Josh Hix, founder @ Plated

Sam Parr

How many of you folks have used Plated before? Some, but not that many. So at least we have a good opportunity to...

Josh Hix

go sign up

Sam Parr

Yeah, to evangelize a little bit, but in a nutshell, just give the high-level description of what the company is.

Josh Hix

Sure, so for the consumer and Happy [the company], I think we're going to talk a bunch about the business side. For the consumer, we help you cook. We're a meal kit business. We deliver all the portioned ingredients you need to cook at home, along with recipe content: - Paper recipe cards - Video content - Etcetera

Sam Parr

Got it. You guys have raised roughly $90,000,000. Do you say how many customers you've had?

Josh Hix

I think all the lawyers will let me say this: it's a few hundred thousand.

Sam Parr

Okay, and you guys recently sold, a year ago, a little over a year ago, for roughly $300 million to Albertsons, right?

Josh Hix

correct

Sam Parr

So these guys have an amazing story because, similar to Giphy, when we were talking about it, it happened very quickly. What year did you guys start?

Josh Hix

I started with one co-founder. We started the business in the summer of 2012 and then sold in the summer of 2017, so 5 years. Which maybe is quick, I suppose, in terms of venture-backed companies it is, but it definitely didn't feel that quick.

Sam Parr

And it never feels fast when you're doing it every day. So I want to hear about the early story because you and I talked about it a few days ago, a week ago, and you were talking about just the early... the first iteration of the product. I found it to be kind of shocking actually. It's a pretty amazing story. So walk me through where you were a few months before starting the business and what led you to, let's say, the first month of the company.

Josh Hix

So, the kind of genesis of the company was that my co-founder Nick and I started out knowing we wanted to work together, but not on what. It was **team first** and **idea second**, which I think is a reasonably good way to go about it. What a lot of the academics would tell you is that the number one thing that kills startups is **co-founder conflict**. I've certainly seen it with friends and folks that I run into, so that part was very important to get right. After we decided that we were going to work together, we sat down, looked at each other, and thought, "Well, what now?" We needed to figure out what the idea was. We tried to go through a process of figuring out what was both interesting to us. So, it's kind of that **P word**: what are we passionate about? But there are lots of things that we were passionate about that would probably be horrendous businesses. So, we asked ourselves: what do we actually care about enough to get up every day, including the bad days, and work on? And also, where do we think there's an interesting business opportunity? We needed to figure out where the overlap is. We actually spent about **six months** doing that—looking at different ideas, talking to people, and trying to be smart. We probably were not that smart, but we were trying to be effective at figuring out what was a good idea. We tested our ideas by talking to friends and family, putting up landing pages, and using all the techniques that everyone is familiar with. We were trying to get a good handle on what was a reasonable business idea. In part, we were trying to do that to a level of confidence that we felt good about taking money from friends and family before we went and launched the business.

Sam Parr

And you basically locked yourself in a room for 6 months, you said, you and your partner. What was interesting to me is some of the founders who have spoken today, they had this... they kind of had a pretty good brand from the get-go, or at least they knew what they wanted to be early on. Whereas you did not start Plated... Plated did not start as Plated. Can you talk a little bit about the very first iteration of the product?

Josh Hix

So part of this was that we were just like **broke as f***.**

Sam Parr

less than broke negative

Josh Hix

Yeah, so we met in business school, which was a lot of fun but also really expensive. Both of us were paying for it ourselves, which is a way of saying that Citibank was paying for it. I think we tried to put it together; we had something like a quarter of a million dollars in debt between the two of us. So, you know, we had negative money. We had some credit cards that, again, Citibank was also paying for, which we used to fund the business. We were just putting everything on a credit card. Nick, at least, was married, so his wife kind of supported us in the sense that she was paying for him. We worked out of their apartment, and I ate all their food. But we had no money for anything, including a domain. I think there were two things that we were doing. One was just being cheap, which was by necessity. The other thing was we were trying to be deliberate about starting the business and testing everything, getting all the obvious big mistakes out of the way before we bought and built the real brand. We wanted to mess up on a throwaway brand, so we started out with dineinfresh.com. It's awful; it's literal and hard.

Sam Parr

a $10 domain name

Josh Hix

Yeah, it was available. I mean, that was the basic search criteria: go on GoDaddy and see what we can buy that is available, right? But it's terrible. It's too literal. No good brands are literal. It's everyone... you know, is it dining? Dine in? How do you spell that? It was just, you know, it's too long, too many syllables, etc. But it was available, and it was good enough to test on. So we ran with that brand for about three months, during which we got through a bunch of milestones. We had enough conviction to take some money from friends and family, although that turned out to be a lot harder than we expected it to be. We raised that money, enough to go buy Plated, which we had to negotiate. You know, not surprisingly, somebody owned it. They weren't using it, so it was reasonably affordable. Then we built a sort of brand identity around it and launched that properly.

Sam Parr

What was the dine-in fresh? Like, what were you doing? What?

Josh Hix

in what sense what were we doing

Sam Parr

Was it just a basic landing page? And you're driving traffic there through what, Facebook ads?

Josh Hix

So, it was a... I mean, it was a fully functional website. It was ugly as sin, but it was a fully functional e-commerce site. It was taking orders for us that we were then fulfilling. All of it was super scrappy; we were doing it out of Nick's apartment. But it was a site to go to, place orders, and manage your account—normal sort of e-commerce functionality, including, you know, kind of customer research. So, I would sit there on the laptop and chat with people, asking what they liked or didn't like, or why they were buying.

Sam Parr

You were just using an Olark, like a website plugin that allowed you to chat with anyone who visited the website.

Josh Hix

exactly

Sam Parr

and where was the traffic coming from

Josh Hix

Mostly Facebook in the early days. Now, I don't know if that's helpful in today's context, but way back in 2012, it's funny I say this to people now. I mean, we started—we literally filed the incorporation papers in June of 2012. The thing that people don't often remember was that in May of 2012, Facebook went public. Facebook was barely a thing then, and they were still basically, and in some cases literally, giving away media. There was some program you could sort of apply to, and I don't remember the mechanics, but they would just give you a $50,000 advertising credit. So we were spending—we didn't get that credit, by the way—but my point is just that Facebook was very, very inexpensive. We were spending $5 or $10 a day, and that was enough to drive 100 visits or whatever. It was enough that we could do user research in real time.

Sam Parr

100 visits a day turned out to be what like 20 customers a week

Josh Hix

I don't think the conversion rate was that healthy but something like that

Sam Parr

So, like, tens a week, tens a month for your first handful of months, or 3 months, 6 months.

Josh Hix

that's about right yeah probably 3 to 4 months

Sam Parr

And you're telling me about the early version of the meal kits. How are you creating the menu? And tell everyone how you're preparing the food.

Josh Hix

Well, I mean, the theme to those answers, and all of them, is that it was me and Nick doing everything. We had no real experience in hardly anything. I have a software engineering background, but I wouldn't claim myself as a professional engineer. I could do enough to build a site and such. Nick was a Marine and had some reasonable sort of operations experience, but outside of that, call it engineering and operations, we didn't know anything about anything. We didn't know anything about the culinary part, or the customer acquisition part, or you know, anything else. But we had no resources, so we just figured it out. On the recipes part, we were just writing them or finding them on, you know, sites like recipes.com. Wherever we could, we were just hacking it together. We were finding recipes, packing boxes at first out of his apartment. You know, we were just kind of doing whatever we needed to do to make it work.

Sam Parr

So, you're... someone places an order that you have made up the menu. You're making the menu daily or weekly or something like that? Weekly. And you literally then just go to Whole Foods or Safeway or whatever... whatever the stores are up here, and you're literally just individually packaging the ingredients and then taking it to the post office?

Josh Hix

Yeah, we were hand-fulfilling everything, which I know a lot of e-commerce companies get started that way. It just happened to be food, but...

Sam Parr

What was that like? Let's say you're packing chicken. What was that wrapped up in?

Josh Hix

So, on the packaging front, again, something we didn't know anything about. We tried to be smart and certainly always erred on the side of food safety. But what that meant is the early packaging design was way too much. It's an industry challenge even today. The amount of packaging is something that we focus on, but back then it was comical. I mean, you'd get a freaking refrigerator-sized delivery for a chicken breast. It was wrapped in a bunch of insulation with ice packs. The general concept was the same as it is today, but a lot less elegant.

Sam Parr

and how long were you doing this out of your apartment for

Josh Hix

The apartment piece only lasted probably 3 months. We pretty quickly... I mean, we knew that that was not scalable. It was not the right thing to be doing for a lot of reasons. So as quickly as we could, we went out and found warehouse space. Not that like everything... that took a couple of tries to get it right, but we got out of the apartment pretty quickly.

Sam Parr

And then so you guys are bootstrapping the company up until this point. You are in debt. Are you paying for all this on a monthly basis with credit cards? Or... yes, so you're...

Josh Hix

No other options, I mean... We were not for lack of trying. We were applying for small business loans and pitching everybody and every other method that we could think of to try to get access to capital, but we didn't have any.

Sam Parr

And at that... Like, you're applying for small business loans. You just said, did you actually think that this is gonna scale to something with hundreds of millions of dollars in value? Or was it just, "Man, if we can get to like $500,000 a year in revenue, I'll be so happy"?

Josh Hix

So, we... I don't think we really had any sense of how big it might get. But we did, you know, both want it to get very big. Also, just in working through the spreadsheet math—which has its obvious limitations—it's very clear that, I mean, basically all e-commerce business models, like I would say as a rule of thumb, most e-commerce businesses need to be very large to break even. There are exceptions to everything, and I have friends that have drop ship businesses and things like that that work. But by and large, e-commerce is a high fixed cost, low variable cost business. So, you've got to sell a **ton** of units to cover your high fixed costs. We thought that we would need to get big and that we were going to have to raise money to get there.

Sam Parr

So, what happened between month, let's say, 4 and 8? I know you guys raised roughly $400,000 in funding. You raised a little bit of funding... What happened between that?

Josh Hix

So, probably at month three, we had enough confidence to go and raise money from people. Now, we thought that was going to be like, you go and pitch some people, and yeah, it's hard, but we'll go do it. It took us three months and about 200 pitches to get anybody to say yes. That first "yes" was a group of angels to the tune of about $400,000, which today is like a joke of a seed round. I mean, most venture businesses are raising $1,000,000. Not that that isn't without its downfall as well. So, we raised that $400,000 from a group of angels—just individuals, right? People that had had some success before and were crazy enough to believe in us. Then, we bought the plate of domain, built the brand, and went to plan this big launch, which was its own special form of disaster. Building up to the launch, you know, we were doing what we thought we should do, which is try to get some press, get the website ready, get the inventory in order, etc. And then go try to get somebody to write about us. So, Nick, my co-founder, was doing all the media at this.

Josh Hix

Went out and got **Thrillist** in D.C. and Boston to do their city-specific pieces on us. You know, we got all excited, thinking, "Is this it? They're going to write these pieces, and we'll be $1,000,000,000 overnight and ride off into the sunset." About three days before the launch, which was on a Monday in October of 2012, we started hunkering down to get ready. We began hearing some noise about a storm coming. For those who lived here at that time, you probably remember that was when **Hurricane Sandy** hit. It was literally overnight, from Sunday into Monday, when that hit, which obviously devastated the area. There was no power, no internet, and no cell phone service in most parts of the city. We came within about three inches of our one kind of sad little warehouse being flooded out of business, which would have completely ruined us. We had absolutely no backup money at that time. We survived that, thankfully. It's a fun story now in hindsight, but we definitely came very close to killing the business. Then we were able to continue growing and eventually raise some venture capital money—sort of proper institutional capital.

Sam Parr

And how long was that initial seed round supposed to last? Or how long did it last for you?

Josh Hix

So, I don't think we really knew how long it was going to last. We were just trying to stretch it as far as we could. We had just been sort of beaten and battered by the fundraising process and knew that it was going to be hard. So, we were trying to stretch it as far as we could. I think, you know, we probably would have estimated 18 months of runway. It was probably more realistically half of that. In part, because once things start working, you know, the marketing requires money. Even though it's profitable on a ROI basis, you pay Facebook, and then it takes a few months to kind of make that money back.

Sam Parr

Is anyone here in the Hustles Ambassador group? Oh great, a fair bit of people. So, I had a long post on there 2 or 3 days ago, and I got frustrated talking to a couple of friends who were trying to recruit basically a co-founder for a company. This co-founder, they were going to pay an $80,000 salary, but people weren't willing to take that because it was a huge step back from their current salary. Even though they said they wanted to start a company, they were like, "Yeah, you know, I'm already getting paid like $150,000. No, I don't want to get paid $80,000." It just frustrated me because I don't think people quite understand that when you start something, your early salaries are typically very, very low. For me, the first year, it was roughly around $20,000 to $30,000. The next year, it was a little bit more than that, and now it's reasonable. But you're paying yourself very little early on, and you had that same journey, right?

Josh Hix

Yeah, so I think it's an important and somewhat nuanced topic. I always feel compelled to say that I think it's a privilege, and I feel privileged to have had the ability to go do it. Even with all the debt, which made it hard, I was at a place in my life where I didn't have kids. I had friends and a supportive family. I knew I wasn't going to be homeless, and that safety net is something that not everybody has. So, I think it's important to acknowledge that because sometimes these things can get sort of glorified in a way they shouldn't. That said, yeah, we didn't pay ourselves anything for a long time. You know, it's a similar kind of story—$20,000 to $30,000 in the first year, maybe, you know, whatever, $30,000 to $40,000 in the second year. By the way, when you start running short on money and you can't make all of payroll, you're the first person that doesn't get paid. That happened multiple times. So, I agree; I think it's a reasonable expectation for somebody starting a business to understand that if you can't do it, you can't do it, and that's just the reality sometimes. But raising money... I mean, I do some angel investing now, and it's a huge red flag if somebody's trying to take a big salary out of it. It's not a good use of the money.

Sam Parr

what do you consider a big salary

Josh Hix

$80,000 is definitely a big salary for the first year of a company. I don't know where, and I don't know if there's a bright line there, but it's closer to $20,000 than $80,000.

Sam Parr

Yeah, I mean, I think that it's easy to glorify this entrepreneur journey, but it takes a long time to get to... to get "market salaries," you know what I mean? And I think that when you and I were talking, I wanted to bring that up because I don't think that people understand.

Josh Hix

Yeah, I don't think... you know, and there's no sort of one place you can just look for what a market salary is. But I don't think that we were paying ourselves market salaries until after we sold the business, after 5 years.

Sam Parr

Let's talk a little bit about some pretty specific tactics. So basically, after raising your second round, I mean, it was definitely like... it started to grow nicely and things were working well. You guys ended up with roughly 1,200 employees and things were going well. But what got you those first customers very, very early on in, say, the first 9-10 months?

Josh Hix

yeah it changed very rapidly and I think that's the real answer to how to go find those customers I mean it's a common question and it's an important one and I get why everybody asks it but at the same time these things are really just arbitrage it's finding places where the media or the attention of people is underpriced I mean that's like in a nutshell what you're looking for whether it's influencers not that that's exactly a secret anymore or facebook in the early days or whatever the sort of new thing is so what we were doing the first ever customers were what we talked about a few minutes ago had a chat client on the website you'd come on you'd get that sort of annoying little pop up and say hey what can I help you with and in the very early days it was just me you know so nick my co founder was not technical so it was off sort of doing everything offline the media and the operations and all these things and I was just sitting on a laptop doing everything there writing the code for the website doing the customer service everything in between and I would just literally sit there and talk to people on chat and it was very helpful you know certainly at times kind of frustrating but I would sit there and I remember the earliest of those chats some of them would go for hours which I still kind of wonder why people were willing to spend hours talking to a random person on the other side of a chat client but they were very helpful in terms of telling me you know why did you click on that ad which is on facebook generally how they ended up on the website and then tell me what you think of the website does this make sense to you what parts of it don't are you thinking about buying are you not like what would it take for you to buy and then just building that back into the copy on the website the sign up flows etcetera in as real time as we could now that obviously doesn't scale but over time facebook in that first two years for us was a big channel we layered on other things and honestly the way I always sort of describe this to investors and other people is we did it all in house customer acquisition that is and it looks like a hedge fund trading desk it's all just sort of arbitrage of you know cost per click and cost per impressions and everything else and what are the tactics that you know other people are not using yet and every time facebook would put out a new tool or audience lookalikes whatever it was it would be great for a month and then like okay for 3 more months and then not work at all after that

Sam Parr

how did you figure out what you could spend early on to acquire a customer

Josh Hix

We just tried to be careful; that's my best answer. Again, I think this is very dependent on the business model. Most e-commerce businesses probably ought to break even on the first order. We are a subscription and low-margin business, so we had to make a bet on how many times you'd order and what the lifetime value was. We just tried to be conservative in the beginning and not shoot ourselves in the foot. As the business got older and we started having more customers, or any customers that had been with the business for months or years, we had a more informed view.

Sam Parr

What about raising a lot of venture capital? You guys raised $90,000,000. I asked, "Have you raised any venture capital?" We have not raised any venture capital. Personally, I don't know if I actually want to ever do that—maybe, maybe not. But when I asked you that question, your answer was different than most entrepreneurs of venture-funded companies, which was, "100% absolutely yes, I will do it again." Whereas most people I talk to say, "Maybe," and a lot of people say, "Never again." You said wholeheartedly yes.

Josh Hix

yeah

Sam Parr

Can you tell me about that decision-making process and why you're going to raise money again in the future?

Josh Hix

so I think it all comes down to knowing what you want to do it probably sounds cheesy but some business models require a venture most don't and I actually think and I think a lot of the topics and businesses that you talk about and cover are aimed at some of the non venture which is I think I'm a huge fan of like I think that that kind of bootstrap businesses or lifestyle businesses don't get enough press get a bad rap sometimes like a lot of my you know happiest most content friends are running those kinds of businesses and so I think that they are equally as important equally as valuable I mean probably on average they're more valuable than venture businesses right I mean that's no sort of secret that most venture businesses fail they're very binary it's sort of $1,000,000,000 or nothing so this is all you know don't sort of overweight what I'm saying some days I wake up and wish that I wanted to go build something that looked more like a bootstrap business it's just not the stuff that I'm I think most interested in and best suited to build which for me is kind of large scale technology products those are the kinds of things I'm most interested in what I've spent my whole adult life working in and those tend to be venture backed type businesses where you need to raise a lot of money to make it work there is no amount of hustle that will allow you to build facebook without raising $1,000,000,000 like it is not simply possible so for me it's a no brainer which isn't to say that it's always fun or always pleasant or anything else I mean having a big board and a bunch of venture guys to manage and go out every once a year or once every year and a half to raise money is a big distraction and has very real downsides including that it's no longer your business or just your business you're going to sell a bunch of it you're managing other people's money etcetera but for a certain kind of business there's no option

Sam Parr

When you guys were starting out, were there a lot of competitors to you? Someone was asking that on the screen. It seems like a pretty crowded space now. Was it like that then?

Josh Hix

No is a short answer. As far as we are aware, we were the first company in the U.S. There was a company in Europe at the time that was getting started; they started a bit ahead of us, but we weren't aware of them. It's an interesting phenomenon: waves of companies tend to get started around the same time. There's something in the media, in the air, or whatever it is that causes a lot of similar types of businesses to emerge simultaneously. However, it was not competitive because there were no scaled businesses. There was hardly anybody doing anything. The label of "food tech" didn't exist back then. The closest comparison that anyone had for us was Webvan, which was not a good comparison. We were thrown out of—I can't even count how many people's offices. I don't know why they took the meetings in the first place; it's a separate sort of topic. People would take these meetings, and we'd start pitching. We'd get, you know, 90 seconds in, and they're like, "Wait a second, this is just fucking Webvan. Get out of here." It's like, "Okay, well, thank you." But, so, no.

Sam Parr

And if you had to start over again, would you start in this space now, or is it too crowded?

Josh Hix

I don't think today that I would go start in this space, at least not without a clever idea around how to differentiate yourself and how to build an audience. You know, it's not clear to me where... and it doesn't mean that these things don't exist. I just spend my day-to-day running a medium-sized business at this point, not looking at sort of new customer acquisition channels. But it's not clear to me where you go to build a big audience in a venture-style through paid media, through hyper growth, etc. today. Because Facebook and Google, to some extent, were the way that everybody did that from 2012 to probably 2016, and that's largely gone.

Sam Parr

so you guys were on shark tank what year was that

Josh Hix

We filmed in the summer of 2013. They film it like a regular TV show, as far as I know. Anyway, I don't know a ton about the TV industry. They film it and then air it throughout the season. So we filmed in the summer of '13, and the season is, you know, September to May or what have you. We aired in April of '14.

Sam Parr

how much traffic did it bring to your website

Josh Hix

a huge huge amount

Sam Parr

Like we were talking, I had a friend that was on there, and she said that they had like 100,000 concurrent users at one point while the show aired. Is that what you...?

Josh Hix

I think I'll give you the rough numbers as I remember them. I should go back and look at these one day. At the time, we probably had you pull up Google Analytics and just look at the concurrent people on the site. It was probably 50 on average if you just looked at an average week. So, across 24/7, in the middle of the night or the middle of the day, whatever, probably 50 people on average were on the site. Back in 2014, *Shark Tank* still aired on Friday nights. We had a big party in the office and had TVs up on the walls with Google Analytics and these sorts of things. Within about 3 seconds of the segment starting, they went from 50 to 50,000.

Sam Parr

oh shit

Josh Hix

And then the site crashed, which is bad. We had a backup site, just like a static page, like a cloud player thing. Yeah, it was an email capture page, so not like a dynamic e-commerce site, just a flat page. You couldn't do anything other than leave your email. That came up, thankfully, and lasted about 6 seconds or something, collecting like 13,000 emails. Then that crashed. So we were on Heroku, if that means anything to anybody. It was built on top of Amazon; it was our hosting platform at the time. They told us it was the single biggest database spike they'd ever seen. I say that not because it's anything to do with us, but I think it's actually kind of interesting to me that a lot of folks still ask and don't seem to appreciate just how **effing big** Shark Tank is as a platform. When we were on, I suspect it's gotten bigger since then. I don't know, but when we were on, it was going into 11,000,000 households on Friday night, which is like 10% of the households in the U.S. And that's before Hulu, reruns, syndication, and DVR, etc. So it's just... I mean, it's crazy.

Sam Parr

They don't take any equity position in the company just for you being there or anything like that. It's just free. I mean, if you say no, it's free.

Josh Hix

They used to... so you may have heard that that's all gone. It's been gone for a long time. It's "free," quote unquote, to go on, and then you do whatever deal you do with them.

Sam Parr

When I was starting this business, I wasn't thinking about selling it. I was focused on building something that would last. However, as time went on and opportunities presented themselves, my perspective changed. A lot of the people I've interviewed - two others today, in fact - have never sold their businesses. I think you're the first one I've spoken to today that has. So, let me ask you: When you were starting this venture, what was your mindset? Were you going into it thinking, "I'm never going to sell this. I'm going to run this forever"? Or were you building with the intention to sell, which some people do (and that's great as well)? What was your balance between building to sell versus building to last forever?

Josh Hix

Yeah, so I agree both are great. Again, just knowing what you want is a big task but important. We wanted to run it forever, so I built two software businesses before this, and my business partner had done some other entrepreneurial things.

Sam Parr

but those weren't really big hits were they

Josh Hix

No, no, they were much smaller. We learned a ton; it was very worth doing, but they were much, much smaller businesses. Both of us have done enough things in our lives, I suppose, that we just... and maybe, who knows, maybe things would have changed. But we wanted to build and run the business indefinitely. That was kind of what we wanted to do. We'd both had some other jobs that we really didn't like. We didn't want to have to go get another job, and we didn't necessarily want to start another business. I mean, those early days were hard. I don't think there's any way around that. So, we were building it to run indefinitely. The sort of flip side of that, though, is once you take venture money... I mean, really, anybody's money, but especially venture money, that's a professional agreement to return that money at some point. They've got their timelines, and if you've never sort of heard it, when you raise money from somebody, their business model becomes yours. Their timelines, their fund timelines become your timelines, and you've got to give that money back at some point. If you don't sort of know it, like, it's not just the silly guy in the sweater vest; it's not his money. It's like teachers' pension funds and real people—it's their money. So, you've got to give it back, which means you have to have some kind of plan for either going public or selling the business. You can't just stay private forever. I mean, there are exceptions to everything, but it's very, very difficult to do that. So, we wanted to run it forever, but we were also making sure we were building relationships with the grocers and things like that.

Sam Parr

And are there any regrets from selling? It's been over a year. Do you ever say to yourself, "That was too soon," or are you like, "That was perfect timing"? Or do you regret not owning what used to be yours?

Josh Hix

Yeah, I don't know what "perfect timing" means. I don't regret it; you know, it's bittersweet for sure. It's a little like... I mean, I don't have kids, so this is just whatever people have told me, but you know, it's sort of like having kids go off to college or leave the house or what have you, because it's not ours anymore. I still run the business day to day, but we're owned by Albertsons, which is a big conglomerate of grocery stores. It's Albertsons and Safeway and 18 other brands. They're a great partner, and we get a lot out of being in that sort of family of companies, but it's not really ours anymore.

Sam Parr

And when you were starting this, were you just looking for something that you were interested in that could go big? I mean, was your interest in building a big business, or was the interest mostly in making sure that people consume healthy food?

Josh Hix

yeah so

Sam Parr

That was a question on here. I think most speakers have a deep passion for the problem.

Josh Hix

Yes, so the short answer is yes. We were trying to solve our own problem. Both of us had finance-type jobs, working 100 hours a week and eating Seamless literally seven nights a week. We weren't really loving that. We were trying to cook and eat a bit more fresh food, but we faced a bunch of challenges. We wanted to do it in a way we were proud of. It's easy to just buy frozen stir-fry kits, but we were both in situations where Nick was engaged and getting married, and I was dating. We were trying to impress our significant others and take care of ourselves. We encountered challenges that we thought other people might have as well. For example, you go to the grocery store and you don't really know what you're doing. How much do I buy? What recipe am I making? You probably screw that up, or the grocery store doesn't have everything you're looking for. At the end of the week, half of it is left over, and you throw it away. You feel bad about that. You probably weren't that good of a cook. There was a lot of friction in that process that we certainly felt, and we believed we could solve it for other people. We also had a passion for the broader healthy living space and still have a lot of plans for other product lines that apply to that over time.

Sam Parr

So, you're talking about feeling bad for throwing food away. If you were to pitch this idea to me years ago, before this was a real thing, I would have said, "There's no way you're going to be able to ship food and it still be healthy." I mean, everyone says that. Everyone's shocked, "Oh my God, it still stays fresh!" Early on, you probably didn't have very nicely insulated boxes. I don't know, you probably didn't have all the fancy stuff that you have now, like dry ice. How were you figuring out how to get food from New York City to wherever you're going without it going bad? That seems like a huge problem. It's a hard problem.

Josh Hix

It's a challenge for sure. It's probably less of a challenge than you might think. So, I mean, the short answer is it's not dry ice. It's never been dry ice. It's just frozen ice packs that are largely water and cornstarch. But in any case, we were buying insulation, and there are reasonably straightforward engineering ways to figure out how to solve this problem. The R-factor of the insulation and the thermodynamics of it are not that complicated. So the problem was never really keeping the food fresh. Not that it's 100%, but that's not the biggest problem. The biggest problem is optimizing that customer experience. You know, less packaging, fully recyclable, etc. And I actually saw... it's up here now... a question about waste and these things.

Sam Parr

waste for what what's that what was the question I was

Josh Hix

looking at this question here on recycling and waste and everything else

Sam Parr

yeah that's the next step question which is recycling

Josh Hix

yeah so it's a good question and it's something that we invest in a lot but I think it's also worth kind of noting that it's a different dynamic than most people including my family who asks me about it too seem to really understand it first which is really this the waste you walk into a grocery store the produce that's in there first off is older than you think it is just because of their supply chain and something like 40% of that's getting thrown away and by the way that didn't show up like with farmer bob and his bare feet it came on a truck wrapped in packaging that's just the reality you don't see it but that's what's happening so when we try to do kind of apples to apples comparisons and it's not fully straightforward to do that I would say and the lawyers won't allow me to sort of make this claim on the tv commercial or anything like that but that the meal kit industry generally this is not just plated is far more efficient than a grocery store in terms of food waste because you're throwing away close to nothing as a consumer of your meal kit we're throwing away 3% low single digit percentages of the food contrast it to 40% of the stack of tomatoes in that grocery store down the street being thrown away before you ever see them and then you're gonna buy them and probably throw away half that's about the consumer average nationally is 50% of the fresh food that you buy gets thrown away I'm sure everybody's had some version of that experience you open your fridge on sunday and it's like well this is all rotten so on the food waste piece the industry is probably a lot more efficient on the packaging and the transportation we're probably less efficient because we're packaging individual portions rather than big portions but it's very hard to tell if that is net net actually any less impactful and you get into a lot of wonky math around transportation and is the lettuce coming from california is it not is it how did it get here you know truck miles etcetera etcetera but I guess net net it's something we care about we're working on but I think the state of it all is different than is maybe apparent to people

Sam Parr

At what point in the company's existence did all these competitors come around?

Josh Hix

I don't know, it's a gradual process. You know, I mean, a couple of them started in the first year or two. I think we've done a lot of competitive research over the years, and I'm very confident that there's really only ever been six companies that had any real scale. So, there's been a lot of small companies; most of them failed, as I mentioned earlier. It's not really a business that you can run profitably at a small scale, so most of the competitors have kind of come and gone. I think this is actually a pattern, not a coincidence. All six of those started within the first, call it, two years of the industry. Beyond that, the playing field was largely established, and you had a lot of long-tail companies enter and exit. But nobody started sort of year three or after and got big.

Sam Parr

So when you guys were all starting out around the same time, you've all scaled together. When that's going on, it's a dogfight for customers, right? I mean, you're going head-to-head with someone... You said 5 or 6 other people? How... What was your plan to beat the other person? To survive? To win? And how are you being different from others?

Josh Hix

Yeah, so you know, again, this may sound cheesy, but I believe it. For our business, and I think for a lot of consumer-type businesses—not all, it's not true for probably Facebook—but for most businesses, I think you should just ignore the competition. It's about understanding who your customer is and serving that customer well. As long as you're in a big enough market, the company will succeed. You know, when I was raising money, the example we would use all the time is Chipotle. Now, Chipotle is basically lunch. They do a little bit of business at dinner, but it's mostly lunch and it's mostly one product. There are six ingredients or whatever the count is. And yet, that business does, and by the way, they're not national. They're in lots of places. I don't know exactly how many zip codes, but they're not in every zip code in the country, and it's a $4,000,000,000 revenue business. There are national competitors, regional ones, local ones, and the bodegas on the corner and everything else, and they still do $4,000,000,000 top line. The question is, are they stealing customers from somebody else?

Josh Hix

Do you understand your customer and serve them well? We looked at lots of examples in food. I mean, grocery stores are, in some ways, a similar kind of story. You know, pick your favorite grocery store. I promise you that's a big business. I mean, Albertsons is a $60 billion top line, and probably a lot of people in this room have never been into an Albertsons. So our kind of internal mantra—not that we always were successful at following it—was the Amazon mantra: **focus on the customer**. Let the customer, or let the competitors, sort of figure that out on their own.

Sam Parr

So, we only have a minute and a half, maybe two minutes left. I want to talk about something that hasn't been addressed. I saw the question here, which is about co-founder relationships. How long did you know your partner before you became partners? There had to be some breaking points. What were those, and how did you guys resolve those issues?

Josh Hix

So, we knew each other for four years before. In my other two businesses, I also started with friends. I think it's kind of a high-risk, high-reward strategy, if you will. When it works, there's nothing in the world better than winning as a team and winning with your friends. When it doesn't work, there's probably nothing worse than losing a friend over work. I had a version of that in my first business. I was 21 when I did it and had no idea what I was doing. I probably still don't know what I'm doing, but I really had no idea back then. The sort of co-founder relationship went sideways, and it was not good. I say now to people that I'm happy I learned that lesson early in life. The way I thought about it was a friend and a friend that I could do hard stuff with—not just a drinking buddy, but somebody that I could work with. Nick and I, I don't think we knew we were doing it at the time, but we had some trial runs at that. We did some volunteering in Haiti, where we were quite literally sleeping on a concrete slab with mosquito nets. You know, like physically hard, mentally hard stuff that kind of proved to us, at least in hindsight, as we were making the decision to work together, that we could do it. Then the last piece—and then I'll shut up—but we had complementary skill sets, not the same. I think that's important because that's another one of the common challenges I've seen people run into. You get two people who have the exact same background. We worked, whatever, it doesn't matter. We worked at the same company together, we're friends, and we're going to go do this. But we do the exact same thing. It's like, okay, well, how are you going to figure out who does what? Only one person can run marketing, only one person can run engineering, etc.

Josh Hix

Like that's going to cause a problem. So for us, it was, "We're friends, we can work together," and we have complementary skill sets. Nick was not technical; I was. He was a Marine and was better at the operations and a lot of that stuff. It just worked. It's not to say we didn't fight; I think that's just part of human relationships. But it worked well.

Sam Parr

And last question, with a quick answer Josh: 7 years ago, 6 years ago, wanting to start something in today's era... You know, what would you say? Like, "Don't make this mistake." What mistake would you try to tell them to avoid?

Josh Hix

Oh man, there's a lot of them. But I don't know, maybe I'll just pick "solve a real problem." I see too many people do this where they try to start something because there's some nifty new technology or the business model is too clever or whatever. If you can't describe the real problem it's solving for a real person very quickly, it's probably not a good idea. Although, half the fun of this stuff is that there are exceptions to everything, and somebody in here will prove me wrong.

Sam Parr

josh thank you very much and we really appreciate you taking the

Josh Hix

time thank you

Sam Parr

thank you