next few years

Moiz Ali

Yeah, I'm sure there is as well. And like, you know, I hope it comes out of the time. I hope I'm an astronaut company. I have no idea what it's going to be, but I'm sure the bar is moving up every day. Sir, can you talk a little bit about how you achieved the million—was the $1,000,000 in sales the first week generally a result of you going to guys who had signed up at club rooms saying, "Hey, come buy this," or was it something else? And more importantly, week two, you did another $1,000,000. How did you get those customers in the door?

Andrew Dudum

yeah it's a great question so you know the the way in which we did that I think reflecting on it was having a very solid understanding of the type of guy we're we're gonna go after the type of messaging that worked type of brand that resonated and the type of offering that we knew they wanted to buy and so you know while people say we did a $1,000,000 in our 1st week they think okay well we launched and all of a sudden when we started learning that first day when we started learning people just came and started running towards us and I think that's where there's a big big education gap in fact there was probably two and a half years before that when we were really understanding our person right we were getting customer insights we were talking to men we're asking them about how it made them feel to be losing their hair or to be struggling sexually or to be feeling like they didn't have energy or they have acne in their mid mid twenties or late thirties and that didn't seem right like really understanding who our person was and so there's there's years of doing that research and in particular years of figuring out what is the brand that activates that customer right and the some of the key insights were stigma is a huge problem right there is this concept of men being too tough to take care of themselves and and brushing it off and so there's this whole kind of toxic masculinity that we had to crush as a brand to to encourage and empower people to go and take themselves and so that was a set of insights there's a whole telemedicine component as you said like I'm the last person who wanna go to the like the doctors and and I'll really only go unless I've I've I'm like bleeding from the head or I've broken arm or something and so if I could make that easier from my phone 90% of our orders take place on their their mobile device talk to talk to a physician click buttons answer questions take photos and then and then I get access to the things I needed like that's make it simple right so there is these insights we knew needed to happen and so you know while while we had an incredible first week and I think it's an amazing sign of the success I don't wanna you know undervalue the fact that it was probably 2 years of work to understand the customer in order to launch on that day and say we have a high degree of confidence what we're launching people are gonna love because we've been talking to them for a really long time

Moiz Ali

Definitely, I absolutely think that's really worthy of being said. You know, one of the other things I saw when I was doing research for this was that multiple branding agencies have taken credit for building Hims.

Andrew Dudum

that's right

Moiz Ali

can you set the record straight who was the branding agency that you guys actually worked with

Andrew Dudum

so we worked with a lot of branding agencies to to be to be totally honest and what we did was and this was I think some of the the secret sauce because some of the insights coming out of this were you could build dozens of different types of brands what we knew we wanted to do was build a brand that could cross gender we knew him and hers or men and women together was gonna be critical because we had this idea of a future health care brand and that wasn't only men and it wasn't only women and so we didn't wanna build a brand that only segmented to men we wanted to build a brand that was accepting of where you felt you were as a man you could be young old straight gay black white doesn't matter but it needed to be as modern and fresh and leaning into that that flexibility that modern masculinity has sure and so what we did was we actually put out a lot of agencies and they came back with concepts and then from there we filter down to a couple agencies and in particular we work with partners in spade out in new york which I think is one of the best branding agencies in the world and what we did with them was actually designed multiple brands so we identified them as a as a great creative itallen and strategic talent and we actually designed 5 or 6 brands and saw how they felt and we sat on them for weeks literally weeks different names some of the names were triplepoint mccoy we almost named the company mccoy remember there's there's admiral was one of them and and so this process of of finding out who we were really happened with partners in spade and then what we did is we took a lot of that work and we brought in some expert teams like jen lane out of new york our vp of design is a guy named daniel kanger who ran creative team at jen lane for a decade he joined us recently a few months ago and he's been working with us from the beginning and we took that brand understanding from partners in state and we said how do we now visualize this how do we art direct it how do we put it on sites on mobile devices and went from there and so you know the the reality is is that we had a lot of people getting us input gotcha and we had a lot of people designing different concepts and then what we did internally at the end of the day is we are directed every single photo shoot by we I mean me and hillary are you know a cofounder of mine and head of prop right now we were on the shoot we were writing the copy we were owning that spirit of the brand so that it really was as pure to what we wanted to be as possible gotcha

Moiz Ali

Okay, so you've got branding coming from multiple agencies, with your curation and vision being executed. You've received all this feedback from customers in two and a half years of studying who you think is going to buy the product and what you think the barriers are to buying these products. Already, you launched and you have $1,000,000 in sales the first week. One of the things I've heard you talk a lot about, and you mentioned this earlier during our conversation as well, is a proprietary marketing strategy. You don't want to be subject to the whims of auction-based marketing platforms like Facebook and Instagram. So first, I want to understand: Are you able to advertise on Facebook and Instagram, or are you not able to?

Andrew Dudum

yes

Moiz Ali

I'm always curious, like, you know, you are able to... Yes, I gotcha. I built an e-commerce business that was largely based on auction-based advertising and found it to be successful. But certainly, it was a roller coaster ride. What are some of the marketing strategies that you use? Certainly, everyone has seen your television ads and your out-of-home ads. Everyone knows that you advertise on top of journals and in the train stations in New York. What are some more unique things that you guys do? Tell me how you're buying this type of advertising. For example, advertising in trains in New York—anyone can do that. Advertising in urinals and stadiums, however, a lot of people haven't done. Are you pulling up these stadiums, or is there a third party that you are working with?

Andrew Dudum

Today, the way we think about this is that we want to create inventory, not buy inventory. Our entire marketing team and strategy goes into every room they walk into—every store, gym, locker room, restaurant, and bar. Their eyes are looking around for literally things we could own, right? Things we could have a relationship with. The criteria is: Where is your target customer, man or woman? It's different for different medical conditions. For example, erectile dysfunction (ED) is something you might want to talk about when you're in a urinal, but hair loss is something you want to discuss when you're in the gym locker room, looking in the mirror and realizing that you're kind of thinning on top. On the other hand, something like birth control may be appropriate in a completely different setting for women, and acne for women is suitable in another environment altogether. This is how we approach our marketing. The reason we think about this is that, for better or worse, the auction-based marketing channels are effective and efficient. For that reason, companies become dependent on them. In building companies over the last decade at Atomic, I've seen a lot of companies become too dependent on these channels.

Moiz Ali

for sure

Andrew Dudum

Inevitably, of course, what happened is the saturation rates. As you want to continue to grow and pump more dollars into those channels, the costs go up. The curves get worse, the retention of the customer gets worse, and all of a sudden, you're really stuck in this limbo. So the strategy for us is we want to have as little of our capital being deployed in free market auction-based platforms. We want to be owning proprietary relationships with other partners. There is no third-party agency; there's no "black market" for buying a urinal. You have to go to the SF Giants and say, "Hey, I love the walls and the urinals, and I don't think you're making any money off of it. What if we paid you X?"

Moiz Ali

So, have you gone to the guys who own Equinox, like related properties, and been like, "Hey, we want to advertise in the locker room at Equinox?" I mean, I would imagine they'd say no, but is that something that you guys have done?

Andrew Dudum

The past, I've talked to the executive team at Equinox many times. There are a lot of different opportunities when you start opening your mind. For example, we were sitting in a bar one night talking about it, and I have this nervous habit of tearing the bar coasters into pieces. I looked down and saw it was a Budweiser bar coaster. Then, someone on our team said, "Why don't we just buy it? Why don't we do that?" So now, if you're in a New York bar or a San Francisco bar, in a good chunk of the bars, the coasters are Hymns, right? They have hilarious statements and are branded. The amount of text messages I get from friends and family saying, "Hey, this is incredible! I would have never imagined doing that," just came from the creativity that we've empowered our team to have. Well, hey, go find...

Moiz Ali

And do you have to work with bars individually to do that, or can you do that at scale with a certain coaster manufacturer?

Andrew Dudum

Yeah, you know, you try to do both. You end up having to do both at a certain point. You get efficiencies and you find individuals that own multiple bars or have a network of bars. Or maybe it's the alcohol distributor or something, right? But it is coming from this first place of open creativity and finding opportunities.

Moiz Ali

You know what's crazy? During this conversation, I've realized that you're the first startup that is not subject to the immediate needs of driving revenue today. In order to build marketing channels, like urinals at the San Francisco Giants or having multiple conversations with the executive team at related properties, you need to be comfortable with the idea that the revenue you generate from conversations you have today will not come from those interactions. Most startups don't have that type of timeline. You have to be like, "Hey, I'm going to have a conversation about generating revenue in the next few days." How is that possible? Is it because your investors are more long-term focused? Is it because you already have such a large moat in terms of revenue and capital? Or, where is it that you're singularly not focused on revenue in the next 30 days?

Andrew Dudum

it's a great question you know when I started a company and I think in part because I've I've built in a number of companies before the the opportunity for for his and hers in my mind is to build a multi generational public company like this is a large opportunity you're talking about probably 80% of health care moving to digital telemedicine in the next 5 years or so that's a huge huge opportunity maybe one of the biggest left in in that I'm aware of right you've got retail you've got commerce you've got real estate transportation and then you've got health care and it hasn't been touched yet and so you know from the beginning that was the vision and when I went and pitched this to kirsten and josh I made it very clear that's what I'm going for I have no desire for this company to be acquired you know a couple 100,000,000 and that's a great exit and then boom I'm sitting on a beach no desire like this is one of those ones you really just put your head down and go for it and in order to do that you have to invest in the brand and investing in the brand what that actually means is losing money right you have to lose a certain amount of money for the purpose of building equity based value and and relationships and communications with your customers it is always cheaper to buy an advertisement on facebook right or to buy for Google ad at low volume but you can only build so much from a true depth of relationship with customers and the variation of customers by doing those types of channels and so what I made very clear to the investors was we're gonna allocate a certain amount of capital to these types of initiatives where every single month we're gonna be testing we're gonna be learning we're gonna be making brand investments and then for the other chunk of capital which is still the majority chunk of capital it's gonna be exceptionally efficient and we're gonna hold ourselves accountable to real numbers and making money back and they signed up for that and to this day we still have those parameters in place where there's an have the percentages changed

Moiz Ali

have the percentages changed or are they pretty

Andrew Dudum

same percentages have been roughly the same the number goes

Moiz Ali

To like the majority goes to non, or more like, I don't want to call it direct response, but more like I'm looking for revenue in the short term versus building brand.

Andrew Dudum

that's right the the the the larger bucket

Moiz Ali

Wow! First, I've been impressed by your marketing budget. I see, you know, I know how much ads in the New York City subway cost, and those are brand advertisements, right? That is a lot of money already. So, I'm really impressed by the marketing. How do you work on attribution when it comes to the idea that you have these chunks that are happening today and chunks that are brand value? Like, you know, your test... I think that's really hard. I'll give you an example: at Native, we were constantly trying to drive people into stores at Target and Walmart.

Andrew Dudum

right and

Moiz Ali

So we tried digital ads and we're like, "You know, do we see a lift in this certain zip code if we bombard these people with ads?" And so we ran those types of tests. How do you know if, like... you know, if you're owning coasters and you're owning the San Francisco Giants' urinals, what's working and what's not?

Andrew Dudum

Yeah, so the only way you do this is through a set of control tests. Depending on the brand campaign, maybe you're talking about TV. You identify the zip codes where those TV commercials went live. You look at spike attribution analysis of the minute it went live and the historical trends before that minute and the six minutes after that. Then, you look at the zip code two blocks away and see if you got that same delta.

Moiz Ali

so tv makes sense but sf giants is much harder are you looking at is there a spike during games

Andrew Dudum

The SF Giants is the same thing, right? So again, 90% of purchases are taking place on mobile. Look at the day games, look at the times of those games, and look at the traffic during those games to understand. You can do spike-based analysis based on zip codes in that type of world. The other thing you can do is more traditional, and this is never accurate to a perfect degree, but at least it's directionally helpful: post-purchase and pre-purchase surveys. For example, "How did you hear about us?" I heard about you from seeing an advertisement somewhere. Which advertisement? Boom! Then you can get an idea, at least proportionally, of where that uncategorized traffic is coming from. Traffic that's coming directly to your homepage, everyone will say, "Hey, that's free traffic, that's organic." Now, the vast majority of it is not organic. You paid for it somewhere; you just have to figure out where you bought it from.

Moiz Ali

Yeah, can you tell me a little bit about the marketing channels that you spend money on today? So, a big bucket is still sort of direct response, and a big bucket is brand. What are the top?

Andrew Dudum

There really are no top three channels. It's more about **buckets**, and then within those buckets are dozens of little buckets. So, you've got the traditional digital channels that you can think of. In the top right, traditional digital is one bucket. That's like all the Facebooks, Googles, Instagrams, TikToks, Snapchats, dating apps, and affiliate marketing— all that kind of stuff. Then, there's an **audio bucket**. You've got all types of audio where people hear podcast ads, streaming ads, radio talk hosts, and things of that sort, including podcasts. There are also **TV buckets**. Finally, there are very nontraditional buckets, like urinals, planes flying over Coachella, coasters sitting at bars, or things like that.

Moiz Ali

Is that the order of buckets where you spend money? Digital, then audio, then TV? No? Okay, look, in audio, podcasts are the number one bucket.

Andrew Dudum

there are the word podcast there there's like 5 let

Moiz Ali

Me change the question then. In digital, it's Facebook and Instagram—the number one bucket.

Andrew Dudum

it's the largest within digital okay

Moiz Ali

what what's another one that's larger within digital

Andrew Dudum

But within digital, you also have dating apps, affiliate networks, and partnerships with education sites. Right? I mean, there are, again, the traditional things like Facebook. I'm not going to tell you all the things we do because your listeners need to literally think about what their product does and what their customers need. Then think, "Okay, where are they and how do I talk to them?" We do that for our customers all the time. That doesn't mean that Facebook, Instagram, Twitter, and all those are not tested, but they're not really the majority.

Moiz Ali

They're not the majority for you. The traditional digital spend is not the majority, that's right. I couldn't agree more with the idea that you have to speak to your customers where they are. What works for one business will work for another business.

Andrew Dudum

I wish there was a silver bullet. I wish somebody had told me this list of silver bullets. But unfortunately, you just have to really understand who your person is and then think about where they're spending their time.

Moiz Ali

Couldn’t agree more with that. Okay, so you did $1,000,000 in sales the first week. Can you talk about revenue or growth year over year? Where are you at? From the perspective of understanding that you’re spending a good portion of your marketing dollars on non-direct response ads, but on more brand equity ads, are you profitable or are you not?

Andrew Dudum

Today, we are not profitable, but we are relatively close. I'd say, in the coming years, when we want to pull that switch, we are definitely capable of doing so, which is a great position to be in. Currently, we reinvest essentially all of those profits back into the engine to grow into new conditions. We recently launched a primary care category that includes everything from asthma and allergies to sinus infections and UTIs, etc. We continue to expand on that front. From a public numbers perspective, I think what's public is that we did over $100 million in sales last year. We also had over 1 million telemedicine visits in the last year or year and a half on the platform. That's actually a patient talking with a physician and getting a treatment evaluation.

Moiz Ali

does that sound like a asynchronous or synchronous communication

Andrew Dudum

It totally depends on the condition and the state. So, it's both. It also depends on what the patient prefers. The company's only been live for 2 years, right? You can think of growth rates. If we did $100,000,000 in sales last year, it was a pretty fast growth rate from the year before.

Moiz Ali

Certainly, there was incredible growth. I don't think anyone is questioning Griff at Hims and Hers. I think it's pretty phenomenal. Can you talk a little bit about the categories that are leading that growth? Also, whether it's Hims or Hers that are leading that growth?

Andrew Dudum

Yeah, so the historical categories, which are Hims, have been around for about a year to a year and a half longer than Hers. They still represent the majority of the business, given the time. The majority of things that we are launching today and plan to launch this year include maybe 50 launches in 2020. Each launch addresses a different medical condition that a patient can get evaluated for on the platform. The vast majority of those are Hims and Hers together, so they are non-gender-specific treatments. These are things like, you know, the majority of things we care about. People worry about sleep, anxiety, their health, immunity, cholesterol—like the normal human stuff. So, they're non-gender-specific, and there's a pretty big investment from our side to bring those offerings to market together with Hims and Hers in a unified way.

Moiz Ali

Got it. So, Hims is the majority of the business. Can you talk a little bit about categories? Does it go like... I've looked at some of your categories. I think it's hair loss, and then I think it's also cold sores. Is that right?

Andrew Dudum

Those are a few of them. Some of the big ones include acne and anti-aging. Then you have supplements for sleep, immunity, heart health, and then you've got the sexual health stuff, which includes STDs.

Moiz Ali

Erectile dysfunction as well. And for the anti-aging stuff, is it like retinoids? Like, are you guys prescribing retinols, or is it over-the-counter stuff?

Andrew Dudum

It's all... so all those categories are prescription categories. Got it. We are actually compounding prescription tretinoin in high concentrations. These are custom formulas for your skin type, your age, the type of acne you're experiencing, or the type of anti-aging that you're struggling with. And we're getting those shipped to you overnight.

Moiz Ali

And so, do you guys own a pharmacy? I imagine there's a lot of regulatory tailwinds that are going in your direction. Patents are expiring, like Viagra. States are opening up their telemedicine laws. Do you guys own a pharmacy, or are you working with a third-party pharmacy?

Andrew Dudum

Both... so we work with a number of pharmacy partners in the provider network. We have also publicly announced a very large, I think it's a 400,000 square foot pharmacy operation, a fulfillment center in Ohio that will be going live in the next few months.

Moiz Ali

And how did you, like, I guess, were there any obstacles when you guys were growing on the regulatory side of things? Let me give you an example: Uber and Airbnb. Those guys were like, "Look, we're gonna do this. We're gonna run into a bunch of regulatory hurdles, and when we run into those regulatory hurdles, we're gonna jump. We're gonna figure out ways around them or over them." Cool. And sometimes that's right, and sometimes that's not. It's certainly a little bit harder with medicine. I don't mean to say that you... I think what you guys are doing is phenomenal and genuinely providing a real service to consumers who are either too embarrassed or can't afford to go to the doctor. So, I'm really, like, genuinely thankful that you guys exist in the world. Thank you. You know, were there regulatory hurdles? Or were you, like, on the Uber and Airbnb side of the spectrum, or were you on the Procter and Gamble side of the spectrum?

Andrew Dudum

Probably neither, right? We're somewhere in the middle. We have a very veteran executive team in these areas, in particular. Our Chief Legal Officer ran the telemedicine practice at Jones Day for a decade. Our Senior Vice President of Regulatory Affairs, Legislation, and Public Policy ran these initiatives at Lyft and at Square. This has its benefits, as they have been doing it for over a decade. Our communications executives also ran it at Lyft. So when you look at maybe Lyft versus Uber or Procter & Gamble, they were kind of in the middle, and I think that's where we fall from a risk tolerance standpoint. Meaning, we are always pushing on behalf of our customers, but we are going to the regulators and the medical boards in sit-down conversations, explaining why we think this is right, as opposed to breaking the law and then having the conversation afterwards. I think we have been very careful to be as safe as possible to make sure that we are the gold standard for telemedicine. This market of telemedicine is growing, changing, and adapting so quickly. We've kind of put it on ourselves, and I feel like that's been a really important part of our strategy to be the talking point.

Andrew Dudum

To these medical boards, I am explaining the benefits of all the things you mentioned. In order to do that, you have to maintain the credibility of following the rules and the laws. It has actually helped change the laws, and we've done that in a number of states. We've had laws changed in the last few months and in the last couple of years. I would expect that to continue to happen as these legislators understand the benefits of telemedicine.

Moiz Ali

And how, like, you know, to that effect, you're talking about being the gold standard of telemedicine. How do you think about your competitors? Some of your competitors are well-funded, while some are less funded. Is it, you know, if people are all prescribing generic Viagra or generic Propecia, it's sort of a race to the bottom? To that effect, is your thought process, "Hey, I want to create proprietary medicines," sort of like the anti-aging ones that are customized for people? How do you think about separating yourself from your competitors?

Andrew Dudum

Yeah, you know, I think it's really interesting. At Hims and Hers, the vast majority of what people buy are treatment solutions that are fairly comprehensive. So they might include, like you said, a generic pharmaceutical like finasteride, sildenafil, or a Valtrex-type medication. But what they also include are shampoos, conditioners, moisturizers, custom topical solutions, and vitamins. We see that across the board. When customers come to us, they don't come to us because they're looking for cheap drugs. You know, those options have always existed. Online pharmacies and Canadian pharmacies have been around for years. What we see from our customers is that they're in their teens, twenties, and thirties, and they're learning about these conditions for the first time. They're coming because they want to get educated by a physician, and they want a comprehensive treatment that's custom and tailored to them. So, you know, I think the commoditization of pharmaceuticals should happen, right? Because they are generics and should be affordable and cheap. The more companies that exist in this space, the better it is for all customers. I think we will continue to be able to differentiate by offering real solutions. A lot of times, those solutions are flexibility, options, and customized care, and as part of that, it might include one of these medicines.

Moiz Ali

Does that push back against the scientific background of the proven medicines? So like if you're using Propecia, which the FDA has said helps you keep your hair, and you're also selling... Now, if you're selling Rogaine, I understand it's also FDA regulated, but are there FDA-approved shampoos, for instance, that allow you to keep your hair?

Andrew Dudum

Yeah, you know, there's always that spectrum, right? One of the things that I believe is that, and this comes from a deep understanding of our customer, is that when they think about their health, it includes pharmaceutical medicines on one side and meditation on the other side. They’re both healthcare; they truly are about healthcare. What I believe we need to offer as a modern platform is flexibility. Saying, "Hey, if you're worried about sleep, there are a lot of things we could do." There's cognitive behavioral therapy; if you haven't tried that, it's incredibly effective. There are things that are over the counter and safe that you can use on occasion, like a melatonin, chamomile, and L-theanine blend. There's Chinese medicine that has been proven to be effective, and then there are also pharmaceuticals. There are side effects, and there are pros and cons to all of these. What we've seen is that customers in our demographic, who are coming into their twenties, thirties, and forties, want that flexibility. Depending on the severity of what they're experiencing and what they've tried in the past, they might have different spectrums for different conditions. So, we as a platform want to make sure we are always standing by the statement that everything on the platform has the best medical clinical experience it can have. That doesn't necessarily mean it's always FDA approved, sure. But when you talk to a doctor about supplements, 9 out of 10 are going to say, "If you're going to try something, that's the one to try." Yeah, and that's really what we're going to always lean on.

Moiz Ali

That's fair. I appreciate that sort of clarity. Really quick question about understanding your team size, because I know we're running up against some time: How large is the team of doctors and nurses that you have on your staff that sort of prescribe medications?

Andrew Dudum

we have over 300 physicians and providers on

Moiz Ali

The platform and how quickly are they writing prescriptions? Is there like a metric where you're like, "On average, a doctor can write a prescription..." or "On average, doctors are writing prescriptions every 7 minutes"?

Andrew Dudum

It's not a metric we choose at all. The provider networks essentially have complete independence in how they treat patients. We are the platform that's connecting the patient to that external provider network. They get paid essentially on an hourly basis to see as many patients as they're able to see.

Moiz Ali

what's the rate of people that they prescribe medicines to

Andrew Dudum

It totally depends on the medical condition, you know. There are safe medications, like tretinoin for acne. You might see, you know, 90% of those patients coming through the door qualify for that medication. Maybe 10%, based on other medications they're on, do not. Then there are more serious medications, like a birth control that has blood clot potential. Depending on the patient, you might have a 50% or 60% prescribed rate. So it really depends on the physician's understanding of that patient. The patient, before they get to that point, goes through a full consultation with that physician. They discuss the medical history, the drugs they're on, any side effects they've experienced in the past, etc. So the range is quite large depending on the medicine.

Moiz Ali

Gotcha, understood. Very... it makes a lot of sense. I have two questions, actually. One is: how has COVID-19 affected the business? Has it been great because no one wants to go to the doctor? I mean, great with the understanding that this is a catastrophe for the world. Or has it been tough? How is COVID affecting you? It certainly affects team morale by virtue of the fact that all of you guys aren't able to go to the same office every day. How is it affecting business?

Andrew Dudum

Sure, you know, I think what I've experienced most from the COVID-19 tragedy is that our team is energized like I've never seen it before. It is a full-on wartime mentality within the digital office at the moment, within Slack. I've never seen anybody on our team act like this. So, we are in a position, I think like many, to actually change our priorities to help the situation. You've got a whole population of people staying at home. Those people at home are still struggling with asthma, bug bites, UTIs, yeast infections, acne, sinus infections, etc. Right? But it is more important than ever for them to stay at home, both for the safety of themselves, their family, and their community. We also want to give as much relief as we possibly can to the healthcare system and not go in for non-life-critical illnesses. What I've seen is our team energized to think about first principles. What can we use our assets for? We have physicians that are experts, we have telemedicine platforms, and we have a pharmacy fulfillment brand. How do we get things to customers that can help them and help the health providers that are on the front lines? So, you saw that we launched the primary care offering a week or two ago. That opens up a huge telemedicine platform, and I hope in the coming weeks and months we'll be able to continue to expand that to more things. From a business standpoint, that's what I've seen more than anything: our team is trying to reprioritize in order to help the current situation.

Moiz Ali

And so, has there been an acceleration in people's adoption of telemedicine in the last, you know, month?

Andrew Dudum

I think across the board there has been an acceleration. When you have people at home and unable to go into a physician's office, telemedicine is the perfect solution. So, I think across the board, people that are working in digital environments—whether that's tele-education, telemedicine, or tele-video conferencing—those businesses are absolutely seeing customers come to them in exchange for the in-person opportunities.

Moiz Ali

Gotcha. Okay, my final question is about the state of the direct-to-consumer industry. You know, I read this quote by Gary Vaynerchuk where he said, "98% of direct-to-consumer businesses are out of business right now and just don't know it." Basically, he means that they're addicted to the Facebooks and Pinterests of the world. Their unit economics will never work. There's been a "come to Jesus" moment with the failure of Brandless and with the headwinds around Outdoor Voices. So, where is the industry five years from now? Is Gary Vaynerchuk right, and where is the industry five years from now?

Andrew Dudum

You know, I think there are aspects of what Gary said that are right. There have been a number of companies, and a large swell of companies, in the last couple of years that have been deploying capital into open auction-based platforms, like we talked about, that have completely upside-down economics. It's not because they're building their brand and investing strategically, but because literally the economics don't make sense. They're trying to figure them out, and every founder is always working their butt off to try to make them work. In an environment over the last few years, when you've had the capital and the investors willing to fund that experimentation, it's beautiful. However, in an environment like today, where I think it's going to be exceptionally hard to raise capital, I think flat rounds will be the next 2 to 3 X rounds because it'll be so hard to get. I think he's right in that a lot of those companies are going to struggle to get profitable, and they're going to struggle to raise capital. So, I do think that is a reality. The market has been able to finance the exploration for a number of years, and we're now getting to a point where...

Andrew Dudum

Where that willingness to finance the R&D is no longer there, companies need to be exceptionally efficient at finding their profitable cohorts, customers, and channels, and focusing on those. In a situation like we have right now with the markets and with COVID-19, survival is growth. If you survive the next year or two, you have grown substantially. As a founder, that's the only thing I'm thinking about, and I think the thing that I would recommend all other founders to be thinking about.

Moiz Ali

And what are the things that you've done to focus on that? So if you're focused on survival or maintaining or ensuring that you get through this crisis, have you pulled back on marketing? Have there been hiring freezes? Or are you like, "Look, full steam ahead, damn the torpedoes"?

Andrew Dudum

You know, we’re in a very privileged position in that we have a material balance sheet of capital in the bank. This gives us the flexibility to become profitable. So, we’re not dependent on raising outside capital, which is phenomenal. However, we did immediately institute hiring freezes and compensation freezes. We communicated this to the team, saying, “Hey, we need to evaluate the impact of what’s happening in the business.” We have no idea what it will be; it might be positive, it might be terrible, or it might be completely trivial. But until then, let’s all just stay calm, remain as we are, and learn. We need to look at the data to make decisions. We’re currently in the process of evaluating data in real time as it’s coming in day over day and week over week. Until then, we’re not making any big strategic moves until we can get a good sense of what’s going to happen.

Moiz Ali

Got it! Fantastic! I really appreciate the time, Andrew. I love chatting with you and being able to see a direct-to-consumer business that has a long-term focus instead of a short-term one. I'm not sure I've ever seen that in the history of my life before. Congratulations! A lot of props to you, not only for all the success at Atomic, but really, Hims and Hers is the gold standard of direct-to-consumer businesses today. I hope you're incredibly proud of what you've accomplished. You know, 20 years from now, you might be looking back on your life and thinking, "This is going to be the first line of my obituary." I hope you feel that pride today and not only 20 years from now.

Andrew Dudum

thank you thank you appreciate that everyone

Moiz Ali

great thanks for the time really appreciate it awesome