Tried and Tested Secrets To Managing A High Growth Business
- Scale and paid is about speed, right? So, outsourcing creative to me doesn't work, not at scale. So if you're a small brand, you can outsource creative all day long because your cycles are much longer. - Yeah. - My cycles are daily. (upbeat music) - Matt Bertulli, what's up, dude? - You almost did it. - I know.
- You almost said the name wrong. (laughing) - So Matt and I were just joking before we started that a lot, some people call him that Bercelli, which if you read the phonetical spelling, it makes no sense. Massive founder of Pela Case. And it is Pela.
Did you guys do the voting online on how to pronounce it? - No, we have fun with it. - I thought you guys actually went to the market and then it was like official, it's not Pela, it's Pela. - Well, yeah, we've done a video like that. We've also done a, like several where...
- You still let the market... - Totally. - Okay. - Yeah, 'cause it's fun, it gets engagement going on, like especially on ads or social. - Okay. But from the CEO... - I don't care.
- He's not even, going to answer. - I know, like brand people are gonna be like, dude, no, you need to pick one, and you need take one. It's like Nike or Nike, which one is it? - Well, that's fair. I would say Nike, unless Phil Knight tells me, I guess I'm not sure. - Right.
- The Phil Knight of Pela doesn't wanna tell us, so... - I'm not saying. - Then there's that. Anyways, if you're not familiar with the brand, started off in the phone case accessories made by a biopolymer, is that correct? Accurate flat seats so people can see it if you're watching the video, I am a big fan, I'm also an investor.
I sit on the board, which is super fun, listening to these guys debate for the best idea, which is awesome, B Corp. - Yup. - Fastest growing Canadian company. Top 10? - We were second in like in retail, I think the only one faster than us in retail was Article.
- So second in retail. - And then number nine... - What can you share about the numbers? - Dude, so right now, like made eight figures run rate. - Yeah.
- It's kinda got there in the last, like four years. - Yeah. - So it's been fast.
- Crazy fast. - Like crazy, crazy fast. Yeah, and like in physical stuff, that's super fast. Like, if it's software digital goods, like the scale is kind of infinite, but when you have to make things and ship them around the world, the logistics part of the business is a pain in the to keep up with high growth. - Yep.
- So you kind of like wanna step it up, you don't wanna rocket it up. - Yeah. - We had a period of about 18 months there where we were rocketing it up and it was a, giant pain in the ass. - What happens in,
that period that breaks? - Everything, so like... - Just inventory levels, product... - I'm sure. Yeah, like it's people will break really fast, capital structure breaks really fast with physical stuff, 'cause you're buying a lot.
Like, for us, we have to buy raw materials 'cause we're vertical. - The whole stack - The whole stack. So you gotta buy everything ahead of time. - You're not dropshippers? - No, we're not dropshipping.
- You're the opposite of that, you build a real business. - Yeah we do like, this weird thing called like product development, R&D, and, we build things. - That's crazy. - Yeah.
So, like capital people and then your systems, like a lot of that broke. - Yeah. - And, so we were at one point between 2017 and 2019, we were doubling every 30 to 60 days, as we were going, like going from like zero to eight figure run rate, it was really, really fast.
So kind of like every 90 days, we were saying, okay, like, did the team break? Did we break capital structure or did we really screw up one of our systems or processes? And it was always one of those, if not a combination of. - And you eventually get to a point where you can kind of anticipate and get ahead of it? - Yeah, totally. So like for a physical goods company, there are these like little suites, but like any business, right? It's kinda similar to like team sizes, the threes and 10's, there's those rules like, physical stuff, particularly the direct to consumer- - Break down the threes and 10's 'cause I know somebody is listening and going like, I wanna know about that. - Yeah, like teams break at your threes and 10's.
So like three people, 30 people or like 10 people, 100 people, that kind of thing. - Yeah, natural breakpoints. - Yeah, like 30 people is a big one for a lot of companies 'cause at least in our network, we know a lot of people that, entrepreneurs that get to 30. - The ceiling, they hit it. - And 30. And that's where they hit it. And then you like, you listen to the problems and it's just there's so many of them with that amount of people. Like worried about 60, 65 right now, which is we're in the awkward zone to get to 100 where like we know again it'll break at 100, but like we're building a lot of infrastructure right now and people ahead, knowing that it's gonna break. - Which is expensive.
- So expensive. Yeah. Yeah. Again, that's the capital structure part, right? - And entrepreneurs, they don't realise that, hey, you need to make these bets with some level of confidence and certainty. And, if you miss execute, yeah, your labour cost is going to be way outpacing your real revenue. - Yeah. You're trying not to get too far out over your skis,
but you wanna be a little out over your skis. - Yeah, take advantage of the opportunity. - Yeah. - So obviously that's today, where did Matt learn how to scale E-commerce? - Still learning, still learning.
- But I mean, obviously you're one of the top people that I turn to, whenever I get some time, my marketing guy calls Matt, which nobody listening will have that benefit, unfortunately. But, and I don't know how much longer it's gonna last for me. Where did you learn this skill? - Well, so I mean, prior to Pela I owned a, an agency called Demac Media, which I had sold to Private Equity, they were doing a big roll up.
So we were about 100 people, that company... - How long did you build Demac for? - It was like almost 11 years, start to sale. - Where did it start? - In a basement.
- Is that the first company? - Yeah, first company. Yeah. I left NetSuite. So we had just gone public at NetSuite, this was 2007-ish, 2008, somewhere around that financial crisis. So I left my great job at NetSuite after we went public, got married, bought a house and then started a company, all in like four months, and decided I'm never doing that much shit all again, like ever at the same time. Started Demac, at that time was just like, I saw what we were doing at NetSuite with in the U.S.
and I'm like, okay, we gotta do this in Canada. Like this E-com thing is super hot in the U.S. and it hasn't really got- - What do you mean by hot in the U.S. just like retailers knowing E-commerce? - Yeah, so like, they were just, Canada and Australia were, at that time, way behind the UK and in the U.S. which both had growing, like, think of it in terms of a percentage of retail that was moving online, right? So penetration, at that time, Canada was 1%, the U.S. was seven or 8%, the U.K.
was like eight or 9% - That's bananas. - It was way, way behind. And working for an American company that did a lot of like backend software, which is what NetSuite is, I was watching what these American guys were doing, thinking, okay, Canadians are about to do this. So I started the agency and I went out to brick and mortar retailers in Canada, so think of like your average shopping mall here. I went to those guys, I said, you don't have an online store right now.
How about I build it, right? I'll do it for very little money up front, but I want a piece of your sales for the next five years. - How do you do that starting in a basement? 'Cause these are not like SMBs. Yeah, like how do you fake it? - Like you fake it.
- How do you get that first deal? Who was it? - So I grew up in a retail family, so I knew what a talk retail. - Okay. - Like my grandparents own retail stores, my mom is a retailer. So like, I knew their language, so when I went in, I was speaking like one of them, right? Like I kind of knew what their pain points were, I knew where the risks were. I knew like all of the stupid terminology. So, Ben Burmaster from Snuggle Bugz.
- No way! Ben was your first. - Yeah man. - That's amazing. - And he's like, still a great friend. And then another guy named Neil Madden from like ECS coffee. And then I got a big one, I think it was Bentley Bags.
Remember luggage? Bentley luggage? - Yeah, yeah, yeah. And then a whole bunch of them in Montreal. It's like we did bench. - Montreal's got a lot of apparel. (muffled speaking) - Tonnes of apparels, like we did a bunch of apparel in Quebec, and then we wound up, like, by the time we sold, we had Sleep Country, we just finished moving Staples over to Shopify in Canada, Government of Alberta, Like we had massive stuff. So it kinda went from like SMB all the way up the enterprise - So you started on the SMB, worked your way mid-market.
- Yeah. - But the business model I've always found fascinating, I mean, was that happenstance and luck that you decided to do it that way? - Yeah. - 'Cause in hindsight performance base is an advanced thing agencies would do. - Yeah, and I started, and, it's tough to switch to, if you're used to like billing. - Yeah. Retainers. (muffled speaking) - Totally. Because it's like, that's better.
And we ultimately did get rid of their performance thing 'cause as E-commerce grew, people don't want it- - They just didn't wanna get up those markets. - No, man, it's like, it started to feel like a tax at scale, upfront, it was like this is a great deal, we should do this, at scale it's tax. So there was a flaw in the model there, but then at scale, we could switch to another billing model, retainer or project hourly, whatever we were doing, whole mixing stuff. - Was there certain companies that inspired your decisions back then that you look to, or? - No, I mean, at that time, like all of us in that space, even the Americans, we were all kind of coming up at the same time. So even though the American market was ahead, at that time, you still only had the IBMs, the Accentures, like the really big, consultancies and tech companies were playing in E-commerce tech, like software. This was pre Shopify.
- So I remember back, most people wouldn't even know this, but Amazon had Amazon had a- - Amazon had a storefront platform for small business that they recently got rid off. - Wasn't that one of their big deals? there was like one, big- - No. - They had a few. - Like an office, there was like an office company that they were cowering. - Office depo,
they had somebody that there was like, a big one. - It was like a big deal. It was like a multi-million dollar deal. - Yeah. - And this is pre Shopify or? - So Shopify I think was actually starting at that time.
But if you remember it, Shopify's history was like, let's go to Etsy Store owners and give them a way to sell their like five bars of show up on Shopify. I remember I was on a panel with Harley. He's another good dude. This is like 2010.
- We've had Toby on the show, I get Harley, Harley brings another level of energy. Toby is a genius. - Toby is another level of genius, Harley's another, level of energy. - I was sitting there talking to him, and it was like I was talking to Einstein.
- Dude, like it's frustrating in how smart he is. - I was like, wow, this guy's on another frequency. - Something's burning in his head. Harley is another level of energy, but Harley and I at the time were chatting, like, I was running at about 30 sites in my agency, and Shopify had about 15,000 stores and our 30 sites had more skews collectively than their 15,000 stores. Because it was just the merchant profile at Shopify at the time, now, obviously their vision was freaking massive and they've done some insane things. But at that time in Canada, it was just immature.
So like to go back to your question, I've learned simply by being in the game a long time. And then having a lot of friends in the game, at the agency we did about 200 or so kind of clients and projects over a decade. So I got to see a tonne of business models, like tonnes of different product categories. Like, dude, we sold everything and, or we're pitched everything, like everything from like sex toys to firearms, to baby stuff. We used to call it the circle of life from like, we did everything, from the point where you had your kid, right? To like raising the kid, to the bed you were, like everything.
So we kind of just breadth of knowledge, right? And then with Pela it was just like, let's take it, let's take all that, and then just focus it in one thing. - But I mean building this agency, and learning as you went, I'm sure there was like moments where you almost blew the whole thing up. - Like, all the time.
- Tell me about some of those- - Dude, service businesses is cashflow, cashflow is a royal pain in the ass in the service... So if you're a service business and you're project-based, which we were for, like the middle part of our life, we hadn't figured out that there were these things called retainers yet. - Yeah.
- So I had like either projects or performance- - Trying to fill a pipeline utilisation. - So you're just trying to fill a pipeline. Now, in the boom days of Magento and Shopify, and we did like a basically a VAR partnership, is what they would have been called at the time. So value added reseller of those two things. While those were rocketing up, the pipeline mostly stayed full, like it was just, it was always there 'cause the demand was so high. But there were definitely moments where like, depending on the cycles of the retail year, where things would dry up, like, we're entering holiday season, retailers and brands aren't exactly in the, hey let's build something new- - Migrate platforms, they're not like that, they're like sell. - No, do that in January,
like right now it's holiday season. So, until we learn some of those cycles, there was a bit of this like, we have more work than we could ever handle. And then you'd have three months in a year and be like, okay, everything just disappeared, what the hell happened? - What's the worst that ever got? - Like we got within 60 days of like no money in the bank, which to me is insane, but then I realised that's pretty normal. - What would you have done to solve it or what did you do? - Okay, so, after that we decided, I went out, I started talking to American businesses like mine. Like I knew some of the entrepreneurs that ran those companies that were a little ahead of me, and I just, I asked questions around business models, so we didn't compete in their market at that time. So it was pretty easy to like build those relationships.
And then they would tell us about like, well, every time you do this, you need to build in some kind of retainer or some kind of ongoing service, or like add in this new service, and that's actually a bit more sticky and you can actually keep clients longer. And it's like, it'll open up conversations for more stuff in the future. I had no concept of like account management and, manage the customer and build like long-term partnerships. We did that on the performance side.
Like those were just embedded relationships, but I never bridged like performance over to nonperformance deals. - To grow an account. - To grow an account. - For multi-year contracts. - Yeah. Never did that.
Also never thought like I was too focused on the tech 'cause my is, I'm a software developer, I like the tech. I never thought, what about the actual strategy of how these companies are gonna grow? So like, how do they fit into the broader commerce ecosystem and, what are they thinking about? And like, what are their competitors doing? And can I actually bring outside thought and creative to them from that angle? So like, I went from being a great, like a decent developer to a great marketer by trying to like find the common ground between like, okay, this is all the data and tech out there, here's how the creatives work, like there's this overlap area, and that's where I thrive. - The insights. - Totally. - So you started Demac the tech side of migrating their backend systems to the internet.
And then, over time seeing this data, building the insights, you became a marketer. - Yeah. - Like a lot of agencies typically have moments of creativity where they wanna start a side hustle, like did you have any of those. - That was Pela, dude. - But was there anything before Pela? - No. - Really, you waited that long to finally- - Yeah, 'cause I had, these performance deals like, so we had about seven or eight sites that were all performance-based. So they felt a lot more ingrained, right? - 'Cause you were aligned to invest time there.
- But then I met Jeremy at, like one of the Napa MMT. - Okay. No way. - I don't know whether, that was that six years ago, seven years ago. Jason introduced me to Jeremy and Jason introduced me to Brad at the same event, but not all three of us. And about a year after that, I was talking to Jeremy I like the material, man, like, can I start investing in this and help you figure out how do we build a business? Because at that point, there was just a product, Jeremy had a cool product, cool idea, but no business. - It was the phone case? - It was the phone case, it like the first one.
- Yeah. - And I thought the material was bad-ass. So like, okay, I've got this agency, we know how to do this, like, let's try to stand you up a business, like we'll invest. And that became the side hustle. So like the original thought was, I'm gonna do 10 of these. - Yup. Like a venture resources kinda...
- Yeah. Like early venture studio model, right? It just so happened that the first one was a potential rocket ship. So I botched like the idea of doing 10 of them, sold the agency, and just focused on Pela. - Now, would you have exited the agency if you didn't have Pela? - I don't know. I've been asked that before. - That's interesting.
- I don't know, because it all hit at the same time. - I didn't realise you met Jeremy at MMT, I knew the Brad connection. - Yeah dude. At the same event, and not at the same time but same event. - And Jason invested, I'm hoping, did he get in on Pela? - Yeah. - Thank goodness 'cause he didn't I'd feel bad. - I know he's the guy that connected the whole thing. - Okay, good.
Thought it would be weird if he didn't. So Jason's a founder of MMT, MastermindTalks, and he's the only person in my life I defer my friend, network curation to. - You can outsource your friends to Jason. - 100% Jason introduce you to somebody, it's like, hey, we're now bros and you don't even know it. - Quality high, dooshbag low.
- I mean, obviously a lot of founders see those opportunities with customers and partners to do that. What do you think worked with your relationship with Jeremy or the way you structured it to now, you're the CEO of this thing, right? - I mean, that was a whole thing, like the story of how we got that point. The nice thing with Brad, Jeremy and I is there's a very, very defined complimentary skillset, right? Like what Brad is great at, like Brad's a big scale, big team, systems and process, like Brad as entrepreneurs go, we've talked about this, he's weirdly good operator, like weird good- - It's weird because he's such an extreme sports guy, which tends to skew towards CEO visionary.
- Which is his background, right? - But he's an incredible operator. - He's an insanely good operator, so like his brain works really well there. So Jeremy is a, he's your classic inventor. - Materials inventor. - He's your garage inventor. Like the guy will, although it is funny now I know this, like people in the Prairies are all like this, they're just insanely resourceful.
- Yeah. - Mostly because they don't have access to all the shit that we do in the cities, so they have to figure it out themselves- - Make it themselves. - Yeah. So Jeremy's is just one of those guys
that like, you tell him, hey Jeremy, can you make a, I don't know, make a vinyl record out of our material anyway, okay, I'll try and figure it out. - Did you guys build him a lab or what's he? - We have a lab here in town. - Okay. - Yeah. There's a whole like you're in our HQ right now, but, our lab and like, we have a small lab/manufacturing, studio, it's about 8,000 square feet, just up the road from here. And that's where Jeremy and then the guy, Bernie, who they made, the first one, they kind of like hack on stuff.
And, a lot of innovation just comes out of us trying weird stuff. - How many product lines are you in today? - So we have Case, so mobile cases, mobile accessories, which is like a bunch of products there, we have eyewear, we have personal care, and we have now Pet. So, think like compostable dog toys, so that the way we look at things is what are the things that you use regularly, but are not single use? And the reason for that is, like a plastic water bottle people are like, why don't you use your material to make plastic water bottle? Well, 'cause you can't make any money at it. The economies of scale and the materials aren't there yet. So we go after temporary use stuff. So like a phone case is like- - It has to have, a high gross margin. - High gross margin.
So it's the Tesla like go build a Roadster first, then a Model S then a Model Y and work your way down. That's kind of what's happening, as we work our way down. Yeah. So it's like, it's all a focus on everyday products without everyday waste. That's the thesis, so it's one category, and then it's just a category so we do product... - And in the whole language around graceful end of life, that would be the through line, narrative for Pela. - Yeah for everything.
Everything we do, every product has to have a graceful end of life. So like the end of life is designed into the product from day one. - So you bury this into the ground- - That can go on a compost, that can actually go to a landfill, that will degrade in a landfill. - How long does it take to turn into dirt? - It depends on the compost environment. So like a good, healthy backyard compost maybe three to six months in Canada. - Which is plastic,
which is never. - Never, or we just don't know yet. - We don't know. We haven't been around that long. - Humans with plastic haven't been around that long.
- What's it like building a company that feels a little bit more impact driven versus, I'm not sure if you did that anything at Demac, but like- - No, like frankly, no, like this is totally, this is the first time, Demac was like, it was fun. It was intellectually challenging, it was like, it's satisfied curiosity, it was super fun. Yeah, the data sets were massive. Like that stuff was all fun, and then it got old. So like, that's going back to what I've sold probably 'cause it was getting old.
Like there wasn't a lot of new or creative anymore with the big guys, the big guys are all very like risk averse stable. Pela is a total opposite, it's the opposite of risk averse, it's what kind of weird crap can we try and how will the market respond? And let's just like keep trying stuff until we figure out what works and then we scale that. The impact and the purpose, like the having a just cause, like everybody's read Simon Sinek's Crap and like it's real. - Yeah. - It actually is real, like I get up in the morning and I like what I do. I don't have any desire to stop doing what I do.
- And the mission based on what I hear at the board level is to remove plastic from the ocean. - Yeah, we wanna stop a billion pounds of waste every year is what we're working towards. So waste being, it could be plastic, it could be food waste, it could be any kind of waste, right? Humans are excellent at creating waste. We're actually the only living creature on the planet that produces waste, like legit waste, as in the waste has no purpose. Every other animal or creature is part of some kind of circular system, we're the only ones that create waste.
So, what we haven't done yet though as a society is make waste sexy enough to be useful. And that's kind of the, what we're trying to do is like, people don't wanna be educated, so they wanna be like entertained and inspired. But at the same time, can you do that and also teach them a little bit? And then not just change their behaviour, but like slide in a new option to their behaviour. So it's all about swaps. - Changing behaviour difficult. - You can't do it. - You can't do it.
- You just can't do it, so like we don't try. I just try to create a product at a price point that's in line with what they're currently used to buying and a quality that they're currently used to buying. And I just try to gently slide it in there, so that they don't even know that they've done something- - Good. - Yeah. - Yeah. - So, it feels good. Like it's actually, the way I've explained it to like marketers is I get to use all of the dirty, nasty tricks, all of it. - Internet marketers, yeah.
- But I feel good about it, I sleep well at night. And it's kind of fun. 'Cause like all that stuff is fun. - I wanna to get into that 'cause, I think, are you guys seven figures a month in ad spend or? Yeah. So I wanna talk about how you do that at scale. But before I do that, I wanna ask you a question.
How did you get Jay-Z to invest in your company? (giggles) - Yeah, there's that guy. - There's that guy. I mean, I remember when, 'cause I've been bugging you guys for two years. You do ski trip every year. - You were the most,
persistent investor we've ever had. - I like to invest in people that do not need my money, call it a crazy idea, but that's a good way to get good returns. - It's a good idea. - And two years of persistence, and then finally you're like, hey man, I think we're gonna raise.
And I'm like, cool, I didn't even ask the terms. I'll wire you the money before you change your mind. And then you're like, yeah, by the way, Jay-Z is involved.
And I was just like, well, that's probably the coolest, partner I've ever had on a counter table. How did that come to be? - Man. So Tom Kennedy, right? Who's also on our board, we reached out to Tom because we were getting a quite a bit of inquiries, inbound inquiries from Venture Capital. And at the time Pela was like, I think our revenue was about 7 million. - So early. - Early. - And Tom's Kensington- - Tom's Kensington Capital Partners in Toronto.
It's big private equity, VC fund, they've been around forever, they own everything. Tom's brilliant though. So Brad had known Tom for, man, I wanna say like five, six years and had become kind of a mentor. So, we reached out to Tom to get his opinion on like, just give us your experience and your opinion. Like, should we entertain raising outside money? Brad and I in both of our last companies had never done that, it was boot strapped. - Yeah, you had liquidity- - And we both had, we've have exits, so like, we didn't need it.
And then Tom, we went through the whole thing, like this is Pela, this is who we are, and this is what we're doing, here's the traction we have. And Tom said, look, I don't know anything about consumer, but I'm gonna introduce you to my friend, Jay and Larry. And if they like it, I'll write you the damn check. So he introduced us to Larry Marcus first, who is Jay Brown and Jay-Z is the third partner in Marcy Venture Partners, got a touch with Larry, Larry's like, yeah, why don't you just come down to LA and meet with Jay and I, Jay Brown and I, and like, we'll chat. And so Brad and I flew to LA, went to Roc Nation, which is the like Jay and Jay's record label/managing company, whatever the, they do so much. And was like sitting in the, I call it the throne room.
It's like the weirdest room, it's just like nothing but gold records, and like, it feels like a major cultural- - Royalty. - Yeah, man, it gets weird. And Jay Brown is just like the coolest, chillest, smartest dude, kinda met him, sat down and within nine minutes of me explaining what Pela was, Jay's just like, yeah, dude, I'm in. He's like we're so in. - What does Jay do? - So Jay Brown is like, he's like one of the business halves of Jay-Z. - Okay.
- So Jay Brown runs Roc Nation, he manages talent, Jay's the other Jay is how I describe it. So while we were in the meeting, Jay was texting the other Jay, Jay-Z. - Jay-Z. - And he's like, yeah, man, like we were talking about this last night, we love it. And their whole thesis, MVP's thesis is they invest in a cultural relevancy, so like where do we think culture is going? That's where we put our money.
Nine minutes in, he was like, we're in. And then there's Larry, and you've met Larry. - Larry is your quintessential investment type. - He's brilliant in his own, right? Larry was like, I have more questions Jay, right? So like Larry asked smart questions.
- Yeah. - Jay and Jay were just like, we like this, we like this. Yeah. - Yeah. - So the whole thing happened super fast. And then to get that kind of investor with that kind of access, we were just like, this probably makes sense, let's just do it.
And we were raising a tonne of money. So it was like, it was a minority investment in the company, but it just seemed like they were the right people. And then Tom came in and then you and Jay and yeah. - Talk about the first time, I'm assuming you met Jay-Z. I know the story, but, like, it's just one of those things- - I was known as the Canadian guy. - Yeah.
- Like he knew who I was. - So walk us through that. - Well, so, like, I went down for the- - How long ago was this? - Man, a year and 1/2 ago. - Yeah. - I think, went down for Marcy's, like Marcy held that event for their LPs, and then they asked- - Down in LA again? - Down in LA.
They had about, I think, seven or eight investments at the time, asked the CEOs to come and just talk to the LPs, right? It was like a four or five-hour like lunch- - CEO summit event. - Yeah it's kinda like a small summit, maybe 30, 40 people. - Yeah.
- So I flew down and I'm like, yeah, sure. And I didn't realise Jay-Z was gonna to be there. And, when I was walking into the event I was following in, and Nick you know who he is, like, he's an, also a tall dude. So like I was following in Jay-Z and Jay Brown. And when I got, it was a cold day in LA, so I'm gonna sound like a wuss here, it was cold. So like I was walking in, I got up and I looked at Jay Brown who I'd known and I'm like, I thought LA was supposed to be warm man.
And Jay-Z looks at me, he's like, aren't you supposed to be the Canadian guy? Like, what do you mean it's cold? And I'm like, how do you know who I am? And so that was the impressive part, was like he had done, clearly, he knows his portfolio, he knew who the founders and the entrepreneurs were enough to take a shot at me as I was standing there. And I'm like, I'm gonna like this guy. This is great. He's whip-smart, like whip-smart. - What did you take away from that day watching him interact with investors, LPs? - Oh Man, you wanna talk about humble? It's weird, like it was definitely the weirdest, like not at all, Todd talks about alter egos. - Yeah. - There's clearly, there's the Jay-Z on stage and then there's Jay in real life.
And, it was weird at how attentive and how like humble he came across, like not at all, like he was interested in what people were talking. Like when he was talking to you, he was in it, it's weird. It's not what I would have expected, like you expect the big personality, like he's one of the most famous people on the planet.
- The whole planet. - Yeah, and I found him one of the nicest, softest spoken, smart, like just great to be around. That was impressive. - I just love the fact that I think people underestimate how dramatically different your life can look like in a few years. I mean, if you go back to the moment where you haven't even made the decision to sell Demac, to, I'm assuming it's like a four or five-year period later.
- Yeah. - And you're in LA- - Well, it's been 2 1/2 years, since I've sold. - I mean, and now you're hanging in LA with Jay-Z and he's an investor in your company and it's one of the fastest growing companies in Canada.
I mean, people underestimate just the sequence of events that are available to all of us, and how that could materialise. - I also think there's like a serendipity element to it. - For sure. - Like once I give my wife credit, 'cause like when Pela was taking off, rewind like three, 3 1/2 years ago, when Pela was really starting to get traction, she looked at me and she's like, dude, we need to talk. She was like, you are not Elon Musk.
You cannot run two companies. She's like you need to pick one, 'cause this is not gonna be good for us, right? 'Cause like, she could see me, like, there was just so much happening with both that it was breaking like, or I was breaking. So, she called me on it and ultimately decided like, and by just deciding, it was funny, like within a month or two, we had met the buyer for Pela just like by happenstance, sorry, met the buyer for Demac purely by happenstance. Like this guy, Mike Brown, got introduced to him and he was talking about, I'm part of this group, Private Equity backed, we're rolling up a bunch of agencies in E-commerce and digital experience, would you guys be interested? That was like within a month or two. And then it was, Brad and I started talking, where do we put Pela? And we started looking across Canada and we came out here.
And there was just this series of events that happened very rapidly, and it was, I still think it's weird. Like, it almost like something was just lining crap up. It's like every time we needed a new stepping stone, it was just available to us. - But I mean, it sounds in hindsight, it's easy to connect those dots, but at the time it was like, there's a lot of uncertainty. - It just feels like chaos
at the time. - And, I've always said that the world rewards courageous decisions. - Yeah, and encourage is one of our four core values, is like, if you don't have courage to do things that look hard or look crazy, then these types of serendipitous events and sequences, they just don't happen, they don't present themselves. no.
- So, credible story. When it comes to scaling paid acquisition, which is, your wizardry, what do you think most people miss? Like what are they not getting about paid that's causing them to just give up after a month? - So my answer now is different than it would have been like a year or two ago. So there's a few things at play like right now. So, attribution is probably the biggest one that people get stuck on where when you spend, so the fallacy with digital marketing is that it's super trackable and that every dollar you spend is, you can see where it comes back.
There is a degree of truth to that, but it's also largely false, right? So, the way I look at paid marketing is the way I would look at any traditional advertising forms. So I studied like the greats in advertising, all of it, like go back and like read breakthrough advertising and like read about how marketing works. Digital is just a different medium, but the principles are all still the same.
Attribution is where most companies I think get stuck, which is if they don't see, if like a platform like Facebook doesn't immediately tell you this was your return on ad spend, they think it's not working and it's not worth the spend. I run all of our machines, like all of our businesses, all the ad machines are run off of a P&L basis, which is like, I am gonna invest $1 for every $3 of revenue. And I'm gonna continue to invest as long as it's scaling. - So you don't care if the actual campaigns themselves ROI like return on spend positive, you're looking for gross investment. - Yeah, I'm looking for KPIs. Like I wanna see certain things at a very big data set level. - Yeah, but you not, afraid to invest. - No. Not at all.
And I think that's the second part, which is if you're gonna try to do this at scale. So like Facebook's great at rewarding small business and small spend, the minute you cross into this six figures of spend on a monthly basis, it starts to become a lot more murky, and that's where people get nervous. And this is where they fall down.
You need to be willing to take a risk. Like just before this call, I was on with my media buying team and we were having a really good 48 hours, 'cause we're running a Pay What You Want event, where we let the customer choose the price. So these ads just lit up like 24 hours ago, like really lit up. And I'm on with my media buyers and they're really good technical media buyers. And on the call, I'm like, you know what? Screw it. And, I dumped an extra 30 grand a day into Facebook and I'm like, here, I'm just gonna jack the budget to 30 grand, and let's see what happens over the next three hours.
And I could see in there it was fear, like- - We don't have enough data. - How? Like, why are you doing that? And I'm like, well, part of this, you have to go off of some kind of intuition, it's like anything else. Like I'm looking at what I'm getting back, there's really good KPIs here, and there's an art to this. And technical media buyers, there's a lot of them out there, they are not good at the art part.
So there's really great creatives, there's really great technical media buyers, where I sit is somewhere in the middle, which I'm pretty good at both. I'm not great at either, but I'm good enough at both, at that intersection. Is like, what allows me to say like, you know what? No, this is working, the is just not telling us enough yet that it's working, but I can see enough, and I can look at other things like Google Analytics. I can look at the (muffled speaking).
- So even if the attribution for the campaigns are not showing up in that specific campaign, if you look at the overall lift, maybe through organic, but it's not really organic the influence (muffled speaking) - Totally, especially if I see a campaign that's like, so the return on ad spend might be crap, but that cost per click is low, CPM is low, socially engagements are great, people are commenting, it's being shared. - But this is the 10,000 hours. - Way more than 10,000 hours. (indistinct) Like a lot of time in the Matrix. - Yeah. - Like a lot of time. - 'Cause like I get it,
if you actually have experience saying, hey, we ran a campaign, we shut down all ads, we looked at a three week period and go like, by the way, we had extra residual from that that's carried through, so that needs to be in consideration in regards to overall spend. - Yes, and it's also like there's this, it's spending at scale is also, it's particularly once you get up to our run rate, like revenue and media spend, when you start spending like seven figures or more a month, right? You're probably not doing it on a very consistent daily basis, like you batch it in and you layer it. - Well the fact that you even said 30 grand for three hours, like you run hourly campaigns? - Yeah. Yeah. For sure. You have to like if you're going to spend a lot of money, - I don't. - Well, no, most people, it's also like, because there's an obsessiveness that you would need to scale, so there are companies that do this at a level that I don't even get.
Like, if you look at a Golden Hippo, Craig Clemens, you'll see him- - I know Craig, yeah, copywriter extraordinaire. - Oh my God! And like media spend, I mean, Golden Hippo's a billion dollar a year company with, however many brands they have. They are one of the bigger Facebook buyers out there, particularly from January until February, which is peak health season. There are guys like that, that make me look like an amateur and that's just, again, great copywriter, meets really good media buyer and that's a pretty decent combination. For us, I focus more on, I'm a good copywriter, not great. - You know it when you see it.
- Know it when I see it, what I am is a weird creative. So like, I like to try really wacky stuff. - Well, talk to me about the campaigns, and then I wanna talk about the team structure 'cause, the one thing that, even Jason at Manga and I joke like, you inspire all of us on these crazy, where do you come up with Pay What You Want, BOGOs.
- Yeah, like the Wear One Wash One. - Yeah, Wear One, Wash One, and like, how like is this kind of in a rhythm and a cadence where we say, on a monthly basis, we need this or on a court like, what is... - So, I do it daily. - Okay. - Customers, so I spend a weird amount of time reading customer reviews, Instagram comments, Facebook comments.
I look at- - You listening and reading. - Yeah, yeah. A lot. And then, so like Wear One, Wash One, which for people listening, last year when COVID hit, our sales plummeted, like we sell phone cases, nobody really cared about phone cases. But then I had a customer tag us on Instagram and the image was her washing her phone case. And she was a nurse and she was posting to tell people, hey, I just wanna tell you that it's important that you wash your phone because this is where a lot of germs live, right? And most people don't think about that.
I looked at that and I'm like, holy crap! That's brilliant. So I turned around and within an hour, I'm like, we should do a, buy one, get one free and call it, Wear One, Wash One. So, we launched that thing. It just went completely bonkers. And we started giving away free cases to frontline workers. Like we told people like if you work in a hospital right now and you're dealing with COVID, 'cause one of my best friends, she's an ICU nurse in Ontario that was like lined in an ICU dealing with COVID.
And she would tell me, she would keep one Pela Case on her phone for home, and then she'd have another one at work that she keeps in a plastic bag. And she'd swap them when she gets to work. So we started giving those out to frontline workers. So like, that idea was simply me looking and watching and listening.
And then, we've got 55,000, like five-star reviews now, I read 'em all, I do like word, density analysis on them. - Yeah, those word clouds. - Totally. Yeah, and then, I look at what other brands are doing. I spend a lot of time on like ideation, I look for space for that. - I think it was actually maybe Cameron or Chrissy Harold poster recently said the best copy is from your customer. - Yeah, that was Clay and, like Clay and I were doing this, in this like branding, no, this is like brand workshop that Clay's doing and I decided to do it 'cause I don't know how to build a personal brand, like what you do.
I know how to build consumer brands, so I wanted to see what is the difference between them. So it's been a lot of fun, but Christy's in there. And this was something we told, Christy, like, look, you've got all these testimonials, and yet you're saying, I don't know what to do from a advertising and marketing perspective, I just copy that and paste it and run the ad. Like some of my best ads are literally just like copying what somebody wrote and running it as the ad, as the review, or like taking them and just promote that. It works now, there's not a tonne of scale there, but you can at least get it going.
And then, part of the process is I take an idea and I try to go to the most absurd, extreme of that idea. Like I think of like, what is the worst ad I could write? Like how do I make it offensive? How do I make it so like, I wouldn't be proud of this. How do I get it like dirty and disgusting? And then, I basically just work backwards from that. It's just my process. - where's the thinking behind that? - Because, like great advertising, so like you need to get attention, if you're gonna do paid media, part of the problem with paid media is like, stop your stroll, how do you interrupt? Well, getting attention is hard, particularly with an ad.
So, instead of thinking too much about like the visual of it, I work on the copy and what I want it to say. And, the reason I go stupid is because that's probably, like if you look at what's popular on social media, like when I'll go to TikTok, it's ridiculous, right? So I fit into, okay, well this is what people are looking for, they're looking for ridiculous. So like, customer, I'll give you an example, doing a word density analysis of all of our customer reviews, we realised that like in the top 10 words and topics, people talk about the feel of the material, it's soft, I love the texture. So I latched onto this soft thing and I was sitting at home and we have a cat, and the cat took a crap on the floor.
And I was pissed and like, okay, I gotta go clean my cat shit, great. I went back to my computer and I'm looking at this soft thing. And, first thing I wrote down was like, soft, like a cat except that doesn't crap on the floor. That's a terrible ad. There's nothing at all that connects those two things, except that's just, it's soft, like a cat. And I'm like soft like a puppy, but then, can you see the dog for another case? No. 'Cause there's not...
And I would just go through as many ridiculous things as I could around soft. And I thought like the, "Get Him to the Greek, do you ever watch that? - Yeah. - Where Puff Daddy's petting the furry wall, right? Like, well, like pulled up that Jif, that little thing. And I'm like, that's an ad.
So all of that has nothing to do with the phone case. But starting there definitely gets me to, wonderfully soft to the touch, but how it makes you feel is even better. Now that's the winning copy. - So go down, pull back until it feels good. - Yeah. Or sometimes just go down there and try the weird crap too. - See that's the thing, I don't think enough people do is just test, right? Like, I mean.
- And we're so protective over brand. - Yeah. - I tell my creative team all the time, like you're running advertising? Throw the brand book away. - Really? - Think in terms of what that meets the customer where they are.
They're on TikTok. They're on Instagram. They don't give a about your brand right now. They want entertainment and they want an engagement, and they want something funny. Especially during the pandemic, they want something funny.
So give them what they're looking for, meet them where they are, and then if they like you, invite them home. It's like just a social thing. It's how it works. - Yeah. - So too many people get too protective over like, it needs to be this font, and I have to use this colour palette 'cause that's my brand book.
And I'm like, yeah, well, that makes for a really crappy advertising. - Yeah, I saw a TikTok ad recently that says your TikTok is the ad like content, make content. - Yes, if you want ideas for ads, just go to TikTok right now 'cause they're the best, and most creative creators is all on TikTok. Like I literally ran an ad over Christmas that had the words, this is an ad, and it's very ugly.
That was the ad, but people thought it was hilarious. 'Cause it's like, it's showing up in your feed, it's interrupting you. And then we ran another one that said, and it was like, this is an ad, and in brackets we put, we're sorry, we're Canadian. And we would use like, we would play off of that. So, like none of that would ever be in a, like a brand guideline, but you have to be willing to test it. - Meet the customer
where they're at in that moment, on that platform. - Yes. - They're scrolling. Stop the scroll. - Yeah. - Like, how do you do this? Like what does a team look like? I think when people hear media buyers they're like, what is a media buyer? - Most people don't really know what that is. - I have a Facebook person.
- You've got a Facebook person. That's a media buyer. - Okay. - If you paid. - But like at scale, what should it look like? How do you structure your team? What's the communication rhythm? How do you do production? - Yeah. Okay. So there's a bunch there. I have one head of paid on staff, Nicholas. - Yup.
- I work with him a lot. And then we have freelance media buyers that also work with us, depending on the brand. - Okay, and there are, channel specific buyers? - Channel or brand. - Okay.
- So, what usually happens is on a weekly basis. So every week, Nick, myself, and those media buyers, we get together and we talk about what we're seeing in the accounts, any crazy ideas we wanna try. - When you say per brand you mean per product line? - Yeah, so like Case will have a different media buyer then like Eyewear and Personal Care. - Yeah. - And then sometimes there's like one guy who'll do two or three, right? I like to do that too because the reason I structure it that way, and even though I'm a good media buyer, I like using Outside, and it's just because of vision and experience, right? So, I'm stuck in my own forest all the time. I don't have the luxury of having an agency where I see hundreds of accounts anymore.
I want their breadth and perspective, and that's what I use, right? And then I have my own playbooks and like what I also like at least with the freelancers we have is we've got a relationship where like, we will beat problems up. And they're not afraid to, like, they're not afraid to throw stuff at me and I'm not afraid to throw stuff back at them, and we'll beat the problem up. And it's never, there's no ego at play, it's just like, let's just beat the problem up. - Candid conversations. - Yep, so like that's the buying side, buying and copy and like ideation. - But who drives
the creative, is that like, does a media buyer actually say, here's the kind of- - He's part of it, so like the media buyers are all part of creative ideation. We then have a actual creative team. So like Tess, Nick, Milo, Kristin in Pela full-time, that's like photography, videography, and they're super creative. - Yeah, so if you say we need a 32nd video that does X, they will go in the street and shoot it. - Like guys make me an ad that like shows a really cute puppy and a phone case, and that can communicate around like texture and soft and they'll figure it out. - Video add. And they'll go do it. - Yeah.
- And they're full time. - Yep. - Are these like, I mean, this is fun. 'Cause I'm like, is there a theatres person? Like, are they got background.
- No, these are like photo and video people like they go to school for like videography or- - Do they have friends that can be actors and they'll just like creative? - Yeah, and then that's great thing too is like they know all the talent in towns. Like when you have to hire actors, they can get talent. - Like budget-tight stuff. - Yeah man.
Yeah like we can do like really inexpensive video production that's super high quality, now there are really talented team, so that helps. - Okay. - I got lucky there, when we hired, we did a great job hiring.
But yeah, they crush creative. So between the media buying and the creative team, we have a weekly sort of like, we have actually two different sinks weekly where we're talking about what's working, do we wanna iterate on something that's working or do we wanna try something totally new? And that's the rhythm and it's just super fast. - Hey, that's so cool. I never even thought of having the creative team.
'Cause then you can just literally say, I need a video on this, run the test, feedback, go deeper, iterate, let's hit it with a different hook. - Yeah. Scale and paid is about speed, right? So outsourcing creative to me, doesn't work, not at scale. So if you're a small brand, you can outsource creative all day long because your cycles are much longer.
- Yeah. - My cycles are daily, like at our spend, it's a 24 hour cycles, sometimes it's a three hour cycle. - Where a creative or campaign will just burn itself through. - At our spend, we can burn creative in less than 24 hours.
- But that's also the advantage because you're feedback will be so much fast. - Yeah, so like, I can send a slack message over to Nick and say, hey, this image is working, but I think it could be better if we like made the font uglier, or like made it brighter or like jack the contrast on it, let's see what that does. Like we'll just try stuff. Video's a little harder, 'cause it's takes time to produce it, but like once you have all the video, you can build story blocks and like just have different openings and intros and always use those and you're assembling creative in the way that you would software.
- And, is that something strategically the creative team goes and builds the story blocks knowing that you guys might want these things? - Yeah. Different intros. - Holy moly. - Like, yeah, so this quarter they have rocks around different intros. Like make me a whole bunch of different three to five second intros that you guys can throw onto any video. So like when a video starts to work, you have 12 other intros in the bank that you can iterate on that video to see if that is- - So it doesn't get stale. - Yeah. - 'Cause really you're just trying to fight against the fatigue. - You're just trying to fight
whatever the fatigue looks like, yeah. And then, there's like a seasonality thing. So like right now our spend will be lower 'cause it's February and it's just a slow time for us. But man, come April Earth Day's rolling around, and by that point, we're in a gas pedal - And do you map to those dates, like you have a 12 month, like here are the kind of like, Valentine and yeah. - Yeah, so you try to map out like a calendar in, any kind of marketing calendar, most brands have them.
I look at step up events, so like they could be, Black Friday is a step up, so like, it'll be a big step up. Or a new product drop could be a step up. And it's, a step up is can you grow the audience off of this event so that this is your new baseline, revenue or spend? - An audience means lookalike audiences? - Any audience, audience, it's brand awareness.
Like, yeah. So like problem and solution- - So that then acts as a trampoline. - Yep, and you're trying to step up off of whatever that event is. So we do, this year, which is new for us, we're going to do monthly design drops every month. - Okay, so your design drops, like this step up or you're trying to find something in that month to pair it against. - Well, we're looking every design drop could be a step, we don't know yet. - You're trying to find
the thing that's gonna happen that month for you to design with. - Looking for a hot something that's gonna rocket. So like we just did one and it became like one of our top five best-sellers within the first three or four days. So it's like, okay, that just got us new reach, new audience, that is a small step. Earth Day, as an event, if we do everything right.
Marketing, like paid influencer, PR, all of it, that's a massive step for us every year, right? It just levels the business up because it's, the media is talking about the planet. Like last year less sell because of COVID, but like this year, it's gonna be a thing again, Earth Day rolls around, every news outlet talks about the climate, which that's a step for me. - That's huge, man. - Every market has it too, like every market is just, what it is, you have to be listening. - You have things going on in your industry, listen to your customers. Obviously I'd keep you here all day selfishly to learn all this stuff.
But as we wrap up, Matt, one question I love to ask everybody is, going back to the early days of Demac to the entrepreneur, you are today, who do you think you needed to become to deal with the level of opportunity ahead of you? - That's good. Okay, I'll frame that the way I think about it. So I'm not, I mean, you know this, I'm a high drive person for sure, right? But I'm not overly disciplined. So for me, it's not like I don't look forward and say, these are, like, I need to be better.
Like, I think you do like 1% per day better. Whatever, I remember you talking about that. For me, it's always about beating my past self. So like, I don't look forward and say like, this is who I need to become, all I know is I gotta be better than whoever I was yesterday. And as long as I like I have a sense that I'm getting better at my craft, that's how I look at development, right? So, and that dictates where I spend my time.
Like I spend a weird amount of time on creative and like free think, like I'll try and carve out hours in a day just to like, think, not do, just think, write and think and like just brain vomit into a note. 'Cause that gets me better at my craft, that's the 10,000, 20,000, 30,000 hours thing. - Is that a new thing you developed over the years? - I would say in the last, like three, four. - Yeah. That's huge. - Once I figured out I'm like,
hey, I'm pretty good at this, I'm gonna go super deep into it, because it's often the thing that's missing in. Like, if you've got
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