Exit Strategy S1E1: Thrive Market’s Unconventional Rise to Success
Thrive Market, Pivots, Influencers, and Growth - April 10, 2020 (almost 5 years ago) • 54:03
Transcript:
| Start Time | Speaker | Text |
|---|---|---|
Moiz Ali | Well, Nick, I'm super excited that you're able to join us! This is going to be the first episode of the Exit Strategy podcast.
I'm really thrilled that you're here. Just a little bit of background about Nick: he is the co-founder and CEO of Thrive Market. Thrive Market is like a Costco meets Whole Foods online business.
He was also an investor in the business that I started, Native. I think you were one of the bedrocks of Native in terms of our investor base. I'd give you a call and tell you about all the problems I had all the time, and you were really calm about that. I really appreciate it.
| |
Nick Green | appreciate it you didn't have that many investors so | |
Moiz Ali |
I didn't have that many investors, but there were even fewer that I felt like I could trust and give a call to. You were certainly one of them, so I always appreciated that.
Can you start out and tell everyone a little bit about Thrive Market, in the off chance that they don't know about it already?
| |
Nick Green | Yeah, so first, I'm just honored to be here. I'm super excited to get to do something like this. I'm in my work-from-home office right now, so it's a convenient time as well. But yeah, I'm honored to be here and excited to be jamming with you in a setting where we're not solving business problems; we're just getting to pontificate. | |
Moiz Ali | that's right | |
Nick Green | So, Thrive Market is... I mean, you described it well. I think the easiest way for people who don't know about the business to understand it is to think of it as a **Costco membership club** meets **Whole Foods catalog**, all delivered online, with a bit of **Trader Joe's** blended in.
When we launched, we were carrying basically the top 7,000 to 8,000 natural and organic products that you find in a health food store. Through the membership, we made them available at **25% to 50% off**. Our mission is to make healthy living affordable and accessible to anybody, with fast and free shipping anywhere in the country.
Now, we actually have not only all of those products but also a lot of our own products. Fully a third of our sales are from the Thrive Market brand. So, we started out very much as an online retailer, but I'd say now we're this strange hybrid beast between a retailer, a brand, and really a community platform online. Our members come to us not just to buy products but to learn how to use them and to participate in campaigns and initiatives that align with their values and their impact on issues like sustainability.
| |
Moiz Ali | Can you talk a little bit about the history of the brand? When did you guys start? What size are you at today? What's the growth look like? How big is the team?
| |
Nick Green | Yeah, so we... I mean, I could spend hours just answering that question. We started back in 2014. Unlike Native, we didn't have lean capital requirements. So, you know, we spent the better part of the first year self-funding the business, kind of getting up to the starting line.
We tried to raise more capital and we got rejected by over 150 VCs. That was the first of many existential crises in the business. We launched, I guess, in October of 2014, which is when we finally went live.
The really fortunate thing that happened to us was that we were rejected by so many VCs that we ended up raising all of our initial money from health and wellness influencers. They turned out to be the best promoters of the business as well.
So we had this, you know, probably over 100 kind of coalition of the willing that was on our cap table and also promoting the business. We grew very, very fast pretty much from day one.
You know, we have over 700,000 members today and we're doing hundreds of millions of dollars in sales, you know, five years in and still growing, you know, mid double digits per year.
| |
Moiz Ali | And so, can you talk about that first year? You said that you got rejected by dozens of VCs. It was you and three other co-founders, and you were sort of bootstrapping the business early on. What was the cost of that? Was that model the same model that Thrive Market ultimately became, or were you guys bootstrapping something slightly different?
| |
Nick Green | I mean, look, like so many businesses, we are iterating in real time all the time. For the first several years, and in that first year before we went live, it was almost like the business model morphed daily.
The very initial model was going to be basically "Groupon for healthy food." So when Ganar pitched me back at the very beginning, you know, I had sold my last company and was an entrepreneur in residence at a startup accelerator. I probably saw about 15 pitches a day and had seen 100 over the prior few months.
Ganar came in and pitched me on an idea he was calling "Shop Tribe." The idea was to literally build, this was back in 2013, "Groupon for healthy food." Groupon was a big thing; buying events were going to change the world. It was the way that everyone was going to buy everything. Why not do it with groceries?
But what captivated me was the mission, which is exactly what it is today: **let's make healthy living accessible to anybody.** The initial idea was to pool people's funds by using a wholesale account from these brands directly, cut out all the middlemen, and reduce prices by 25% to 50% off so that organic and natural products are at or below the conventional equivalent.
| |
Moiz Ali | Isn't it crazy? Sorry, sorry to interrupt you. Isn't it crazy how e-commerce or startups are fashionable? You know, in like 2012 and 2013, "Groupon for X" was fashionable. A few years ago, it was like "Uber for X" that was fashionable. That's what you guys were like, yeah.
| |
Nick Green | We, you know, we iterated through every fashionable business model of the day. For instance, we were briefly going to be a subscription box for healthy food.
The challenge we were trying to solve was: how do you make these natural, organic products— which at retail tend to be 25 to 50% more expensive than conventional products—accessible to anyone? The first barrier was price.
Groupon was one way to solve that, but it involved getting your groceries on a 10 to 15-day delay or more as we tried to buy direct. It also meant getting your coconut oil one day, your chips the next day, and your toilet paper the following day. It just didn't really work.
Where we ultimately landed was on an evergreen catalog and then the membership model. We really started studying Costco closely and realized that it allows you to run your product business at zero margin because all the margin comes from the membership.
For us, this was especially positive and powerful because we use every paid membership to sponsor a free membership for a low-income family. This approach turbocharged our mission, as it doesn't actually cost us anything to let those low-income families in. In fact, they drive product sales, which gives us more volume.
It baked in the ability to truly get margin from the people who can pay while remaining accessible to everyone else.
| |
Moiz Ali | Costco's business model is crazy. When you look at the 10-K, their net profit is basically the equivalent of the membership fee revenue that they generate. They also limit the margin that they take on any given product.
For Kirkland products, it's around **13%**, and for other types of products, it's something like **11%**. Those numbers might be off by a little bit.
I remember reading this one story where the Costco CEO was sitting on the board of directors of Starbucks. Howard Schultz was like, "Guys, great news! Coffee prices are going down, but we're not reducing prices, so our margins are going up."
After the meeting, the Costco CEO goes to Howard Schultz and asks, "When are you going to give us a break on coffee prices?" Howard Schultz replies, "We're not intending to pass along any savings or discounts to retailers like Costco."
The CEO then says, "Great! We're going to eliminate Starbucks coffee from all Costcos pretty soon because you're not passing this along." Howard Schultz responds, "Okay, we'll give you a price discount then."
| |
Nick Green | Right, which makes sense and speaks to Costco's scale and negotiating position with their vendors.
But also, I think your bigger point is that they pass everything along. Their value to the members is the savings on the membership. That was very much where we started.
You know, the interesting thing is today, the value is actually much more. It's the ability to vote with your dollars for brands whose values you align with. It's the ability to get all the highest quality products curated in one place. It's the ability to shop by your dietary needs and things like that.
So, it's interesting how some of the ways the businesses diverge from Costco, sure. But fundamentally, that first thing we had to solve was: how do we make it affordable? That only happens if we can go without margin. That only happens if we have another source of margin, and that was membership.
| |
Moiz Ali | And so, it's 2014. All these VCs have said no to you. How much of your own capital did you put down in order to start the business? How much did you invest to pivot from ShopTribe to ultimately what becomes the right market?
| |
Nick Green | so it's low low 6 figures | |
Moiz Ali | you | |
Nick Green | know we is that each | |
Moiz Ali | person or is that altogether | |
Nick Green | Each of us, no ganar and me, individually... I mean, I could go into the whole kind of saga. We spent $100,000 alone on an agency to build the website, which we found out two weeks before we were thinking we were going to launch, basically wasn't even started.
So, like, be aware. This shows our level of sophistication. We brought in Sasha, our third co-founder, at that moment of crisis. I remember going to Sam Teller, who is a good friend of mine and was running the startup accelerator Launchpad LA. I asked him, "Who in LA is the best CTO for startups? Wherever they are, whatever they're doing, we need to hire them. We'll give them whatever percentage of the company they need right now."
We're in an existential crisis. He said, "Sasha Sartha." Fortunately, he had just rolled off his last business and merged with another one. Unfortunately, he was talking to like 40 other companies right now. | |
Moiz Ali | yeah of course | |
Nick Green | So, we more or less locked him in a room and didn't let him leave until he came on as our fourth co-founder. Had we not done that, we wouldn't have gotten to launch.
We spent $100,000 there. We spent a bunch of money just on payroll, ramping up, thinking we were going to launch before we did. It was like every mistake you can think of making, we probably made. We had no excuse to be doing it either because both Gennar and I were serial entrepreneurs. We both started and sold businesses before, but it was this very humbling reminder that starting something is hard.
Sure, learning takes time, and usually, you learn the same lesson at least twice before you really learn it. In the end, a lot of those things ended up being the best things that ever happened to us.
We failed to raise money, but we ended up connecting with all the influencers. We failed to build a site, but we brought on the right co-founder who, to this day, is our CTO, head of products, and drives huge amounts of value in the business.
So, it was challenging, but we wouldn't be where we are had we not stumbled so much early on. | |
Moiz Ali | And were you worried early on when you sort of spent six figures? You're like, "What the heck are we doing here?"
Yes, okay.
Yeah, so how old are you?
| |
Nick Green | 1,000 times yes | |
Moiz Ali | how old are you at this time you're you're like like the when when | |
Nick Green | I try to | |
Moiz Ali | Be calm, right? This is you being calm. You're like, "Yeah, we spent six figures and things weren't working." If it happened to me, I'd be like, even today, "I cannot believe this happened."
| |
Nick Green | No, we weren't calm at all. It was moments of real despair, you know? Sleepless nights... all the cliched things you would do if you're pouring money into a black hole and not seeing anything come out. We were feeling so lost.
Now, looking back, it seems like the whole trajectory was inevitable—this led to this, and that led to that. But at the time, the only thing it clearly was leading to was more failure. Those were some of the darkest, darkest times of my entrepreneurial life, for sure. Probably my life in general.
I mean, you question everything, right? You question the business model, your selection of partners... you question yourself, of course. Like, did I just get lucky the first time? Am I regressing to the mean here?
| |
Moiz Ali | Yeah, absolutely. So, you launched the site. It's on Magento, which I think people don't talk about enough regarding their tech stack.
I remember talking to Christopher Gavigan once from Honest, and he said, "We're replatforming for the third time in our life at Honest." I thought, "That seems like a lot of work."
You guys have been on Magento, doing $100 million a year. Is Magento amazing? Is Magento better than Shopify? Why Magento, I guess?
| |
Nick Green | so I mean that's a technical question you should spend some time with sasha on more than | |
Moiz Ali | me yeah | |
Nick Green | He would laugh if he heard you even asking me that question. But, you know, there are pros and cons, right? Every platform has its pros and cons.
Magento is very scalable. It's also got a really robust set of off-the-shelf applications that you can use. Shopify does too, and there's a large developer community. So, the ability to scale up engineering resources to get going quickly was really imperative at the time.
We obviously felt a lot of pressure to launch, being six months after we initially intended to. Yeah, and so, you know, that was a call that Sasha made.
I think there's definitely been some challenges with Magento too, not to say that there wouldn't have been other challenges with any platform we selected. So, we've actually kept some of the core e-commerce infrastructure on Magento, but a lot of the front-facing aspects of the site and applications we've actually pulled off and put into React and other platforms. | |
Moiz Ali | Okay, so you're... it's 2014. You've spent six figures. You've pivoted from Shop Tribe and a bunch of different models to what ultimately becomes Thryv.
| |
Nick Green | yeah we're still shop tribe until 2 weeks before we launched by the way | |
Moiz Ali | wow that's crazy | |
Nick Green | yeah and I could show you you I could show you | |
Moiz Ali | in your shoptribe | |
Nick Green | Yeah, I could show you our color. It was **magenta**. I don't mean to screw it up because it sounds like "magenta," but it was magenta as in like a cross between purple and pink. That was the color.
| |
Moiz Ali | of the site | |
Nick Green | That was the color of the site. The whole branding was that. Our logo was essentially a gemstone, and the company was called Shop Tribe. It was not positioned the way it needed to be.
There is actually a story behind our fourth co-founder, Kate Mulling, who is a brilliant writer, content curator, editor, and brand mind. She came in and basically said, "Guys, this ain't gonna work. This, this, and this." It probably took her two months to convince us to move out of Shop Tribe.
So, I mean, weeks before we were launching, I was spending time on the phone with some website squatter in Florida trying to buy thrivemarket.com, lest we be forced to launch a shop.
| |
Moiz Ali | wow okay what did you pay for it | |
Nick Green | We paid low... oh God, it was between $10 million and $200,000.
| |
Moiz Ali | Gotcha. It was, you know, I'm not sure I told you this, but when Native was trying to sell—when we were trying to sell our business—we hadn't owned our trademark. I think I might have mentioned this to you while you were investing, and I was like...
| |
Nick Green | I probably didn't wanna I probably didn't wanna hear this | |
Moiz Ali | You were actually... you were like, "You need to go solve your trademark issues," because we've had a lot of trademark issues. So, you know, I was like, it was sort of on the back burner. I was like, "Okay, I need to solve these trademark issues." M&A is coming up down the road, and I'm like, "Okay, these trademark issues are becoming more important."
At one point, we had signed, you know, we signed not a term sheet but like a letter of intent or something to that effect with P&G. P&G was like, "You need to go buy your trademark." The only thing holding up the transaction was our trademark.
So, we purchased the trademark from two people living in the middle of North Dakota on a Friday. Then, the next week on Wednesday, we sold the business—five days later. But it was literally the only thing holding us up from our transaction. | |
Nick Green | I'm guessing you paid more than $20,000 or you're a much better negotiator than that | |
Moiz Ali | No, no. Substantially more than 10 times that amount makes me feel better.
But like, we had to do it. We never bought Native.com, but we had to. It was either that or we had to change our name and sort of restart the business. Proving that we could do it under a different name was not going to happen.
| |
Nick Green | Yeah, I mean, look, we've had different challenges with Thrive Market too, and probably some similar to Native. You've got a term that is already out in the zeitgeist, and there's a lot of common use already of some of the marks.
So it was one of the trade-offs with Thrive: do we go with something that really evokes something powerful but is going to be less ownable from a trademark standpoint, or do we try to create something like "Nike," which is a totally new word and very ownable? But, you know, building brand equity around that is going to take a lot of time.
Trademark is underappreciated. It's one of those things that you don't think about until there's already been a lot of value built in the business in most cases. But if you can solve it early, it saves a lot of headache down the road. | |
Moiz Ali | Yeah, and if someone else owns your trademark, they have monopsony power. They have the only asset that you need, and you cannot go anywhere else for it.
| |
Nick Green | that's right | |
Moiz Ali | It's a lot of trouble. That's right.
Okay, so it's 2014. You've launched the site and you've rebranded to **Thrive** because you realized **Shop Tribe** was a big mistake. The gemstone's out, the magenta color is out.
How do you get your first, you know, **$100,000** in sales?
| |
Nick Green | I mean it was just influencers so this was another situation | |
Moiz Ali | out of the gate you had influencers | |
Nick Green | It was 100% right. We ended up raising money because we couldn't secure funding from any institutional investors. So, we went to health and wellness influencers and asked them to invest in the company, in addition to being affiliate partners.
What we found out is that it not only brought in capital very slowly—like there were $10,000 to $25,000 investments—but we brought in 50 to 100 of these folks. They were totally aligned with the mission. They understood what we were trying to do and cared about it themselves. Many of them became, and have become, good friends of ours. They were not just financial partners in the business but true supporters of our cause.
All of these dynamics caused them to want to promote us in a very different way than they would have if it was just a transactional relationship. They were stakeholders; they were aligned with our vision. They got to know us as people and understood what we were trying to do with the business. When they started talking to their audiences about it, they saw monster reactions.
It was actually too much, too soon. I can remember our original warehouse was in the center of our office, which was about 6,000 square feet. To give you a sense, we now have 800,000 square feet of Bowman Center space today. The entire warehouse fit, along with all of us, into an office that was 6,000 square feet.
Within 2 or 3 weeks, we had storage containers in our driveway. We had racks and bins that we were fulfilling out of. Our entire driveway was filled with boxes stacked so high you couldn't see the sky. It was crazy! Once we actually got live with these really value-aligned, authentic, and supportive influencers talking about us, there was no turning back. We blew through the first... | |
Moiz Ali | and and so they agreed to invest prior to you having a dollar in sales | |
Nick Green | Virtually, call it 80% of the influencers that ultimately liked us, and many of whom still continue to be amazing partners, came in before we had a dollar of sales. It's a really interesting kind of window into the way VCs think versus the way, you know, kind of a value or values-driven, mission-oriented investor thinks.
Every VC said no. None of them could see it. Our success rate with the influencers is probably 70 to 80% close rate. You know, like 3 out of 4 of them were coming in. There were two things that contributed to that.
One was they understood the value proposition. They got that healthy living made easy and healthy living made affordable matters. It matters to millions of people because those millions of people were also the people that were their audiences.
The second side of it goes back to the ways that we got help early on from specific individuals. We had one of my buddies from college, John Durant, who's basically a meta-influencer. You know, an influencer to the influencers, if you will. Coming in through a trusted person that they really look to and follow made a massive, massive difference.
He opened up the doors, and then as the dominoes started to fall, every influencer knew more influencers, and it just spiraled from there. So, we have 400 people on our cap table today.
| |
Moiz Ali | so was was john durant the first influencer since that signed up who was the first influencer | |
Nick Green | John Durant predated all the influencers. The first influencer that came on board was Mark Sisson of Primal Kitchen. At the time, this was pre-Primal Kitchen, mind you. He was just Mark Sisson of "Mark's Daily Apple."
He was a mega influencer in the paleo community. Back in 2013 and 2014, paleo was much bigger; keto wasn't even on the scene. Paleo was the biggest lifestyle tribe that we were going after.
John introduced us to Mark, and then he introduced us to Wellness Mama, who has been our biggest influencer overall. It was just one after the other after that.
We got very, very lucky from a people side, getting the right people coming into the business at the right time. We were also very fortunate to find people that, like I said, cared about the mission. That was the thing: if we hadn't been doing it for the right reasons, those influencers wouldn't have come on board.
| |
Moiz Ali | It's also spectacular to get people who are basically going to be your customers to become your advocates as well. There's nothing more authentic than that.
So, it's year one. I think I've heard you say in the past that you didn't spend a dollar in paid media in the first year. How much did sales look like in the first year?
What is your... what is the first... like, I know you've raised from, I don't know, 400 influencers or something to that effect, you know, within year one of them cutting you checks. Because I imagine it wasn't like one round; I imagine it was sort of investing a check at a time.
Yeah, it was rolling. How much have they invested?
| |
Nick Green | So, we raised $8.5 million before doing a Series A. We did the Series A nine months after we launched, and we are probably at a $40 million run rate at that point. You know, we did over $30 million in the first year, so it was... yeah, it was crazy, right?
We stood up a 40,000 square foot fulfillment center over the course of like six days. I remember, at one point, four or five months in, it was just like doing whatever we could to meet the volume. In many cases, we were even asking influencers not to talk about us. It was this crazy backward situation where there was so much demand that we didn't know what to do with it.
To be honest, we probably could have done more in sales in the first year than we did. It was very vindicating, or very validating, of the core thesis of the model. What the VCs were always skeptical of was that, you know, normal middle-class, middle-American people want to get healthy. I was like, "No, no, no, no. They're out there!"
This is my background; I grew up in Minnesota. I know that people in the Midwest and the Southeast, many of whom don't live near a Whole Foods, want this. But, you know, a VC who lives in San Francisco and doesn't do his own grocery shopping is like, "Yeah, sure," not in touch with it.
So, it was incredible to see that come in, where there was more demand than we knew what to do with, and it was coming from people who were everyday middle-class, middle Americans.
| |
Moiz Ali | Is there anyone who you know initially told you, "No, we're not going to fund you," that came back and ultimately invested or tried to invest in the Series A or Series B?
| |
Nick Green | a lot of them a lot | |
Moiz Ali | of them | |
Nick Green | And some of them, it was like, "Oh, come on!" Right? Like when you had some of the people that would tell you that you're going to fail. Or you had the people that listened, nodded, and then just didn't respond to your emails. So, you know, those are not the people you're going to let invest.
But we also had a lot of people that gave really well-reasoned explanations for why they weren't investing. And the truth is, we are making a high-risk bet. It's an operationally intensive business. Neither Gennard nor I had e-commerce experience. We're going up against Amazon and Whole Foods at the time. We're not the same business, right?
| |
Moiz Ali | of course | |
Nick Green | Yeah, and so we had some folks that were really, really thoughtful. One of them was Dana Settle at Greycroft, who said no, but also said, "Hey, I love what you're doing. I love the mission. I align to the lifestyle myself as a mom. I see the value proposition and I believe in what you're doing. It's too early, and the risk profile is not right for us right now, but let's talk in a few months."
She continued to follow up, and like, that's who we went with in the series.
| |
Moiz Ali | And you didn't do any of those, like, "Silicon Valley, I'm gonna take the meeting and just shit on you for being assholes to me" type of rounds when you do your Series A or Series B.
| |
Nick Green | I did those... no, but I did those all in my head. Okay, gotcha. Those are like fantasy moments, but no, I never actually picked up the phone and made that call.
| |
Moiz Ali | Gotcha. So this guy, Erlich Bachman, goes into VC meetings and he's like, "You know what? I'm sensing that you guys aren't the right fit." In these VC meetings, he'll be like, "These pastries are shit."
One time, he actually took his balls out and put them on the conference room table to say, "Fuck you." You know, there were a bunch of...
| |
Nick Green | not not my style | |
Moiz Ali | not your style yeah yeah I | |
Nick Green | don't think you're your | |
Moiz Ali | own style | |
Nick Green | Yeah, of course you'd think about that. Not that specifically, but like, of course you'd think about, you know, those rejections were so painful.
Right? If you're someone who's competitive, if you're someone who's succeeded at things they've done in the past, to be told "no" is hard. To be ignored is even harder. Honestly, that was the worst. It was like the people that don't even give you the time of day.
Sure, it was super hard, but again, it was super formative. At the end of the day, I have to be grateful to those people because we wouldn't have gone to the influencers had those guys said "yes." I don't think we would have built the kind of company that we have.
| |
Moiz Ali | and so you launch how big is your catalog in year 1 year 2 | |
Nick Green | We probably launched with 45,100 SKUs and scaled it up to 65,100 pretty quickly. So, it's been more or less stable.
I alluded to this earlier, but that first barrier we wanted to break down was affordability. However, there are all sorts of other barriers to getting healthy. One of them is actually just the intimidation factor of, "Where the hell do I start?"
If you walk into a Whole Foods, I've been in a Whole Foods before, and choosing between 50 almond butters is totally overwhelming. If you search for almond butter on Amazon, you're going to see 40,000 results.
So, part of our value is to be hyper-curated, to be that place that is your trusted resource where you don't have to think about whether this is the right quality. Everything reaches our high-quality bar, and we're going to recommend the best products in each category for you.
That has stayed the same. Our product catalog has probably grown less than 500 SKUs in the last 2 to 3 years.
| |
Moiz Ali | Wow! So, is there a lot of recycling among the SKUs? Like, are you pushing?
Yeah, okay. Gotcha. Net.
| |
Nick Green | Net, so we're... yeah, I mean, the trends are always changing, as you can imagine. We're, you know, we mix shift. We're always, always, always looking to go deeper with the brands that really align with our values.
We want to work with brands that are authentic, that have amazing stories, and that are doing real innovation. What we don't want is a brand that's become commoditized, become lazy, you know, just sort of turning the crank. If that's the case, we'll go into private label and we'll do it ourselves, and we'll do it better.
That's been actually one of the most exciting things: to see that we can reward these amazing, innovative brands. We will invest to go deep with them. Then, in the areas of the catalog where there's not as much happening, it's innovative on the third-party side, we can drive the innovation ourselves.
Right now, we work with 40 co-packers on our own brand. We're sourcing from supply chains literally all over the world. Our product innovators, notwithstanding our current situation, are normally traveling all over the world all the time.
We're now getting to a scale where we can actually build supply chains ourselves. For example, we're working with a farmers' collective in Patagonia that didn't exist before Thrive Market. We're standing up this collective that is helping to convert farmers down there to traditional grass-fed beef practices.
That's, you know, cool stuff like that. It's been just amazing and rewarding. | |
Moiz Ali | And so, when you have a catalog of 45,000 products or 65,000 products later on, how do you...
You know, Facebook had this amazing realization early on that if you were able to get 7 friends in 10 days, you'd get addicted to Facebook. Slack says that once a team has sent out 2,000 messages internally in Slack, or has had 2,000 Slack messages, people are addicted to Slack and will not churn.
Is there some sort of north star that you were looking for? Were you like, "If we can get you to make 5 purchases in the first month," or "If we can get you to purchase Kettle and Fire bone broth in the first year, you know you're gonna get hooked to our brand?"
| |
Nick Green | yeah there's a there's a bunch of those there's a there's a big question in my mind always of how much of those like how much of that is correlation versus causation right and as soon as you start to do things to drive behavior the correlation and the causation can start to break down yeah but I mean the the most obvious thing is if people order they will stay. Like the the the most important proxy for value and it's not even really a proxy it is the source of value is people getting products that they love and coming back to buy those products again so you know we will like the first order is sacrosanct for us like we wanna drive as many people the moment they join the membership to be placing a first order within 30 days that's you know day 0 we'd look at day 0 day 7 day 30 day day 30 order rates we also have a concept we call core members so those are members that have placed 4 or more lifetime orders and what's interesting is regardless of the rate that that takes you to to you know the rate that those orders are placed in or how long it takes you to get there once you have placed 4 orders there's a really significant inflection in in stick rate and we're you know we're we're pretty lucky and that the the upfront membership fee also act as as a filter to get people who truly are invested in the life cycle I think one of the biggest mistakes we made early in the marketing side was trying to convert people right that's not our that's not actually what we can do today as we get to bigger scale and go more mainstream maybe that'll be something for the future but today what we wanna do is capture the people that already want this lifestyle that are working really hard to achieve it but don't have the best option and as soon as we started we call that the wellness champion and you know if we can go after those people bring them in and get them the first order that is you know those people are gonna gonna renew at a very high rate and today our renewal rates annually are over 70% so it's it's it's not as high as costco but I think if you looked at part of the reason costco's are are over 90 is they've titrated the membership base over so many years if you look at you know apples to apples our 1st year 2nd year 3rd year renewal rates I bet we're on par would be my would be my hypothesis and they don't they don't obviously don't publish their cohort data | |
Moiz Ali | Sure, sure. Yeah, and so what does that mean in terms of people? For people who buy memberships, what percentage are buying an actual product in the first 30 days?
| |
Nick Green | so it depends on the source of the traffic but half of people will buy will will order in the 1st 3rd | |
Moiz Ali | purchase in the 1st 30 days | |
Nick Green | Yeah, almost a third of them will place an order on the first day. You know, we used to actually have it at 100% because literally the way you would start your trial membership was by placing the first order.
That's something. We actually decoupled those two steps. I call it really two problems in one. There's the basket building problem and then the membership problem. Neither one is really a problem, but it's like a task that we have to do.
So, we have to convince someone that it's worth spending $60 a year on a membership, and then we have to get them to place an order. This is not trivial for us because the average unit value is only $6, while the average order size is over $70.
So, we're getting them to put 10 to 15 or even 20 items into a cart. That's a 40 to 50 minute exercise for most people on their first order. Sure, our CPAs are, I'm sure, higher than the native CPAs. But the value of that customer, if you can get them to place that order, is quite high. | |
Moiz Ali | Oh, absolutely! Well, you know, in Native, our average order value is about $20 to $21. We also saw the same inflection, which is that if you purchase Native four times, you are never going to use another deal. We had you, and we were really excited about that.
So, you know, we were talking about how categories change and how the world has gone from paleo to keto. For Native, deodorant also went from regular deodorant to charcoal deodorant, which became a much bigger thing and never existed a few years ago.
What are some of the categories that you've seen sort of grow at Thryv? And what are the categories that are the largest? If you could talk about that today.
| |
Nick Green | Yeah, I mean, we could spend a while talking just about charcoal if you want. That's been one of the most bizarre trends, and it's sort of like across all categories. Charcoal in your beverage, charcoal in your deodorant.
| |
Moiz Ali | is it holding | |
Nick Green | it it's like faded a bit right and like all these all of these all of these trends right the the the faster they rise the the faster they fall typically you know 2019 was all about cbd you know cbd hemp extract and you know we were saying I mean like growth rates that we had never seen in any category. To the. That cbd was becoming one of our top 5 subcategories on the entire site and it's still doing really well but it's stabilized and then it's and then dropped off I think for some of the more commoditized skews keto continues to be huge and it has been for now a year and a half to 2 years you know I've looked at some of the Google search trends and it's definitely ebbed a little bit but that hasn't been the case for us we're still seeing that as as a diet search term dwarf all of their dietary search terms combined so it's that big and you know plant based is as you'd imagine is is also really really significant I think one of the most heartening trends that we've seen on-site in general has been more interest in environmental responsibility and sustainability so you know just an anecdote there we're we're carbon neutral on all our shipping we actually buy offsets to completely neutralize our shipping footprint our carbon footprint nobody cared about that 4 years ago even our most like hardcore members it was like do you have free shipping we actually get we get as many inquiries today about carbon neutral shipping as we do about free shipping so people really are starting to care about that you know reusable vessels we were 98% virgin free virgin plastic free and all of our packaging you know we went fully recyclable in our packaging 0 waste fulfillment like these are topics that were not in the zeitgeist 5 years ago for most consumers even natural organic consumers today they absolutely are so I would say if I were to pick the top 3 I'd say environmental responsibility keto and plant based are probably the 3 the 3 big ones and then within there there's all sorts of flavors | |
Moiz Ali | And so, if you had to, let's break down the largest one that you mentioned: keto.
Let's break that down a little bit. Is it, you know, keto snack bars? Is it keto, you know, like a soy version of keto? Can you break it down?
| |
Nick Green | It's keto everything. It's keto, keto beverages, keto strips for the actual testing of your ketone levels.
It's exogenous ketones, which you can actually ingest to go ketogenic. There are a bunch of different products that aren't keto per se but are mapped to the keto diet, whether it's nuts and seeds, MCT oil, or collagen peptides.
You know, it's incredible. It's been absolutely amazing. It's our number one acquisition strategy as well, historically.
Again, notwithstanding this moment, which is very different with COVID-19, historically, it's very interesting. By the way, in a crisis, people have stopped thinking about their diet. They just want to get healthy food.
But in normal times, people are absolutely obsessed with keto, and it's the number one acquisition strategy we have.
| |
Moiz Ali | That's interesting. I definitely want to come back to COVID-19, but let me talk a little bit more about, like, you know, you said keto is your number one acquisition strategy.
You've grown from, you know, $30,000,000 in year one on the backs of influencers to hundreds of millions of dollars in revenue today. You went from $0 in paid marketing spend with a bunch of affiliates to what I imagine is a much more robust marketing budget.
I think I've seen you guys run TV ads, out-of-home ads, and I'm sure you're doing Facebook ads. So, where are you spending money today when you're trying to do paid acquisition?
| |
Nick Green | Yeah, I mean, we're still overwhelmingly digital. We definitely pulled in some of the more traditional channels. But, you know, paid social works for us. Paid social in combination with influencer marketing works really well for us. Influencer... what?
| |
Moiz Ali | Does that mean that, like, an influencer is posting something and you are promoting that Facebook post?
| |
Nick Green | we've we've done that we've had it actually done advertiser access with the with influencers that we're we have really great partnerships with and obviously they control the message and the content but we pay for the media we've also just seen that if we run facebook ads with our influencers likeness and again in partnership with them and all the content they can perform extremely well we also see that if somebody you know when we're spending on it's an ecosystem right so people most people even if you're doing last book attribution there's there's multiple touches that are contributing to that conversion and so you know we will see that facebook has something top of funnel builds awareness and then when you partnered with you know you do a partnership promotion unit they have nothing to do with each other those two sources spend contribute to both both channels being more efficient so influencers actually had a real renaissance for us since we split out that funnel so it's interesting on instagram as you'd imagine it's it's overwhelmingly mobile traffic same thing actually on facebook but instagram especially and especially with so many of our influencers being instagram influencers we were seeing that when you try to get somebody to start a trial while placing that first order the chance you were going to get that conversion in that moment on the phone when someone's going through their instagram feed given that it takes 40 to 50 minutes is just super super low yeah so you had 1 an attribution issue where people were finding us through instagram but were then converting later and not being attributed but 2 you just had a lot of fall off right in the in the funnel so as we switch to a simpler funnel let people sign up directly for membership gave them monthly and annual options all of a sudden our influencer channel just started performing like dramatically better like 50% better in terms of in terms of last click contributed cpa which has allowed us now to go to a lot more influencers to promote more heavily with our with our top influencers and so that's now you know it was overwhelmingly our largest channel for a long time then it wasn't now it is again which has been super exciting | |
Moiz Ali | what what was your overwhelming was it facebook or instagram or are you sort of | |
Nick Green | Looking at influencers... Yeah, influencer marketing was the most significant. You know, Facebook has had its moments. I could spend a lot of time talking about Facebook; I'd probably say a lot of dumb stuff since you're the Facebook master.
But we have struggled, honestly, with Facebook. I think only in recent months have we started to understand its role in the funnel. If you're lucky enough to have native on your hands where you can actually make last click work with Facebook, and it backs out on an actual attributed CPA basis, you're very lucky. We can't.
What we found is that Facebook does serve a really important role in the funnel. When you start to get away from just the myopic last click way of looking at things, and you start to think about what the true CPA is... I'm not even talking about multi-touch attribution. I'm just talking about intuitively putting your human hat on and thinking more broadly about what it's doing in your marketing ecosystem.
We've done some tests to actually try to quantify that, and it's really significant. Interestingly, we've been leaning into Facebook a lot more over the last 6 to 9 months, and a lot of that also has to do with the simpler...
| |
Moiz Ali | And so, if influencers are your number one channel, what is your number two channel? What is your number three channel?
| |
Nick Green | number 1 channel by spend is influencers number 2 would be would be facebook | |
Moiz Ali | and what is number 3 we've had | |
Nick Green | Paid search and paid shopping have actually been our biggest channels during certain periods. To me, that is an artifact of us over-focusing on the bottom of the funnel. Right? Because last click will tell you those channels convert really, really well. Sure, yeah, but they're also stealing a lot of conversions. | |
Moiz Ali | Definitely. Google used to tell me, "We’re your cheapest CPA." I would say, "Take out all branded search terms and branded ads from this, and then what is the CPA?" They would respond, "Why would you ever do that?"
I explained, "Somebody just found our product on Facebook, Googled this product, clicked the ad, and you're trying to claim all the credit for this."
| |
Nick Green | I mean, the biggest breakthrough we ever had—I don't know if this podcast isn't just about marketing—but the biggest breakthrough we ever had on paid search was to split out branded and unbranded paid search. They're two totally different animals.
Definitely! We don't even... I will literally scream if I'm in a meeting where people talk about our CPA on paid search as a whole. It's like...
| |
Moiz Ali | then couldn't agree more | |
Nick Green | Yeah, if you have a $60 CPA, but your CPA on branded is $10 and your CPA on non-branded is $200, your peanut butter is $200.
| |
Moiz Ali | $cp you have | |
Nick Green | a $200 c p | |
Moiz Ali | Yeah, I'm like, branded search is a tax that Google forces you to pay so that you don't lose the search box to somebody else.
Whenever I'd explain that to my Google rep, Google would be like, "Oh, I guess I get what you mean." I'm like, you must have heard this from everybody else. Nobody thinks of Google's branded search as real acquisition. It's **bullshit** acquisition. It's somebody finding your product somewhere else and sort of paying Google for it. You have to pay Google for it.
We only have a few minutes left. I want to ask a few fun questions. What is your favorite product on Thrive Market?
| |
Nick Green | I mean that's like asking who's your favorite child right I love them all they all have right | |
Moiz Ali | now you have one kid so you have an answer to that | |
Nick Green | It's a... yeah, it's super easy. And then I guess I would probably go with the first product, right? Which are extra virgin organic fair trade coconut oil. I mean, that's the one that started it all. On it was both our...
| |
Moiz Ali | that's a great answer | |
Nick Green | It was our acquisition hook, and it's an amazing product. Now we're doing it fully regenerative, which is also super exciting.
| |
Moiz Ali | can you talk about the best selling product on thrive like I don't know if you say most popular | |
Nick Green | I already mentioned it. It's collagen peptides, so it's said "collagen peptide."
Okay, gotcha. Yeah, so two years ago or five years ago, collagen was basically a beauty product. Now, it's become a health supplement.
It’s just amazing how the industry has emerged. They are now taking bovine collagen and converting it into a high-quality source of protein. | |
Moiz Ali | What is it like? You know, you and I have hung out a few times. You're generally an incredibly healthy person. What's an indulgence product that you still buy off of Thrive Market? Like, do you get Haagen-Dazs ice cream?
| |
Nick Green | on thrive market or from like from somewhere else beside thrive market | |
Moiz Ali | actually both now I wanna know both | |
Nick Green | Oh, interesting. I mean, on Thrive Market, it's definitely chocolate. So, you know.
| |
Moiz Ali | I milk or dark like | |
Nick Green | Dark, dark, dark, dark, dark, dark... but there's you. Now, this is also a huge trend we didn't talk about that kind of ties into keto. You know, the sort of sugar-free sweets are blowing up for us. Whether it's brands like Smart Sweets or Lily's Chocolate, monk fruit sweetened chocolate has been incredibly, incredibly popular with keto.
I love Lily's; I can eat a whole one of those bars. So that would be my indulgence on Thrive. Gotcha. Off Thrive, I don't buy a lot of junk food, but I'll tell you the one candy I cannot resist is Skittles. Skittles! Yeah, like I'll buy one of those giant bags at the movie theater and finish it halfway through the movie. | |
Moiz Ali | Wow, that's crazy!
Okay, will Thrive Market ever sell its branded products in brick-and-mortar stores?
Yes, 100%.
| |
Nick Green | Whether that's in someone else's brick-and-mortar stores or ours, is the decision we'll have to make. | |
Moiz Ali | okay gotcha this is not a fun question has covid 19 been good for | |
Nick Green | You or bad for you? I mean, it's a national and obviously international crisis. It has been a huge opportunity, and we feel a responsibility to step in and provide at a level that we've never had to before.
You know, it's gone from finding healthy groceries being something that a lot of American families were thinking about, to getting access to any groceries being something every American family is thinking about.
So, I would never say it's been good for us. It has definitely created volume for our business and an insane number of challenges on the back end. But it is the ultimate moment for our mission. This is our opportunity to truly make it accessible in a time when people don't have a lot of options.
| |
Moiz Ali | Yeah, and I don't mean... I certainly don't mean like COVID-19 being like evidence throwing parties because there's COVID-19. I really mean like, is it from a business perspective?
| |
Nick Green | for a business standpoint yeah no we're we're in the opposite | |
Moiz Ali | of the | |
Nick Green | spectrum for sure exactly yeah yeah | |
Moiz Ali | Okay, finally, this is going to be my last question because we're almost out of time. You know, you guys have raised $100 million in revenue and $100 million in VC funding. There are four co-founders and a team of what must be a couple hundred people. I think the last time I visited the office, it was $100 million in revenue.
What is the exit strategy with this business? Will you be working here in 10 years? You know, Jeff Bezos is never going to quit Amazon, and Mark Zuckerberg is never going to leave Facebook. Will you ever leave Thrive Market? Is that happening in the next 24 months, 5 years, or 5 to 10 years? When does this happen?
| |
Nick Green | Yeah, I guess the way I would answer that question is: every time that I have tried to predict the future, even one year out in the past, I've ended up being so wildly wrong that I don't do it anymore.
You know, we're building this business for the long term. Whether I'm the right person to be the CEO ten years from now, I don't know. Would I like to be the leader of where I think this business is going? Absolutely.
Do I think we have the opportunity to build a business that is doing $1,000,000,000, if not tens of $1,000,000,000 in sales? I absolutely do.
Do I think that this mission has to be achieved? Right? I think that it's ludicrous that it's easier and cheaper to buy highly processed, denatured foods than healthy and organic ones, destroying the planet. So whether it's...
| |
Moiz Ali | thrive market or something else like this has | |
Nick Green | To happen in the world, and so I believe that we are better positioned than anyone else to do it. I would be very, very happy if we were sitting here 10 years from now, and I was still plugging away on Thrive Market. We would be having the impact that I believe we could.
| |
Moiz Ali | And are your investors clamoring? Like, you know, at Native, we didn't really have a lot of investors. So we didn't have anyone clamoring for returns. Like, you were an investor, you weren't called.
| |
Nick Green | didn't want you to sell I would have loved you to I wanted you to keep going | |
Moiz Ali | Yeah, fair enough. In fact, you weren't the only one. When I called a couple of people and told them we were selling the business, they were like, "Fuck you!" I was like, "Holy shit, we're returning significant returns on the capital invested." But by...
| |
Nick Green | The way Native, where we're coming from... but I should've said this at the very beginning. Part of the reason I'm honored to be on this call is that I think Native is the best investment and the shortest timeline that I've ever had. It has made me look smarter to so many people than I really am as an investor, so thank you for that.
Our investors are patient. That was one of the really advantageous things about bringing in people that align with the values and the mission. They want to get to the same place we want to get to.
It doesn't mean that the right strategic thing for the business may not be to find a partner at some point. It doesn't mean that we may not choose to go public and create liquidity for our investors. But, you know, when we go public, that's not the end of the business; that's the beginning of the business, surely.
If we choose a partner, it's not because we're trying to wash our hands and walk away. It's because we think that's going to accelerate our path to scale.
So, I think that for us, the greatest asset in our business is that long-term vision and the willingness to plan for that and act in that direction versus optimizing for a short-term outcome. I think if we continue to do that, wherever the outcome lands, we're going to have a tremendous impact. | |
Moiz Ali | Okay, you know, if you guys are based in LA, I tweeted yesterday that I was going to interview you for this podcast. A bunch of people said, "Hey, we want to sell our small businesses' products to Thrive Market."
What's the best way to get in touch with your buyers? Is it LinkedIn? Is it a bad idea because you guys have a limited SKU set, or are you still looking for new products?
| |
Nick Green | We're always looking for new products, right? Like, we want to find that innovative product that's on the bleeding edge of the trend curve. It should be doing something really unique, have strong values, and a great founder. That is what we live for.
So yes, you can email our buyers or ping them on LinkedIn. You can also go online and literally submit a form that will go directly to our buyers. We read every single one of those submissions. A lot of our best products have come in straight through the front door.
So no, we are always looking. We are incredibly discerning. We reject 30 to 50 brands for every one that we bring in, but we are always looking. | |
Moiz Ali | yeah and just as a note you guys rejected native which I loved as a story by the way | |
Nick Green | I know I find that I mean that's I I don't I don't hold the cards | |
Moiz Ali | no no you don't control it no no no no | |
Nick Green | I I I love it believe me I pushed | |
Moiz Ali | No, I love the independence of your buyers to be able to say, "This isn't the right product for our consumers." Even though you, as an investor and the CEO of the company, were pushing in one direction, your buyers were saying no. I love the ability that you have, like, of buyers to be able to sort of stand up to you and say, "This isn't the right product for us."
| |
Nick Green | that's right | |
Moiz Ali | Okay, fantastic, Nick. This was great. I want to sign off by thanking you for three things.
**First**, for doing this podcast.
**Second**, for certainly investing in Native and being this fantastic resource that I had for years. I remember I'd call you up, and we'd chat on the weekends because both of us worked on the weekends. You were like this calming, rational force. You were the only person telling me not to expand into 15 other categories, and I really appreciated that.
**Finally**, when we sold the business and I emailed all of our investors asking them to sign the documents, you congratulated me. You said, "You built this business the way you wanted to," and I really appreciated that. I was trying to build Native the way that I thought was right for me as a CEO and as an operator, not for anyone else.
I think that may have caused a lot of mistakes that we made as a result of that. Selling was possibly one of them. Certainly, the business is a lot bigger today than it was two years ago. But that note meant a lot to me, and I still read it from time to time. I really appreciate you saying that to me.
So, thanks for all three of those things. I really appreciate your presence in my life.
| |
Nick Green | That means so much, and I appreciate you saying that. That note reflected one of the things that I learned from you, which was that maniacal focus and that willingness to do it exactly the way you wanted to. So, it's been a two-way street, and there's much more to come.
| |
Moiz Ali | nick thanks so much for your time really appreciate this |