How to build a $600 million company without raising money (with ButcherBox CEO Mike Salguero)

1. 0:00 – 1:17

   Start-ups are like hacking through a jungle

   1. MSMike Salguero0:00

      Startups are like hacking through a jungle with a machete. At the very beginning, what you need are people who are willing to hack aimlessly because you don't know where you're going, but just like work night and day and just keep hacking until we find a path. And then you, you're just like, "Ooh, okay, here's a path," like, "Let's take the path." And then you start needing like some people with s- a little bit more experience, maybe they know how to use a compass. And then eventually you get to a road. When you get on a road, you kinda need people who know how to drive cars. If you just go for the car drivers, then you lose the hacking culture, like you're willing to do whatever it takes to get this thing off the ground.

   2. JBJeff Berman0:36

      This is Masters of Scale. I'm Geoff Berman, your host. This week on the show, Mike Salguero. [upbeat music] Mike Salguero is the founder and CEO of ButcherBox, which he has bootstrapped into a $600 million revenue business. Do I have that right?

   3. MSMike Salguero0:58

      Yeah. We, we're hoping to do 650 this year, so.

   4. JBJeff Berman1:00

      Okay, 650. Has been D2C and is now in Target stores nationwide. Mike, welcome to Masters of Scale.

   5. MSMike Salguero1:05

      Thank you. Uh, longtime listener, I'm thrilled to be here.

   6. JBJeff Berman1:08

      We're thrilled to have you. Let's start at the beginning. Um, w- where, where did your entrepreneurial journey begin, Mike?

   7. MSMike Salguero1:13

      Well, I had a paper route when I was 10 years old, um, which wasn't

2. 1:17 – 3:22

   From paper routes to t-shirts

   1. MSMike Salguero1:17

      quite entrepreneurial, but, uh-

   2. JBJeff Berman1:18

      Do we, should we explain what paper routes are to the younger-

   3. MSMike Salguero1:20

      [laughs]

   4. JBJeff Berman1:21

      P-

   5. MSMike Salguero1:21

      Paper routes are where you pick up a sack of newspapers-

   6. JBJeff Berman1:24

      [laughs]

   7. MSMike Salguero1:24

      ... 35 of them, and deliver them, uh, every day, uh, six days a week, um, rain or shine.

   8. JBJeff Berman1:29

      So you, you had the bug early. You were, you were out hustling.

   9. MSMike Salguero1:32

      Out hustling early. I went to school in Boston, and I did a bunch of sales jobs, and, uh, I got out of school and started doing, uh, real estate rentals, um, which was a very entrepreneurial, sales-focused thing. Um, and on the side, I started a little T-shirt company. Um, and my first T-shirt was a shamrock, and it said Boston on it, and sold it during, uh, St. Patrick's Day. And I, I had like 100 shirts that I paid $5 a shirt for, and I sold them for $10 and made $500 like the fastest I'd ever made money.

   10. JBJeff Berman2:05

       Well, you, you knew your market pretty well.

   11. MSMike Salguero2:06

       Yeah. [laughs] Yeah, yeah.

   12. JBJeff Berman2:07

       Yeah.

   13. MSMike Salguero2:07

       Uh, us Bostonians love, uh, St. Patrick's Day. Um, and then I did another T-shirt, uh, this was in, uh, 2004 during the, uh, George Bush, John Kerry election. The T-shirt said Buck Fush on it, and we sold, uh, 17,000 T-shirts, um, over the course of like a two-month period.

   14. JBJeff Berman2:26

       Wow. And so, I mean, this is, this is still pretty early days of e-commerce.

   15. MSMike Salguero2:30

       Yes.

   16. JBJeff Berman2:30

       So were you selling this through Amazon, through your own website?

   17. MSMike Salguero2:34

       Mostly like at festivals, door to door, set up a booth. Um, I had salespeople. I was in a few stores and had sold all these T-shirts, but I didn't have, um, I didn't have any money. I was like, "Where did all the money go? L- what happened here?" Um, but-

   18. JBJeff Berman2:48

       Where, where did all the money go?

   19. MSMike Salguero2:49

       [laughs] I think it went to like, you know, we'd, we'd go out at night with, uh, backpacks full of T-shirts and go to the bar and sell them, or, you know, and then use that money to buy drinks, and that's where the money went.

   20. JBJeff Berman3:02

       Yeah.

   21. MSMike Salguero3:02

       Um, and so I ended up, uh, like, uh, having this realization that I didn't know what I was doing, and I wanted to go get a real job. So I worked as a real estate developer for three years, got my MBA at night at Babson, which is known for entrepreneurship.

   22. JBJeff Berman3:15

       Yep.

   23. MSMike Salguero3:16

       And then left that and started my first company. Um, ran that for eight years.

   24. JBJeff Berman3:20

       What was the first business?

3. 3:22 – 8:17

   CustomMade and the marketplace trap

   1. MSMike Salguero3:22

      First business was called CustomMade.com, and we bought this, uh, listing service from a woodworker who had built this... He built it in 1996. We bought it in 2008, and, uh, he had 350 of the best woodworkers in the country on this website, and when you talk to them, they're like, "I get all my business from that website, and I pay $35 a year for a subscription."

   2. JBJeff Berman3:42

      Hmm.

   3. MSMike Salguero3:43

      And so my co-founder and I decided that we were gonna try to buy the website, make it better, because this was 2008, and, um, the website, you couldn't log in and manage your own profile, so easy things like that. Like, oh, we'll just make this. It'll be super easy. Um, and then expand it out of woodworking into other things custom. We raised venture capital, and we moved from focusing on, uh, a listing service to focusing on a marketplace where we took a marketplace fee for everything-

   4. JBJeff Berman4:11

      Mm-hmm

   5. MSMike Salguero4:11

      ... that went through, which wasn't really a good idea. But-

   6. JBJeff Berman4:13

      Why not? I mean, the, it's the eBay, Etsy, right?

   7. MSMike Salguero4:16

      The challenge with the idea was a custom transaction, like if you're gonna get a custom dining room table, you want to do a tremendous amount of back and forth with the maker. And you think about these makers, um, they're not necessarily tech-savvy. This is like 2011. Not necessarily tech-savvy, might not even have a cell phone yet, um, and we're asking them to interface with a consumer on our platform so we can keep the platform fee. It didn't work. Um-

   8. JBJeff Berman4:43

      They were just going around the platform at that point.

   9. MSMike Salguero4:44

      They were going around the platform. They were complaining that they had to be on the platform. They didn't wanna p- pay the platform fee once it was, [laughs] once the, uh, transaction had happened. Uh, they thought it was unfair since they had to do so much work. Um, but we had raised money, uh, on that idea. So in 2011, we went out and, uh, we raised money from Google and First Round Capital and a few other top-shelf VCs and, um, they bought into the marketplace concept. Uh, and it became pretty clear that the marketplace wasn't gonna work. Um, but we couldn't, like, we couldn't go back because we had already chosen the, the train of marketplace VC capital.

   10. JBJeff Berman5:25

       And, and it wasn't gonna work because on Etsy, for example, the product choices are limited. There's only so much customization.

   11. MSMike Salguero5:32

       Right.

   12. JBJeff Berman5:32

       Or even on Airbnb, like, you know, you may need to communicate with the host about can we get an early check-in or whatever it might be.

   13. MSMike Salguero5:38

       Right.

   14. JBJeff Berman5:38

       But it was the level of the customization that made it hard?

   15. MSMike Salguero5:41

       Yeah. I- if you think about what most people think about w- with custom, it's like you can monogram the thing.

   16. JBJeff Berman5:48

       Yeah.

   17. MSMike Salguero5:48

       That's it.

   18. JBJeff Berman5:48

       Yeah.

   19. MSMike Salguero5:48

       Um, my co-founder actually still runs CustomMade. It's now a jewelry website, and you can fully customize things, um, but just in jewelry, and they now do all of it themselves.

   20. JBJeff Berman5:59

       Hmm.

   21. MSMike Salguero5:59

       That's a much easier, better way to do it.

   22. JBJeff Berman6:01

       Sure.

   23. MSMike Salguero6:01

       We had, uh, 60 people at our height. Um, we were burning like half a million dollars a month, um, and just, you know, flooring it towards a wall that we kind of all saw.

   24. JBJeff Berman6:10

       Why was there not a pivot available? Like, I mean, if, if they pivoted the business or evolved the business since, what was happening when you were, you were accelerating toward that wall, and you could see you were gonna slam into it, where you couldn't Hit the brakes or-

   25. MSMike Salguero6:23

       Yeah

   26. JBJeff Berman6:23

       ... you know, jam the steering wheel to the left.

   27. MSMike Salguero6:25

       It was so attractive, this idea that you could be a marketplace for custom stuff, and that's what we sold our, our venture capitalists on, and we raised about $30 million. Um, because at the time, Airbnb, Uber, there are all these, like, third-party marketplaces that had, had sprung up, and they were doing really well. So when we wanted to go back to a listing service or some sort of other model, uh, we got a lot of pushback, a lot of like, "That's not what I invested in. I didn't invest in a listing service, I invested in a marketplace." If I had been older and wiser and better, I probably would've said, "I don't care, I'm doing what's best for the business."

   28. JBJeff Berman6:58

       Yeah.

   29. MSMike Salguero6:58

       Um, but that's not how it, [laughs] that's not how it happens.

   30. JBJeff Berman7:01

       If an entrepreneur were coming to you today under these circumstances, it sounds like your advice would be, like, slam the brakes or, like, d- grab that steering wheel and twist it if you know it's going to fail.
4. 8:17 – 10:04

   Losing your integrity to your investors

   1. MSMike Salguero8:17

      Yeah. I mean, um, I think that that's really hard. I would say that I lost my integrity. Um, I knew what was... Well, I thought I knew what was better for the business, um, but when you have, you know, top VCs telling you... Not, not... It wasn't always a threat, but it was just like, "No, this is the way you should do it."

   2. JBJeff Berman8:36

      Mm-hmm.

   3. MSMike Salguero8:36

      You know, as somebody who was young, it was my first company, it was like, "Okay. Well, they must know better than me." I talk to lots of people who are trying to raise money these days, and I try to tell them that there is a path of bootstrapping, which, um, I'm happy to talk about, but you go out, you try to raise money. We, we went on about 75 different pitches, uh, and then we got a check, right?

   4. JBJeff Berman8:56

      Mm-hmm.

   5. MSMike Salguero8:56

      And w- when there's that dynamic, you don't really think about the person that you're gonna be locked to for 10 years.

   6. JBJeff Berman9:03

      Mm-hmm.

   7. MSMike Salguero9:04

      But you don't, you don't go through the whole... You don't really go through the dating process. It's like, "Oh, they'll give me a check. Okay, great," like, "I'm tired. I should take that check. I need the money."

   8. JBJeff Berman9:11

      Put, put a ring on it.

   9. MSMike Salguero9:12

      Yeah.

   10. JBJeff Berman9:12

       Yeah. Let's go.

   11. MSMike Salguero9:13

       Um, and so you don't really necessarily think about what happens if this goes sideways.

   12. JBJeff Berman9:18

       Yeah.

   13. MSMike Salguero9:18

       And we had a lot of, uh... We had negotiated really well. We had a lot of, like, rights, like they couldn't overthrow us, they couldn't outvote us. Um, but even still, a lot of pressure for us to kinda do what the original plan was, even if it didn't seem like that was gonna work out.

   14. JBJeff Berman9:33

       What happens to, to end your time at CustomMade?

   15. MSMike Salguero9:36

       We ended up, um, doing a, um, a transaction with Wayfair, which was another business in Boston. Uh, all of our employees were able to get a job at Wayfair, which was nice, um, except for me. Uh, and yeah, we, we had a party and, uh, closed the gate, it was this big iron gate, and put the lock on it, and that was it. That was the end of it. And, uh, that was right before Memorial Day weekend of 2015.

5. 10:04 – 13:21

   The origins of ButcherBox

   1. JBJeff Berman10:04

      Okay.

   2. MSMike Salguero10:04

      And I had been, um, buying a lot of grass-fed beef, uh, because my wife and I were trying to clean up our diets, and so then I just started asking the question like, "How would you deliver meat to someone's house?" And Omaha Steaks had been doing it for a long time, so I knew there was, like, a way to do it, just couldn't figure it out. When CustomMade closed, I took the weekend off and then decided that I was gonna start... I was gonna spend the summer trying to spin up this concept of delivering meat to your door.

   3. JBJeff Berman10:30

      So you gave yourself a whole weekend-

   4. MSMike Salguero10:32

      [laughs] Yeah

   5. JBJeff Berman10:33

      ... of a break-

   6. MSMike Salguero10:33

      Yeah

   7. JBJeff Berman10:33

      ... between the-

   8. MSMike Salguero10:34

      It was a long weekend though. Yeah.

   9. JBJeff Berman10:35

      Yeah. Okay. Fair.

   10. MSMike Salguero10:35

       It was.

   11. JBJeff Berman10:35

       All right. Three-day weekend.

   12. MSMike Salguero10:36

       [laughs]

   13. JBJeff Berman10:36

       Right. Memorial Day, here we go.

   14. MSMike Salguero10:38

       Yes. It just felt like that opportunity was like... I needed to, like, move on immediately.

   15. JBJeff Berman10:43

       Mm. What was telling you? Was this head? Was this heart? Was this gut? Was this... What, w- what was animating you to say, "F it, I'm gonna get going"?

   16. MSMike Salguero10:51

       I think it was heart and gut, 'cause rationally I was burned out and that was probably a bad idea. I really wanted to, like, keep doing business, um, but I wanted to do it differently. I wanted to do it my way. And so even when I started ButcherBox, and to this day, uh, my Fridays, I, I stayed at home. I was like, "I'm not working on Fridays. I'm just gonna, like, hang out with my daughter." Um, and so I tried to build in the breathing time in the space of, um, starting the company.

   17. JBJeff Berman11:21

       Mm-hmm.

   18. MSMike Salguero11:22

       When you start a company, uh, in my, in my experience at least, there's, there's not that much to do right outta the gate. During that time, during that summer, I was, um, working out twice a day. I was spending a ton of time with my family. I was-

   19. JBJeff Berman11:35

       I mean, this one's completely counter to most people's idea-

   20. MSMike Salguero11:37

       [laughs]

   21. JBJeff Berman11:37

       ... and I think a lot of people's experience-

   22. MSMike Salguero11:39

       Yes

   23. JBJeff Berman11:39

       ... in starting a company.

   24. MSMike Salguero11:40

       Yes.

   25. JBJeff Berman11:40

       Because it's not like you were pre-product, right? I mean, you, you at least had, like... You, you had some of your supply chain teed up.

   26. MSMike Salguero11:47

       The big unlock for the business was I met, uh, the former head of operations of Omaha Steaks-

   27. JBJeff Berman11:52

       Okay

   28. MSMike Salguero11:52

       ... who was like, "I can introduce you to some people," and he introduced me to one place in Wisconsin which cut meat and also shipped it out, so it was like a one-stop shop.

   29. JBJeff Berman12:01

       Okay.

   30. MSMike Salguero12:02

       And the summer we spent, um, trying to figure out, uh, what a Kickstarter campaign would look like, so we launched on Kickstarter. My idea was I'll put $10,000 into this business for, for everything and if it doesn't work, it doesn't work, and the Kickstarter will tell us if this is something that customers want or not.
6. 13:21 – 19:31

   Hiring for grit: the barbell strategy

   1. MSMike Salguero13:21

      Yeah, so I mean, the first thing that I did that I think was, uh, really important was I hired an intern.

   2. JBJeff Berman13:30

      Mm-hmm.

   3. MSMike Salguero13:31

      So, uh, on that Tuesday after Memorial Day weekend-

   4. JBJeff Berman13:34

      Mm-hmm

   5. MSMike Salguero13:34

      ... I had a, um, a college freshman, um, knocking on my door at 8:30 in the morning, saying, "Okay, what are we doing?" And he was gonna work all summer for me for $10 an hour.

   6. JBJeff Berman13:46

      Okay.

   7. MSMike Salguero13:46

      It turns out that Bobby, uh, has now tells the story that the only reason why he applied was I was the only job, uh, that didn't need, didn't require a cover letter [laughs] . So he's like, "Perfect," sent in a resume. I think it was, like, I, I might have been the only resume I got. But I met him, I was like, "This'll work," and we just, uh, we, we started working together. And I think it's important because I oftentimes meet founders who, uh, they, they believe they have to do everything.

   8. JBJeff Berman14:11

      Mm-hmm.

   9. MSMike Salguero14:12

      And if you believe you have to do everything and you aren't willing to outsource anything to anybody else, um, you will work 24/7.

   10. JBJeff Berman14:19

       Yeah.

   11. MSMike Salguero14:19

       Uh, the trick, I believe, even when you're starting out, is to bring people around you.

   12. JBJeff Berman14:25

       Yeah.

   13. MSMike Salguero14:25

       Know what you're good at and bring people around you. So I had the benefit of, um, I had been the CEO of a 60-person company. I kinda knew what that was like. I knew what I didn't wanna repeat this time, certainly culturally. But also, I knew myself well enough that if I had to, like, just start working on Tuesday myself-

   14. JBJeff Berman14:43

       Mm-hmm

   15. MSMike Salguero14:43

       ... I don't think I would've, like-

   16. JBJeff Berman14:44

       Mm

   17. MSMike Salguero14:44

       ... launched this thing. I needed energy and people around me to, like, kinda push me through-

   18. JBJeff Berman14:49

       Mm-hmm

   19. MSMike Salguero14:49

       ... the doubt, and the failure, and all the, all the things I was carrying with me.

   20. JBJeff Berman14:53

       If the ButcherBox story were starting today, would a Bobby GPT be as valuable for you as Bobby the Babson student was?

   21. MSMike Salguero15:03

       One of Bobby's, um, biggest ahas for the business was, um... So as I said, we were gonna ship grass-fed beef in the mail. Um, and I was like, "Why don't you stand outside a Whole Foods, pretend you're a student, and just ask people would they ever get this delivered to their door?" And, uh, he, he came back and was like, "Yeah, no. Like, no one's gonna spend... The, the price was $129. No one's gonna spend $129 a month on beef. But if you offer chicken, or pork, or-

   22. JBJeff Berman15:33

       Mm

   23. MSMike Salguero15:33

       ... seafood, they will."

   24. JBJeff Berman15:35

       Mm-hmm.

   25. MSMike Salguero15:35

       And so all of a sudden we went from, like, "We're doing grass-fed beef," to actually we're doing everything-

   26. JBJeff Berman15:40

       Mm-hmm

   27. MSMike Salguero15:40

       ... and we're gonna compete against the butcher. Uh, I don't think Bobby G- GPT would've gotten that.

   28. JBJeff Berman15:44

       Yeah.

   29. MSMike Salguero15:45

       Um, I think you needed a human being to, to figure that one out.

   30. JBJeff Berman15:51

       You said that you, uh, started building with cultural principles that included-
7. 19:31 – 23:39

   The curated box and the power of constraints

   1. JBJeff Berman19:31

      easy.

   2. MSMike Salguero19:31

      Yeah. Um, so the, the question around what's the equivalent to grass-fed beef in other species There's a better way to raise an animal. Um, so people were looking for that back then. Uh, we actually didn't start with seafood. We, we launched seafood maybe a, a year later because it was too complicated. It was pretty clear what claims people were looking for. But the, the facility in Wisconsin that was doing all of our product was able to do all three of those species.

   3. JBJeff Berman19:57

      Oh, okay.

   4. MSMike Salguero19:58

      And so when we launched, launched with a Kickstarter, it was you could pre-buy a box, and we had some other goodies and prizes as well, but it, you could pre-buy a box and y- and you would choose your species. So it would be either all beef or beef and chicken, or beef, chicken, and pork. Um, those were the three options. And because we didn't raise any money, um, the idea was we were just gonna send you whatever we wanted to. Um, we were just gonna send you what we felt was a great value for your, your subscription. But really, the reason why I did that, um, and I believe that, uh, you need to constrain yourself, like constraining yourself is really important in entrepreneurship. I didn't want to have, "Hey, you can just choose whatever you want," because then you have to have inventory. And so we had seen Blue Apron, we had seen the HelloFresh's and the Blue Apron lookalikes that were all just shipping whatever they wanted to.

   5. JBJeff Berman20:47

      Mm-hmm.

   6. MSMike Salguero20:48

      And I thought that could, that could work.

   7. JBJeff Berman20:50

      Mm-hmm.

   8. MSMike Salguero20:50

      Um, and so we, yeah, we launched with a, a curated box, The Butcher's Selections, um, and all people chose was the species.

   9. JBJeff Berman20:58

      Right. Right. But it's ultimately it was a you get what you get and you don't get upset kind of like-

   10. MSMike Salguero21:03

       Yeah, and if you do get upset, then, um-

   11. JBJeff Berman21:05

       Right

   12. MSMike Salguero21:05

       ... we'll do better next time.

   13. JBJeff Berman21:06

       Uh-huh.

   14. MSMike Salguero21:06

       Because for us, as a subscription business, subscription businesses are great because if you delight the customer, you keep them-

   15. JBJeff Berman21:13

       Yep

   16. MSMike Salguero21:13

       ... and then you get that revenue next month. And so all we were trying to do was build the best boxes possible so that people stayed.

   17. JBJeff Berman21:20

       Yeah. I mean, committed monthly recurring revenue is a really beautiful business model.

   18. MSMike Salguero21:24

       It sure is.

   19. JBJeff Berman21:25

       Yeah.

   20. MSMike Salguero21:25

       Yeah.

   21. JBJeff Berman21:25

       Yeah.

   22. MSMike Salguero21:26

       Uh, it, it's tough. It's a, it's a tough... It's tough to delight your customer, but it certainly puts your focus on the exact same thing the customer wants.

   23. JBJeff Berman21:32

       Yeah. Well, and, and, and it's not truly committed, right? I mean, you have to earn it every month.

   24. MSMike Salguero21:37

       Right.

   25. JBJeff Berman21:37

       Yeah.

   26. MSMike Salguero21:37

       That's right.

   27. JBJeff Berman21:38

       What happens next? You, you, you have this successful, successful Kickstarter campaign. You've got money in the bank, you've got a, a facility in Wisconsin that's able to fulfill. Um, n- now you gotta build and run a business.

   28. MSMike Salguero21:51

       Yep.

   29. JBJeff Berman21:51

       So what, what, what happens next?

   30. MSMike Salguero21:53

       Yeah, so, um, we, we, the Kickstarter was a 30-day campaign, and then we immediately launched our website, and it just kinda started working right away. I mean, the first week we probably had, I don't know, 30 people who signed up, and then it was 50, and then it was a couple hundred, and, and we shipped out our boxes early to all of our, uh, Kickstarter people, um, and then called them all up, um, which I didn't do 'cause again, I wouldn't have done that. Uh, but I, I found some guy, um, who made 400 phone calls or whatever it was. Uh, and he's like, "Just checking in. Do you need any recipes? By the way, we're a subscription business. Do you want another subscription?" And so he was able to, he was able to convert 30, 30% of them. Took, I don't know, four or five months to get 1,000 subscribers. And 1,000 subscribers when you're doing $129, uh, a box is, you know, that's a, you're already over a million-dollar business.
8. 23:39 – 25:44

   Why bootstrapping saved ButcherBox

   1. MSMike Salguero23:39

      Um, yes, there was a lot of, uh, external interest, um, in the early years of ButcherBox, for sure.

   2. JBJeff Berman23:45

      So whose money did you take?

   3. MSMike Salguero23:46

      I didn't take any money.

   4. JBJeff Berman23:47

      Oh, you didn't take anyone's money?

   5. MSMike Salguero23:48

      Yeah, no, no.

   6. JBJeff Berman23:49

      Why not?

   7. MSMike Salguero23:49

      Unfunded. At the very beginning, I had had such a bad experience. I, I had felt like I had got so burned, and I lost myself. As you said, I, like, lost my integrity. I didn't wanna introduce that. Um, and then as time went on, we figured out how to build a positive cash cycle, uh, cash conversion cycle, so we didn't need a lot of cash. We were growing well. Uh, we were having a great time.

   8. JBJeff Berman24:15

      Mm-hmm.

   9. MSMike Salguero24:15

      And so it just kinda became like, well, maybe, maybe this is what we're supposed to do.

   10. JBJeff Berman24:20

       Yeah.

   11. MSMike Salguero24:21

       And then you fast-forward a few years after that, and Blue Apron went public, and then they proceeded to, in, in 2017, so this is two years after I, I launched, they went public, and then their stock crashed.

   12. JBJeff Berman24:33

       Mm-hmm.

   13. MSMike Salguero24:34

       And so any money that was, like, available for box subscription food companies-

   14. JBJeff Berman24:38

       Disappeared

   15. MSMike Salguero24:39

       ... disappeared.

   16. JBJeff Berman24:39

       Yeah.

   17. MSMike Salguero24:40

       And so I actually... I, I don't think I'd be around right now if I had raised money.

   18. JBJeff Berman24:44

       Why?

   19. MSMike Salguero24:45

       Well, I would've raised money in 2015, and I would've been on, like, an 18 to 24-month, like, you know, runway where I'm supposed to spend all that money.

   20. JBJeff Berman24:52

       Right.

   21. MSMike Salguero24:52

       And so I would've been out looking right when Blue Apron went under.

   22. JBJeff Berman24:56

       What would you have done with the money such that you would've been in such a hole and not have been profitable two years later?

   23. MSMike Salguero25:02

       Marketing.

   24. JBJeff Berman25:03

       Ah.

   25. MSMike Salguero25:03

       That's where most of these-

   26. JBJeff Berman25:04

       Yeah

   27. MSMike Salguero25:04

       ... most of the money goes to in these businesses.

   28. JBJeff Berman25:06

       Yeah.

   29. MSMike Salguero25:06

       Um, and so at the time, there was Blue Apron, and there was, like, 100 Blue Apron lookalikes.

   30. JBJeff Berman25:12

       Yep.
9. 25:44 – 28:36

   Influencers and box-one profitability

   1. JBJeff Berman25:44

      you find?

   2. MSMike Salguero25:44

      Influencers Um, so we went out to all of these nutritionists and paleo enthusiasts, the people whose blogs I was reading when my wife and I were trying to clean up our diets.

   3. JBJeff Berman25:55

      Yeah.

   4. MSMike Salguero25:56

      And we said, "Hey, like w- I started this company because I read your blog, and then I couldn't find a source for grass-fed beef. Would you send an email to your audience and tell them about this, uh, about this product? And here are all the attributes, and here's why we're doing what we're doing. And, uh, by the way, we can't pay you upfront, uh, but we can pay you a residual." So every month-

   5. JBJeff Berman26:15

      And, and like an affiliate fee, basically.

   6. MSMike Salguero26:17

      Yep.

   7. JBJeff Berman26:17

      Yeah.

   8. MSMike Salguero26:17

      But like instead of an upfront one, it was like every month that that customer, uh, stays, you get a check.

   9. JBJeff Berman26:23

      Okay, so it was an affiliate fee with a tail.

   10. MSMike Salguero26:25

       Yeah.

   11. JBJeff Berman26:25

       So basically, you, you acquire us a customer who's a three, four-year lifetime customer or longer-

   12. MSMike Salguero26:30

       Yep

   13. JBJeff Berman26:31

       ... you-- the money's gonna keep coming to you.

   14. MSMike Salguero26:32

       You're getting $10 bucks-

   15. JBJeff Berman26:33

       Yeah

   16. MSMike Salguero26:33

       ... a month.

   17. JBJeff Berman26:34

       Yeah.

   18. MSMike Salguero26:34

       And lots of people said yes to that. First year, we did five million. The second year, we did 35 million, and then 100 million. Pretty much up to 50 million, that was our only marketing. And, you know, the constraint of not having money, uh, forced a discipline both on the acquisition side, but also on the operational side, where it's like, if we're only making $20, well, how do we make $21? Well, I just negotiated a new box price, and it's a dollar cheaper, or I just negotiated new dry ice, or I just negotiated the price of, uh, the tape that like fixes the box. And so we, we just, um... That's one of the things I still love about the business is it's like there's a lot of creative marketing stuff-

   19. JBJeff Berman27:17

       Mm-hmm

   20. MSMike Salguero27:18

       ... and then there's a lot of like hardcore operational where all the money's made, where you, you, you just need to be ruthless about negotiating and dropping costs that don't hurt the customer at the end of the day.

   21. JBJeff Berman27:31

       Mm-hmm.

   22. MSMike Salguero27:31

       The, the best moves are ones that, like, you can get the same product for cheaper, and you don't hurt the customer.

   23. JBJeff Berman27:37

       Yeah.

   24. MSMike Salguero27:37

       Really, ultimately, what we've built over the past 11 years is, um, a brand that people trust. We, we've never cut a corner, and we always are like, uh, transparent with our customer. We're just constantly, um, try- trying to do something different than the meat industry has done. The meat industry is pretty broken in this country. Um, a lot of the labels are just confusing, and people don't understand what they're eating. And, um, really, the industry has been built since the 1950s on cheap, food safe protein, and don't ask a lot of questions about how it's been-- what's, what's actually happening behind the scenes. And with a more educated customer, a more health-conscious customer, that doesn't work anymore. Customers want, um, first of all, they want something that they feel meets their ethics and their integrity, and secondly, um, they want more information than just, uh, just like, "Trust us, it's g- it's good."

10. 28:36 – 35:23

    B Corp, brand trust, and moving into retail

    1. JBJeff Berman28:36

       Mike, as you're scaling to $650 million in revenue and beyond, how are you ensuring that this, we don't cut corners, these are core values for us, um, stays in an organization?

    2. MSMike Salguero28:48

       Yeah. I think it's easier if I'm in charge still. Um, but if I was to step down or if I was to get hit by a bus, um, that's where I started to get concerned. And so in 2020, we, um, became B Corp certified, which is a rigorous, uh, third-party audit of your business, of what you do, of what you stand for, who your partners are, uh, what your impact on the environment and community, like a whole bunch of different, um, questions. Um, and that is the thing that I, um, fall back on now.

    3. JBJeff Berman29:21

       Mm-hmm.

    4. MSMike Salguero29:21

       So, uh, part of the B Corp certification, you can change your corporate bylaws to specifically state that you are not making decisions just for shareholders.

    5. JBJeff Berman29:30

       Mm-hmm.

    6. MSMike Salguero29:31

       I don't see how a company can be built-- A company that wants to do the right thing can be built in the right way if you are just supposed to make decisions to make people more money.

    7. JBJeff Berman29:41

       Is going public an option?

    8. MSMike Salguero29:43

       Uh, it, it is, but, uh, no. [laughs]

    9. JBJeff Berman29:48

       Why not?

    10. MSMike Salguero29:48

        There are very few publicly traded companies that are like B Corp or take, take that path. Uh, I think it's a hard path to take where you are not gonna just care about your shareholders. Um, if we did it, it would be really be like a non... a, a very small piece. But then I, I, I, I come to the question of like, why?

    11. JBJeff Berman30:07

        Mm-hmm.

    12. MSMike Salguero30:07

        Like, w- why would you, like why would you sell the company? Why would you go public? Generally, either you're sick of the business, like you're like, "Get me out of this thing," um, or you need liquidity.

    13. JBJeff Berman30:19

        I just finished reading Eric Ries's, uh, new book, um, which will be out by the time this episode, uh, drops. Um, and he, um, in, in one section of the book, he talks about companies like Patagonia and Costco, um, that because of their high standards in their sourcing, their ethical sourcing, um, they've changed entire industries. Um, to your point about the meat industry being not, not the cleanest in the world, um, how are you seeing the impact in the overall ecosystem because you all are now generating hundreds of millions of dollars-

    14. MSMike Salguero30:58

        Yeah

    15. JBJeff Berman30:58

        ... um, of, of better raised beef?

    16. MSMike Salguero31:00

        Yeah. It's great. Um, the industry is changing. Um, the large companies h- are paying attention. Um, like I said earlier, uh, when, when we started, people couldn't find pasture-raised grass-fed beef in their local grocery store. It's actually become easier for people to find that. Um, we still think ours is higher quality. Uh, but the, the, the industry has responded. Um, there's a meat conference every year, uh, which is a fun conference to go to, and-

    17. JBJeff Berman31:32

        High stakes, high stakes

    18. MSMike Salguero31:32

        Yeah, high stakes. [laughs]

    19. JBJeff Berman31:34

        Yeah. [laughs] Sorry. Dad jokes.

    20. MSMike Salguero31:35

        It's great.

    21. JBJeff Berman31:35

        Yeah.

    22. MSMike Salguero31:35

        It's good. Um, the first, I don't know, three or five years that we went to the meat conference, people like had no idea who we were. Now, we're being asked to be on committees. We're being asked to speak. We're being asked to talk about like claims base, why this is imp- both important as well as it turns out like a better, more resilient customer.

    23. JBJeff Berman31:56

        Mm-hmm

    24. MSMike Salguero31:57

        Um, and so a lot of... Like, the industry is changing.

    25. JBJeff Berman32:01

        Yeah.

    26. MSMike Salguero32:01

        Um, we like to say that we, we, we wanna help small family farmers, like help them grow their business, and also guide large companies.

    27. JBJeff Berman32:10

        Mm-hmm.

    28. MSMike Salguero32:11

        And we're willing to work with everybody, as long as they're willing to do the right thing, and we can help, we can help smaller people scale up their businesses, and we can help larger people do the right thing.

    29. JBJeff Berman32:20

        The expansion into retail from DTC, what drove that decision, and how has that experience been for you?

    30. MSMike Salguero32:26

        Yeah. So retail, um, reality is, so lots of people get groceries online. It's about 14 to 20% of the market, depending on how you look at it. The reality is even our customers go to the grocery store two times a week. The grocery store is where people go to buy meat-

Episode duration: 35:44