Ten Years In The Making is a weekly podcast on how to effectively grow a startup.
Adam Robinson: All right. So, we are on our Episode number– I don’t know what it is. This is probably number 5 of Ten Years in the Making. I have with me Michael Wieder, he is the co-founder of Lalo, which my wife absolutely loves because we have a nine-week-old and it is like the slick baby product brand that we all never knew we needed until we had a kid. And we’re like, we can’t have this Fisher-Price like plastic, green and purple, like whatever, really messes up the function, whatever, of our house.
So, dude, can you give me a five-minute bio? So, by the way, it’s not just D2C big, sweet store on my favorite street in Manhattan, Bond Street. How do you get to be the person who is behind a brand like that? What’s the arc of your career that led you there?
Michael Wieder: The arc probably looks more like some crazy roller coaster or more like setting out on a cross-country journey without Google Maps. So, my career actually started in sports and entertainment, and I started my first company in college. I managed musicians, produced events, the town buying for big brands like Skype at South by Southwest, ultimately parlayed that into what I considered my dream job, which was becoming a sports agent.
We did that for a few years, really missed the entrepreneurial side. I was like deep down in me and realized I need to get back to that and start a fitness tech company, bootstrapped that, ended up shutting it down. And that’s when I joined an early-stage tech company called WayUp, where I was the fifth employee. My co-founder Greg was the fourth employee and he was leading sales. I was leading brand partnerships.
And fast forward, three-plus years of being there all the way through Series B and raising tens of millions of dollars there and growing that business pretty big, and Greg and I were catching up and he said to me, “It’s crazy. I have some friends and family who are having kids. And I was at my cousin’s apartment. And this is nuts how people buy so much stuff. They don’t know what they’re getting, why they need it, how much it costs. Like, are you seeing the same thing? Or are you guys trying to have kids soon because you’ve been married for a year?”
And that was a very blunt way to ask. And my wife and I had just started trying, and I had seen the same thing. I said, “Yes, this is crazy. I don’t know what I need if I’m going to have a kid soon.” And it’s like, “Well, I think there’s a business here, do you want to do it together?” And I was like, “Yes, let’s do it. There’s definitely something here.”
We dove in, start surveying people, finding out what actually was the problem in the space. Was it the products? Was it the brands? Was it the shopping experience? And what we quickly figured out was that it was really a disconnect between the brands and the consumer that it was really, really run by legacy brands. It was a highly fragmented market where you were basically shopping for a different brand for everything you were buying. And there was no deep connection because everything was run through third-party retail.
And so, we said, “Okay, this is weird.” And we started looking into it more and we realized that most brands were marketing through this just perpetuation of fear and anxiety. So, just your kids not going to sleep or they’re not going to eat if you don’t buy this thing, we’re like, “That’s garbage.” Like nobody wants to be marketed to like that. And we flipped that on its head, going market through the idea of love and trust and be there through the different milestones parents go through with their children because that’s an unbelievable moment that allows you to market through celebration and support and that is the antithesis of what was going on in the market. And can we create a brand identity around that, and then figure out what we need to sell and make and really be first about the customer and the experience and the brand?
Adam Robinson: So, what was the first product? Was the product some sort of consumable content or something like that?
Michael Wieder: Yeah. So, the first product happened to be a product we don’t sell anymore, was our stroller. And we brought that to market because it’s a highly considered product and purchase and you make it early on. Oftentimes, it’s bought by the parents themselves or the grandparents. And when we launched that, we built a ton of notoriety for the brand. Even people that didn’t buy it were interacting with the brand.
And four months later, we launched our high chair. And almost immediately upon launching our high chair, that’s when we really knew we had something. Sold out in six hours, sold out our next batch in a week. It was the early stages of you buy as much inventory as you can and sell through it. So, that’s really, we knew we had something, and then it became really clear that customers wanted things for their homes.
Adam Robinson: And is that why you killed the stroller because they want something...
Michael Wieder: Yeah, it was a really hard decision. And something, I think entrepreneurs get in their head about is like sunk-cost fallacy, like the idea of it being so hard to let go of this thing because you’ve poured energy, money, you have inventory, whatever it may be, without the long-term vision of why you may need to move past it or forget the sunk cost. And for us, there was so much that went into that.
It was our first product. It was our first baby. There are not many businesses that kill their first product. And there was nothing wrong with it. It was a great product, but we knew what was going to help us win.
Adam Robinson: So, you’re brand partnership sports agent guy Greg is in sales. Who made this stroller? You guys like drawing it out on a pad, I mean, this is what I’m confused by. It’s like…
Michael Wieder: Look, it’s amazing.
Adam Robinson: I build software companies. I guess you could say that’s what I do. Now, I’m interviewing you, and that seems to be what people want these days or whatever. But like, I ask just everyone. I was interviewing Jen from Kin yesterday. I’m like, “Who made the stuff that’s in the Kin?” You’re telling me the whole story about what happened or whatever. Literally, this thing that Ari Emanuel and Bella Hadid are inbounding you about, like who made that?
Michael Wieder: Right. It’s a great question. And we knew we never made physical products before. And the first people we started talking to were people from that world. So, we can get up that learning curve as fast as possible. And the thing about product development is like it’s a function, it’s a trade, but it’s also a language because the idea of supply chain and negotiation with vendors and setting up a reliable supply chain that can scale with your business, that has economies of scale and the nuances. Being an entrepreneur, you can get through a lot of it, but you have to be able to sit across the table from a factory owner or a vendor supplier and speak the language. Otherwise, you’re not going to be taken seriously.
So, it was every conversation absorbing, learning, not being afraid to ask really stupid questions, acronyms, the amount of times I’d be sitting in a meeting, someone would say something and I’m on Google, like, what is that thing they just said? Just so I could absorb it and learn it, we had to be dedicated to that.
And fast forward, the five-plus years that I’ve been working on product development, I feel like that’s a big, strong suit of my skill set now. The first product that I actually designed with my own fingers, a pencil and paper just won an award, so.
Adam Robinson: What was the product?
Michael Wieder: So, it’s part of our play gym. Our play gym, I don’t know, when is it being released?
Adam Robinson: It is like sometime in November, they’re going to get all– they wanted me to wait until I had six individual episodes to release them also.
Michael Wieder: Cool. We’re on them, our go till November 7th on us. So, we just won the Parents magazine Best Toy Award for our play gym. And that was a product that a lot of was my sketches, how it would come to life. And of course, we had industrial designers and engineers that actually turned it into a 3D CAD manufacturable product.
But one of our things with this mirror toy and this prism that could be folded into a triangle, can lay flat, can have a mirror, can hold these art cards, can go on the gym, can go on the mat, can be turned through, can be used for peek-a-boo. And that was literally we were walking to a team happy hour and I had a moment, I just pull out my notebook and I started sketching on the notebook.
Adam Robinson: That’s awesome.
Michael Wieder: Yeah.
Adam Robinson: I mean, that’s just so cool. And I can strangely relate to so much of this just on a– I was like I traded credit default swaps for Lehman Brothers for 10 years, and then I’m like, I want to be an Internet entrepreneur. How do I do that? So, like reading books, talking to people, asking, and then even more recently than that and that was like very arduous.
I mean, I would love to talk to you about your success story in a totally new area of competence, it seems uncommonly fast, right? The title of the show is Ten Years in the Making. If I look at this thing that I have right now, it’s going to be very– everybody’s going to use it in direct-to-consumer e-comm. It’ll be a household name at some point in the next few years.
My first company I started almost 10 years ago to the day. And there’s this Tom Clancy quote, “An overnight success is ten years in the making.” This seems fast to me that you would just conceive of this baby idea. I mean, you worked in startups before, which I think really, really helps, like me coming from trading. Dude, the retraining of the brain that has to happen, it’s just crazy.
But still, this seems like, I mean, I don’t know. Do you agree with that? To just create a stroller that sells, and then product number two, crushes, like having not been like– I mean, the Hatch girl, she had her other wedding dress business first, and then that makes like a more common trajectory, I think. But like, what do you have to say about that? Do you agree? It’s sort of uncommon, like…
Michael Wieder: Yeah, I do. And I don’t think we’ve reached the pinnacle of success in what we’re setting out to do in changing the shopping experience for parents. I think there’s a lot more to go in our vision of what Lalo can be. I think that there are a couple of things that I think about here. Number one is I often find that there are a lot of people that pivoted out of sports and entertainment that have gone on to do other successful things because it’s such a cutthroat, fast-moving industry. So, if you have that personality, you can translate that somewhere else.
The other thing as an entrepreneur is I think that a lot of great entrepreneurs, or maybe this is just me, should get as close to an expert as they can on as many things, but you don’t need to be the expert. You don’t need to be the guy or girl that’s doing the best possible job at that thing. But if you can get as close and as dangerous as possible and as many things, you can hire better, you know what skill sets you’re missing. You can move at a different speed.
And for me, I’ve done that in everything because I’ve been in music, sports, fitness, HR tech, now D2C e-comm, baby world, and it’s just sinking your teeth in, but it’s everything, every program, for me, I remember really wanting to get really good at sketch when I was at WayUp because if I knew how to design pages, I can sell product vision to the product and engineering team that I know would be great for our business. And from there, I parlayed that into really learning Figma and…
Adam Robinson: Oh, what a great tool that is. Oh, my goodness.
Michael Wieder: I mean, Adobe should have paid more. And I try to do that in every skill set that I consider part of my arsenal is like, how can I get as good as possible? I know I’m not going to be the best, the expert because that’s not my job. I want to be the ultimate generalist because I think that makes me a better entrepreneur.
Adam Robinson: Yep. Student of the game, I like to sort of phrase all this.
Michael Wieder: For sure.
Adam Robinson: So, I had Ryan Pamplin from BlendJet on the first episode, and he gave some advice that just listening to that story, I think you probably did a lot more research on the market than a lot of people do when they’re just starting companies and they’re like, let’s try to make a stroller. Just the way you described your interpretation of what the problem was is way more in-depth than I think most people would approach that problem with just an observation, I think it’s the right way.
You’re essentially doing– so there’s this great book about building software called The Four Steps to the Epiphany. And the guy’s whole concept is he calls it customer development, this process. You have your product hypothesis and you have your customer hypothesis. And you have two separate teams testing both hypotheses at the same time. And if the customer hypothesis does not deliver demand for the product that you are building, you stop building the product, you start over a completely different hypothesis, and then go again.
And like whether you intended to or not, I feel like I’ve seen a few examples of people who had really successful companies that either did that intentionally or by virtue of their previous job, they were just doing that. And then they were like, oh, if I– you know what I mean?
Michael Wieder: Yeah, I mean, for us, neither of us were parents when we started working on it and we were able to approach it extremely objectively.
Adam Robinson: Right.
Michael Wieder: Parents are very opinionated and have thoughts, but also, every child is different, every parenting style is different, like it’s all unique. So, all the inputs of data that we were getting in, in our research, were pointing us in a million different directions. But being objective, not being parents, we’re able to find a common thread amongst all of them and kind of like put the out, like figure out which were these outlier pieces of advice. So, that was really helpful. A lot of things in our space just start by a parent having a problem with their kid, and then it just doesn’t apply to the rest of the market.
Adam Robinson: Right. And how did you literally do that research?
Michael Wieder: We literally put out a SurveyMonkey and we just put it out to friends, ask friends that we knew that had friends all over the country. We wanted to make sure it wasn’t just in New York where we’re based because New York operates like nothing else, especially in living situations.
Adam Robinson: You would come up with a weird product survey in Manhattan. It would feed you drugs. It would feed you street drugs.
Michael Wieder: Whenever we ask New Yorkers about a product, they always ask if it folds.
Adam Robinson: That’s funny.
Michael Wieder: How can you make it smaller? Does it fold? Can I put it away? And that’s not a problem that everybody has all over the country. New Yorkers believe it’s the problem everybody has around the country.
Adam Robinson: Right. Because New Yorkers just believe that there’s no other place in New York. I mean, that’s just the thing. That’s what you think when you live there.
Michael Wieder: Anyway, but yeah. So, we were able to dig in, and then we kind of infiltrated that survey into parenting Facebook groups to get more data and make sure we were diversifying the feedback. And then we started digesting it.
Adam Robinson: How many responses do you get from SurveyMonkey? Literally, you just ran one survey.
Michael Wieder: It was like 2,000 responses.
Adam Robinson: Two thousand?
Michael Wieder: Yeah. So, you ran one survey, you get 2,000 responses, and you were convicted enough of those responses. You’re like…
Michael Wieder: Oh, people were angry. They were like this sucks.
Adam Robinson: We’re going to drop everything and solve this problem.
Michael Wieder: Yeah, I mean, the survey was a part of it, but as we started getting deeper and deeper, we did research in other ways. So, pretty like we’re already in the product development cycle, we were starting to define the brand and the website and things like that. And we would just make trips to BuyBuy Baby and we would stand there and we would talk to people.
Adam Robinson: That’s awesome. I mean…
Michael Wieder: Yeah. No kids, no nothing. We were creepy guys, like I said, standing in the aisles of BuyBuy Baby. And there’s one couple that will always stand out. This woman is about to pop. They are standing in the stroller aisles, but with their phone, looking at their phone. And I go up to them, I say, what’s the one word you would describe how you feel right now? And they both look at each other and they go, “Overwhelmed.” And that was it. That was all we needed.
And I find out that that was their third trip there. They were having twins. They didn’t know what stroller they needed. And they were like about to have these kids. Like, we didn’t think that parents should ever feel that way. That’s an unnecessary thing. And why is that the thing that they’re worrying about? There are so many more important things in raising a kid than that.
Adam Robinson: Look, my wife’s mother works in a high-end baby store in Houston. So, this whole thing was just outsourced. But the stroller thing is something that makes, like everywhere else in the world, they’re sitting in this floppy canvas. You go to France, people are pushing around their affluent babies in these things that barely, they’re like a little– and here, it’s like yo! If you don’t spend $3,500 on a stroller that you can take out of your car in 0.5 seconds and activate the wheels, you don’t love your child, just flat out. You are not enough of a parent unless you do that.
Michael Wieder: Yeah.
Adam Robinson: I have the stuff, but I just never, I just can’t. I don’t understand it. I’m navigating the whole of the marketing messages, like you said. It’s just like, oh, your baby’s going to die. Well, were you ever concerned that babies grow up?
Michael Wieder: No.
Adam Robinson: So, it’s like a short-time period of LTV, right?
Michael Wieder: Yeah. There are over a thousand purchasing decisions made in the first year of a child’s life. That’s number one.
Adam Robinson: Right. So, it’s like you make up with time, with breadth. And I guess what I’m hearing from you is like the idea is if you are the one trusted source for this, then they just buy everything. Why wouldn’t they just buy everything from you if you’re doing it that way?
Michael Wieder: Yeah, I mean, generally speaking, addressable markets are pretty stagnant. You have this many people over, and this is who you can sell it to. In our space, that is an ever-replenishing addressable market. Every day, there are new babies going through different life stages, and they need products.
Adam Robinson: They all need 1,000 things.
Michael Wieder: Yeah, exactly. Exactly. So, I mean, when we put out a customer survey to see what our customers want us to make, we get almost 100 individual types of products people want us to make. And we could make all of them. And we’ll slowly chip away at that. And we have made a lot of progress this year in launching a ton of new products until next year. But there’s a ton of opportunity. The concentration of LTV is probably unlike any business. What would you rather do, sell someone four pairs of pants a year for the next 10 years or sell someone 100 things in 12 months?
Adam Robinson: You’re right.
Michael Wieder: And then someone else on 100 things.
Adam Robinson: Yeah.
Michael Wieder: Because you’re not going to get that same person again in our industry, it’s just different. And for us, it’s forced us to think about how we market a lot differently too.
Adam Robinson: Right. So, what do you mean we market a lot differently? What does that mean? Different than what?
Michael Wieder: I mean, just the way we think about…
Adam Robinson: A jeans company, for instance.
Michael Wieder: Yeah. An apparel business is completely different. I mean, anything that’s a highly direct response, right? Like, I can buy this any day of the week, I can wake up. And today is going to be the day I buy a new toothbrush or a new t-shirt or blender. You can’t do that. You need to be having a kid. They need to be before or at that milestone or be unhappy with the product they chose previously to fulfill that need. So, they have to be in a certain life stage.
And oftentimes, they’re not buying the things for themselves. They’re getting them as gifts off of baby registry and shower. So, in terms of like, even with Retention.com, this is one of the biggest things is we did a really interesting look at data this week where we were relooking back at the time to purchase from email signup, so not people were going through Retention.com, but people that are actively opting into our email signup. And the average is 16 days to purchase.
Adam Robinson: Wow.
Michael Wieder: I’ll let you guess, if you remove day one purchasers, so just people are getting a welcome offer, what do you think that number goes to?
Adam Robinson: I mean, I don’t know, like– I’m going to guess it’s still very close to 16 days.
Michael Wieder: It’s 120 days.
Adam Robinson: Oh, we’re thinking about this completely wrong. Sorry about that. Yeah, yeah, yeah. So, I thought the point that you were going to make is, like– yeah, yeah, sorry. I want to get first-day purchasers, in other words.
Michael Wieder: Yeah. There are these first-day purchasers that come in, they’re there to buy. But if you remove the people that come that day to buy and sign up that day, it’s people that are coming in, and then they’re buying 120 days later, either because they’re doing research as they’re pregnant, they’re looking for a registry, and then they’re buying when they need the product. For our high chair, a lot of people start at four months old. So, if they’re looking right when they have their kid, they’re going to buy it four months later because they’re starting solids between four and six months, and that makes a lot of sense.
We also have this other problem of people that visit our site. And then they add our product to– so they visit our site to validate that they want the product. That’s the choice they’re making, and then they add it to their baby registry. But instead of them buying it, and Sue buys it for them as a baby gift, and now we don’t– that person looks like someone that didn’t convert until we can bring them back and win. So, we can scrub our list because that person didn’t purchase because they might have signed up for emails, but they’re just waiting to buy the next thing from us because they got the other thing as a gift.
So, then we start looking at, okay, there are so many of our customers whose first purchase is just a cushion for our high chair, but they never bought a high chair. So, now that we can extrapolate that they own our high chair from a gift and they’re really a repeat customer. So, when people ask us, what’s our repeat rate, we’re like 3x what Shopify tells us. It’s way bigger, so these are challenges we deal with every day. Our conversion rate is a lot lower than benchmarks because you have this whole cohort of people who are convenient just to validate a purchase and put it on a registry.
Adam Robinson: Man, fascinating. So, the brand looks great, store on Bond Street. Is that sort of like did you bone up in that category, too? Did you get some really tight agency to help you early on? How did you do that? Did you have other influe– it’s like, I want to be the Apple, you know what I mean? Like…
Michael Wieder: No, I mean, obviously, there are brands that inspire us, right? But for us, the articulation of the brand needed to be in-house. I don’t really understand people and entrepreneurs that have someone else figure out how to articulate their brand for them. That’s your job as an entrepreneur, to be able to sell your vision.
So, for us, the articulation and the brand needed to be in-house. I knew what I wanted it to look like and wanted to feel like. But we would bring in creatives to help us here and there to kind of evolve it, but I’m a big believer that brands are ever evolving. They are living organisms. They need to continue to grow and adapt.
But I also believe any creative that’s touched our brand should be able to leave a mark and find ways to elevate it, too. It’s not about having brand guidelines in a box that you have to follow, but you need to make sure no matter what we do, it feels like Lalo. So, that’s kind of what’s guided us and we’ve done as much as possible in-house.
Adam Robinson: Yeah. Cool. What do your brand guidelines look like? Is there like a book? Is there is like rough, sort of…
Michael Wieder: It’s a book.
Adam Robinson: Is there like a sentence that describes it?
Michael Wieder: There are some words that have been put down. We never believed in paying for $150,000 to have an agency write those few words, like we write those words. And it’s actually become more of a Figma design system at this point than a book or a deck because the visual identity needs to evolve. And there is some documentation of photo styles and things like that, but that evolves too. And it should evolve by campaign or product launch like that. It should be ever evolving.
Adam Robinson: Yeah. Gotcha. So, this sounds complex. How many people and how many places do you have going on? And are you running back and forth to China all the time?
Michael Wieder: So, our team is mostly remote. We have a headquarters in New York, a small office here, because we have product and things to store and samples and stuff. We also have a small little studio space in San Francisco where some of our product team is. And we have people all over the country. I mean, we have people in Indiana, up and down the coast of California, Pennsylvania, New Jersey, Colorado. We have people all over.
And I think that just has allowed us to get a lot of great people on the team. And we try to get together as much as possible. Actually, we’ll be down in Austin as a whole team. So, hopefully, we’ll link up all in there.
Adam Robinson: Cool. When?
Michael Wieder: First, second week of December.
Adam Robinson: Cool. Got no way actually that week, but hit me up.
Michael Wieder: Yeah. Let’s see. And then, overseas, we do have someone in Hong Kong that works for us and someone in London. But before the pandemic, we were in China a bunch. But actually, our supply chain is quite diversified now. We have suppliers in China, Turkey, Vietnam, Thailand, Mexico. So, we’ve really worked on diversifying our supply chain to find the best suppliers for the right products because in our industry, you can’t just go to any contract manufacturer and get baby products made. They have to be certain certifications and testing equipment and things like that and know the compliance and regulatory constraints of baby products.
Adam Robinson: I mean, this just seems like, how did you learn that? Just like relative to what I do, it just seems so far out there, but I guess, it’s kind of like…
Michael Wieder: Oh, man.
Adam Robinson: As you put it, you need to do something like the opaqueness of it becomes sharper and sharper and sharper until you’re finally an expert, I guess.
Michael Wieder: Yeah.
Adam Robinson: Cool. So, funding, like, seems pretty capital intensive. How did you think about that? Some people are like, get as much as possible whenever you can. Has it been like a perpetual fundraiser? How long ago did you guys launch this? Was it a few years?
Michael Wieder: This was launched three and a half years ago.
Adam Robinson: Right. So, how did you fund it?
Michael Wieder: So, I mean, originally, it was like anybody that would write us a check?
Adam Robinson: Yeah.
Michael Wieder: We had 90-plus people on our cap table by the time we did an institutional round. We still pretty much have stayed away from traditional VC, which has been, I think, beneficial. We have a lot of great investors on our team, but we also have a lot of great cheerleaders by having that many people on your cap table, you have people that are rooting for you, spreading the word, telling friends and family members. So, that’s been really helpful. But it’s a grind. My co-founder Greg handles fundraising for us. I’m lucky that he loves it. He loves fundraising. He’s probably one of the only founders out there that loves fundraising.
Adam Robinson: I mean, you’re lucky you have him.
Michael Wieder: Yeah, and so that’s worked. Yeah, I think we’ve always had a motto that you have to survive until you thrive and not losing sight on just like living for the next day, continuing to grow, and knowing that that’s important in the early stage. And for any entrepreneurs, there’s a lot of talk about dilution and valuation, but we have a friend who’s passed this sing along to us that half of a watermelon is still bigger than a whole grape.
Adam Robinson: Yeah, that’s awesome. I never heard that one before.
Michael Wieder: Yeah. So, that…
Adam Robinson: Stop using that.
Michael Wieder: That stuck with us, right? Like if you can continue to make that thing big, it’s okay if you own less of it because at the end of the day, those investors, the dilution is what allows you to do the things you want to do to make the business as big as possible.
Adam Robinson: Right. So, you mentioned you co-founded Lalo’s fundraising, and also with this idea that you’re constantly sort of taking on new generalist skills or whatever. So, when I started my first company, I would consider a mistake that I made was I had, for a software business, two business side co-founders and one developer, which is just either one in one, or two developers and one business side co-founder, because you’re building something and there’s nothing for the business guy to do forever. We were just sitting around. So, how did you– like brand partnerships, sales, this is a pretty closely related skill set.
Michael Wieder: Yeah, I mean, my skill set is a little bit more on the creative side, creative thinking strategy, things like that.
Adam Robinson: Has that always– like you came into this knowing that?
Michael Wieder: Yeah. Yeah, I mean, that was, I think, a big reason he asked me to do this with him. It was like every seed of an idea. But one thing we did early on that was really helpful is we wrote down who was the final decision maker on what? Because we’re both opinionated people, there is overlapping ability and those two sides of the business are very closely aligned. Our backgrounds aren’t that far apart, even if my skill set is more creative and I can design and do things like that and have that creative eye. For us, by writing that down, we knew that if we disagreed on something, we knew who the final decision maker was and that we were following.
Adam Robinson: Can you give me three examples of topics?
Michael Wieder: Disagreement?
Adam Robinson: Just like the things that you wrote down.
Michael Wieder: Yeah, yeah, yeah, totally. I mean, creative, brand, marketing, technology, retail. On his side, CEX, finance, legal, HR, fundraising.
Adam Robinson: Yeah, yeah, that makes sense.
Michael Wieder: So, if we had two-term sheets and we were arguing on which one to go with, he’s like, I think this is the best one. Like, I know it. I’m going with his word because that’s his…
Adam Robinson: Even, like voting founder’s shares or whatever?
Michael Wieder: Yeah. It was completely 50/50.
Adam Robinson: Yeah, okay. I gotcha.
Michael Wieder: I mean, that was helpful. If you are in a co-founder relationship that is not 50/50, there is a power dynamic that is different.
Adam Robinson: Yeah, yeah, yeah. So, speaking about an endgame, you mentioned having a sort of much bigger vision for this, right? So, what are you guys trying to get out of it in the end? And has that changed? I mean, you started this business at a very strange time. Did that strange time change anything about– I mean, to me, my future vision changes all the time. I tried to sell this business in February. The guy walked. And I’m like, I’m so glad I didn’t sell this thing because it’s so much bigger than I thought it was. So, what is sort of current that you guys are shooting for, medium and long term? And has that changed since you started it?
Michael Wieder: Has it changed? I don’t think it’s really changed. I mean, for us, we want to create a generational brand. We don’t think that there’s been a generational brand in baby for a long time. There’s Graco, which is a mass-market brand, been around forever. There are other brands, Fisher Price, you mentioned, Gerber. There hasn’t been a brand that’s generational, that’s a brand, not a product, but a brand in a long time. And we want to look back and we want, when we have grandkids, to know that they’re going to still be able to be in Lalo products. So, we want to build this thing as big as possible.
Adam Robinson: Love the ambition, by the way. That’s amazing.
Michael Wieder: Yeah. And there’s no reason I can’t be, right? But for us, the way that we get there and the potential, like, look, we both have two kids and families and live in New York. So, yeah, we want to make this thing as big as possible to provide as much as possible for our families. And I think that’s anybody in any profession all the time, that doesn’t matter if you’re an entrepreneur or not.
Adam Robinson: Here’s what I’m curious about, my gross margin on my business is like 98% or whatever. When you’re running one of these things, that’s not bad. And there’s this near-term trade-off of literally like cash to me versus growth rate versus cash to the business. I mean, is it just like how do you think about that? Because to some extent, you could just grow faster. Like living in Manhattan with kids, that is expensive. Are you just like, look, we’re going to agree to whatever our salaries are for however long, we’re going to reassess in two years or whatever? How do you think about life budgeting? And then how do you think about the growth cash flow trade-off for your business?
Michael Wieder: Yeah. I mean, for us, early on, we didn’t pay ourselves for almost a year.
Adam Robinson: I didn’t pay myself for five years, dude. Five years.
Michael Wieder: Yeah. And God bless. Maybe Lehman Brothers was…
Adam Robinson: I mean, I caught as good little. For CBS traders, the financial system blowing up was fantastic, and then Barclays bought us and paid us his big bonuses. So, like, I was able to do that. I’m not like, most people can– I self-funded the business and was able to do that.
Michael Wieder: It’s a beautiful thing. Yeah. So, for us, I mean, any chance we can to be able to pay ourselves what we think we deserve, and obviously, there are the ownership pieces. It’s a conversation with our board. And we do it in a responsible way.
And then cash flow for the business, I mean, look, you can grow at all costs and the out of business. We’ve seen D2C businesses in the last year go through different types of “acquisitions” or straight-on go out of business. And that’s not going to stop because the way to run the business is changing.
And that doesn’t mean that businesses need to be profitable from day one. There is a benefit to having outside funding and be able to grow at a certain beat and pace that is good for the long term. But you do need to know how to become a profitable business if you’re selling physical goods, like that is no doubt important.
And it’s capital intensive. So, you have to just think about the different ways you finance your business and debt vehicles that are important to financing inventory or when’s the right time for an equity raise, how much time to leave, how much runway to leave yourself if you’re going out to raise, like a lot of people wait till a month or two of the runway and it’s already too late. Then you’re like taking a bridge at a crappy valuation and figuring it out.
So, we think a lot about cash flow, and it’s obviously always a topic at a board meeting and things we talk about every day and where do we invest. And we’ve remained a pretty lean team. I mean, we’re still under 20 full-time employees.
Adam Robinson: Love that. Are there private metric valuations that you follow anywhere? That’s probably a question for your co-founder, but I’m just so fascinated by this. It’s like if you’re out in the market all the time, how do you even know what you’re asking for?
Michael Wieder: Yeah. I mean, there are a lot of different valuations that have been out there in our business, and the ultimate, they’re trading off and on multiples of EBITDA but sometimes revenue, but there’s never anything been done that’s a good comp for our business either. None of these businesses have traded. Some had 15 times EBITDA, have no D2C channel. No ownership of customer data, like none of that. So, how do you then comp that to a business like ours that does have those benefits and added value?
Adam Robinson: It’s a great question. Well, man, that’s just so different than what I do every day. It’s just such an awesome thing to be able to get into the heads of people like you. So, wrapping it up, if you could write one marketing tip on a billboard, what would it be?
Michael Wieder: Write your own playbook and your own would be italicized or underlined or something. I think, in our space, especially, in the market, in general, that it’s always falling back on best practice, best practice, best practice. And it’s like, how do you think the best practices started? They were new at one time. Someone tried something and f*ck sh*t up. That’s how a best practice becomes a best practice.
Adam Robinson: Yeah.
Michael Wieder: So, focus on– yeah, you may want to go in a direction of a best practice, but always think about how to apply it to your business, to your challenges, and think about the slight nuances that drive your business forward. Don’t just do it that way because that’s how it’s been done before.
Adam Robinson: Love that. Love that. In the final five, favorite book?
Michael Wieder: Favorite book?
Adam Robinson: Yeah.
Michael Wieder: So, my favorite book, I don’t know if I would call it a favorite book, but it’s a book I always recommend. I buy it for my team. I buy it for a lot of people. It’s Checklist Manifesto, Atul Gawande.
Adam Robinson: I have a copy of it, but I haven’t read it. But I’m a checklist Nazi, so I’m going to actually put it on my thing to read soon.
Michael Wieder: Yeah. So, it’s a great book and it’s one of those books that looks really dry, but it’s super fascinating. The anecdote story is about how a checklist can save the most catastrophic things, and then you start thinking about how it applies to your business and your teams, talking about through surgery and pilots and all of that, so.
Adam Robinson: Sure. Love that. Are you following either a CEO or a person that has an influence on you, your life, how you’re doing things, whatever?
Michael Wieder: Like on social media or in general?
Adam Robinson: Yeah, just like whatever. I don’t know. I like Elon Musk and I follow him on social media. Everybody says he’s going nuts now. I think it’s amazing that he’s sending people to the moon or whatever.
Michael Wieder: He just fired four guys today. Is there someone I thought? Yeah, I mean, personally, there’s someone who’s near and dear to me. His name’s Jerry Inzerillo. Especially when I want to be a sports agent, he dealt a lot behind the scenes with very powerful and famous people and just how to treat your life and how to treat people with respect and how to deal with different types of personalities. He’s been very influential in my life.
Adam Robinson: It’s a great answer. We know you’re married. We know you have kids. You said you lived in Manhattan.
Michael Wieder: In Brooklyn. I live in Brooklyn.
Adam Robinson: Oh, Brooklyn, sorry. New York. Favorite vacation you have ever been on?
Michael Wieder: Probably my honeymoon in South Africa.
Adam Robinson: Oh, man, I want to go so bad.
Michael Wieder: Yeah, South Africa is amazing.
Adam Robinson: What was the whole summary of it? Did you do the safari thing and the wine thing and like the– whatever?
Michael Wieder: Yeah, we did all of it. So, Jerry, who I mentioned, Jerry Inzerillo, he actually produced Nelson Mandela’s inauguration. And Nelson Mandela was his daughter’s godfather. So, I felt very strongly that if we were going to South Africa, we were also seeing some of the history and understanding that, too. So, that was really important to learn about the apartheid and the impact on the country and really, really fascinating how that democracy was formed.
But we did that. We went on a safari to the bush for a few days. We went to Cape Town. We went to wine country and just the different experiences. We did a bike tour in Soweto. And we got a lot of different types of exposure to different types of people and amazing food and amazing scenery and culture and really just, it’s an awesome, awesome place, and then nature.
Adam Robinson: Man, that sounds great. Somebody else, I forget who it was, but they were like, “My wife and I literally feel like our life began after we spent three weeks in Africa.” And I’m like. “Was that enough time?” And they were like, “I would go back to Africa as frequently as possible, for as long as possible.” Yeah, I’ve never been in a lot of places. Africa, never.
Michael Wieder: Definitely recommend it. Now, there’s a direct flight from New York.
Adam Robinson: Oh, amazing. Well, Mr. Wieder, thank you very much. That was just a fascinating chat, very enlightening. All of these questions I have, I just couldn’t even have guessed your responses to them. So, I mean, that was fun to be the interviewer.
Michael Wieder: Yeah. Awesome. Thanks for having me.
Adam Robinson: I appreciate the time, man.
Michael Wieder disrupted a $10B industry not by solving a problem, but by solving a feeling – ”overwhelmed.”
Michael is the Co-Founder of Lalo, a thriving D2C brand that makes modern day baby and toddler products. He started the company when he noticed a disconnect between legacy brands and consumers in the baby gear industry.
By going to stores where expecting parents shopped, Michael learned his target audience’s exact feelings, allowing him to build a brand identity and product line to meet his ideal client’s desires.
In today’s episode, you’ll hear Michael share specifics on the boots-to-ground research he did to shake up a long-standing industry, how being an outsider to your market can be a benefit, and how Lalo has raised tens of millions while primarily avoiding traditional VC funding and staying under 20 full-time employees.
Key Takeaways from Daniel Murray
- The benefits of zigging while others zag in creating a brand identity.
- Why Michael isn't concerned about dilution when it comes to onboarding investors.
- Michael’s advice for navigating the co-founder relationship for decision-making.
- How Michael used in-person research to uncover a major disconnect between legacy brands and consumers in the baby gear industry.
- Why business “best-practices” can often come from making mistakes.
- The concerns Michael has about D2C brands who “grow at all costs.”
- Why can it be an advantage to enter a space you don’t have experience in?
- Michael’s tips for articulating and establishing your brand.
- Different questions founders can ask around financing their business.
- The success Michael found by having more than 90 people on Lalo’s cap table.
- How Michael went from a sports and entertainment background to building a disruptive baby gear brand.
Michael Wieder on Managing Dilution as an Early Stage Startup
Michael Wieder Inspiring Quotes
- “I want to be the ultimate generalist because I think that makes me a better entrepreneur.” - Michael Wieder
- “That’s your job as an entrepreneur, to be able to sell your vision.” - Michael Wieder
- “I’m a big believer that brands are ever-evolving. They are living organisms. They need to continue to grow and adapt.” - Michael Wieder
- “For any entrepreneur, there’s a lot of talk about dilution and valuation, but we have a friend who’s passed this saying along to us that half of a watermelon is still bigger than a whole grape.” – Michael Wieder
- “You may want to go in a direction of a best practice, but always think about how to apply it to your business, to your challenges, and think about the slight nuances that drive your business forward. Don’t just do it that way because that’s how it’s been done before.” - Michael Wieder