How To Buy A D2C Startup For Cheap and Sell It For Millions

1. 0:00 – 11:20

   Introduction to Mehtab

   1. SPShaan Puri0:00

      It will go down as one of the best private equity deals ever. Over the 19 years, they put $226 million in to Weight Watchers and got 5.37 billion out, 4.7 billion of realized profits. [upbeat music] All right, what's up? Uh, we are back, and we got another episode. Uh, we got a guest here today. Mehtab is here. He's a, he's a friend of mine who most people, I think, probably, probably haven't heard of unless you're in the D2C world or you're on Twitter or you know what's going on in that, in that area. But, uh, I wanna introduce you because you're somebody who, A, has helped me a bunch with my D2C brand. You, like, know a bunch of tips and tricks and hacks and shit like that. So I'm like, um, I basically have a little scoreboard in my head, and everybody's attributes are there. And then yours was, like, business hacks was, like, filled up. And then the other thing was that you... I don't know if you listen to the show regularly, but you would send me little nuggets of like, "Oh, you should talk about this. You should talk about this." And so I kinda got confidence. I was like, "Oh, I think he's just got his back pocket full of interesting stories that are off the beaten path." And so I kinda like that. Do you listen to the show? First, let's start there. Yeah, all the time, almost religiously, so- Sam, I sent- ... my go-to shower podcast. Oh, that's, that's perfect. Uh, [laughs] we, we are the number one rated shower podcast- That's true ... in the country, actually. [laughs] Millions of men [laughs] lather to us. So [laughs] Sam, I sent him a picture of, uh, the Vancouver show where, like, the stadium or, like, the, uh, the theater was filled up, and he goes, "Wow. Oh, that's a lot of virgins." [laughs] That's hilarious. So true. That's a good burn. My, my fiance listens to the show religiously, too, and she wouldn't use ChatGPT when I told her about it maybe a month or two ago, and you guys mentioned it the other day, and she was sending me screenshots. So you guys caught her using that. [laughs] Dude, the Dharmesh pod. I, I think you're referring to the Dharmesh pod. Yeah, yeah, we were- I've been using it all weekend after talking to him. Uh, I implemented a lot of the stuff that he was talking about. Man, he got me hyped up. Also, what a lot of people don't realize this, is Dharmesh pods always get tons of views on YouTube, and finally Shaan, like, texted Dharmesh in a group chat- [laughs] ... and was like, "Hey, Dharmesh, what are you, uh, what are you doing?" And he goes- [laughs] ... "Oh, nothing, really." And I go, "Really?" And he goes, "Well, I'm just doing a few things." And he, like- [laughs] ... gave this, like, very detailed list of, like, internet marketing, not hacks. But he was like, "I'm just, like, testing, like, buying ads, like, $500 here just to test this. And then I'm, like, responding to comments." [laughs] Just, like, the small stuff that you wouldn't expect someone who runs a $20 billion company to, like, be doing. Be caring. And it, uh- He's very tactical. We don't even do it with our... It's our own podcast, and we don't do any of this stuff. Like, people are like, "Oh, the thumbnail, the, the title." People don't realize we don't see those. We don't approve those. We don't know about those. We're not involved in it. Uh, we don't do a lot of this stuff that we probably should, but, uh, you know, can't be bothered to do all that stuff. But he did. He did do it, and- They say the, they say the devil is in the details, and I ain't trying to hang out with him. [laughs] Dude, he's the man. Like, he was like, "Oh, I'm not doing anything," and then he had this, like, w- really long list, actually. Mehtab, you said this phrase the, to me the other day. Uh, I called you, and you said a phrase that I've stole and I've just been saying all around town. I've just been saying it everywhere, even when it's not really appropriate, 'cause I thought it was so funny. Sam, I was talking to him, and I was like, "Oh, you lived in, like... Are you, like, you're living in Utah? Why Utah? Like, you're... Aren't you, like, Canadian, and you're, like, Indian? Like, what's going on here?" And he was like, uh, he's like, "Oh, yeah, my wife something, something." And I go, "Uh, I asked you something about your wife." [laughs] And he goes, he goes, "Yeah, you know, me..." He goes, "Yeah, you know, uh, I, I look like I got beat with the ugly stick, but somehow I ended up with an awesome [laughs] looking wife." And I thought that- It happens. It happens. B- It's common here ... I thought beat with the ugly stick was so funny. [laughs] I've been using that everywhere. [laughs] I use it to refer to my business partner all the time, so you're good. [laughs] Oh, you take him down with you? Oh, always, yeah. [laughs] He's my go-to, so- Okay ... I don't know. I Googled him. He, he's pretty handsome. How, um, how- [laughs] ... how old are you? Uh, I'm 29. Wow. I'm looking at- And you're interesting because he does stuff that, like... You say words that, um, most people don't say. So I, I, I pay attention to vocabulary. So for example, in the tech world, and me and Sam used to live in San Francisco. And, uh, you couldn't go outside. You couldn't poke your ear out the window. You wouldn't hear the word EBITDA. Nobody says EBITDA in San Francisco. Nobody knows about it. Nobody talks about it. It's not a thing. But then when you get into, like, the cashflow business kind of world, that's all you're gonna hear, a bunch of p- a bunch of different people talking about words that have to do with profits. You say a bunch of other words, like, uh, dividend recap, distressed buyout, and he talks about all these things that I frankly don't know what they mean, what they do, how it works. But I know that, that you come from a little of a different world. So I'm excited because I wanna talk about some ideas from your w- the, your neck of the woods, your part of the business world that is less, uh, stuff I'm less familiar with personally. And so I think I'm gonna, I'm gonna learn a little bit. Where, where do you wanna start? What, what, what topic should we start on? You sent a doc with some things. I wanna, I wanna look at some of these. Let's start with one that we had- Well, hold on, Shaan. Y- I need a little bit of background here. So you- Mm-hmm ... you basically, uh, I... Like, I read your Medium post. So if I understand this correctly, what, w- uh, the name of your holding company you guys buy into or you buy entirely outright, uh, distressed or d- only okay performing D2C brands, and you make them great. Is, is that the summary? Yeah, that's the gist of it, and we're less of a hold co. and more of a, um, an independent sponsor, if that makes sense, and that just means you do everything on a deal-by-deal basis. So the equity that you're working with might be very different on a deal-by-deal basis. That doesn't make sense. I don't understand. What sp- [laughs] What do you mean when you say sponsored? Um, so it just means that we're the ones making the investment. And say on one deal Shaan's a co-investor with us, and then on the next deal only Sam's on the cap table with us. And you run it, or you hire CEOs, or what?

   2. MBMehtab Bhogal6:05

      Um, it depends on the, the portfolio company. Right now I am day-to-day with one of our portfolio companies, um, Sola Wood Flowers.

   3. SPSam Parr6:10

      And how many do you have? Like seven, I think.

   4. MBMehtab Bhogal6:13

      No. There, there's three platform companies, and then there's another 8 to 10 kind of minority equity and debt positions that we have.

   5. SPSam Parr6:18

      And the whole thing is roughly of what size, so, uh, me and listeners understand?

   6. MBMehtab Bhogal6:24

      Um, the core platform companies, which is what I would count as part of the revenue because we own the majority of those companies, is well in the eight figures. Um, so kind of that, that mid-eight figure range. Yeah.

   7. SPSam Parr6:33

      And is, is the biggest one the, the flowers company?

   8. MBMehtab Bhogal6:37

      No, that one's slightly smaller than the succulent company, but the flower company is the one I'm most bullish on. That one's solwoodflowers.com, and that's just because, um, there's a lot of room for margin expansion yet, so.

   9. SPSam Parr6:47

      What's that called?

   10. SPShaan Puri6:47

       I mean, that's the one you, that's the one you talk about the most. So, so let's give, let's g- let's give... You said three platform companies, so you said a succulent company.

   11. MBMehtab Bhogal6:54

       Mm-hmm.

   12. SPShaan Puri6:54

       A, uh, Sola Wood Flowers, so it's a, like a wood or fake flower company, correct?

   13. MBMehtab Bhogal6:59

       Yep. Made, made in our motherland, Shaan.

   14. SPShaan Puri7:01

       That... Yeah, b- exactly. So made in India. People buy them for, like, weddings and things like that, right? 'Cause flowers are-

   15. MBMehtab Bhogal7:07

       Yep

   16. SPShaan Puri7:07

       ... super, super expensive at weddings, and so these look really good, but they don't cost as much as fresh flowers or whatever.

   17. MBMehtab Bhogal7:14

       Exactly.

   18. SPShaan Puri7:14

       What's the, what's the third, like, majority-owned company?

   19. MBMehtab Bhogal7:18

       Um, that one's an apparel company.

   20. SPShaan Puri7:21

       An apparel company, okay.

   21. MBMehtab Bhogal7:22

       Yeah.

   22. SPShaan Puri7:22

       And so, um, you own these three. Let's talk... Before we go into the details about each of these, um, I wanna know the origin story 'cause you've told me, you've told me some interesting things, like I think you met your co-founder on Reddit, like in a subreddit. [laughs]

   23. MBMehtab Bhogal7:36

       Yeah, yeah.

   24. SPShaan Puri7:37

       And so g- take us back. Uh, go, go all the way to... I, I see here something about, about, about getting sick at 17. St- st- start there, and then tell us the story of how, how you got to this, this spot now when you're 29 years old.

   25. MBMehtab Bhogal7:48

       Yeah, so the quick and dirty version is essentially, um, diagnosed with spinal stenosis and degenerative disc disease when I was 17. Um, so that meant, you know, obviously doing anything physical for work was kind of out of, out of the picture. Um, so I decided to learn more about e-commerce and entrepreneurship and just kind of stumbled. Um, I, I started a, a Facebook page called Guitar Porn, and this is back when organic reach was awesome. You know, you post something, people would actually see it. Facebook blessed us with so much free organic reach. It was the greatest time ever, um, almost like TikTok is now, right? And then, um, I transitioned. I started doing basically guitar runs, like semi-custom guitar runs with big brands, and we'd partner with a d- a retailer, a dealer. This is before brands would work with you directly, right? And we would sell out these pre-order runs and basically take a cut. Eventually we cut out the retailer and became the retailer ourselves. Uh, that got to kind of low seven figures. That was nice because there was no CapEx, so we didn't have to have much cash, right? It's all pre-orders. Um, after that, I started a men's hair product company, which is really ironic 'cause I'm, I'm Sikh. Um, so I, I don't cut my hair, and I have a turban.

   26. SPShaan Puri8:53

       [laughs]

   27. MBMehtab Bhogal8:53

       And, uh, so did, did that with one of my best friends. That also scaled to kind of low seven figures, along with a guitar pedal company that scaled to low seven figures. And then after that I decided, um... You know, these are all fairly small. Like, TAM's really small for niche guitar pedals. Um, so I decided to start investing. Realized, hey, you know, no one's gonna come to me. Just given I'm nobody.

   28. SPShaan Puri9:15

       Right. You, you weren't even doing guitars. You were doing guitar pedals specifically.

   29. MBMehtab Bhogal9:18

       Uh, so the first company was a guitar retailer, like actual full-blown guitars. And then, yeah, the one that was really profitable was guitar pedals, just because the margin was insane, and I partnered with a, um, a guy who I'd met flipping guitars, like just trading guitars with, and he was a Grammy-nominated guitarist, right? He is. Um, he plays in a band called Periphery, for any metal nerds. And, uh, so that went well. Like, those were both flowing well in terms of cash-

   30. SPSam Parr9:41

       But were your-
2. 11:20 – 18:50

   How old were you when you made your first million?

   1. SPShaan Puri11:20

      that through these kinda like smaller e-com things, and then how'd you get into this kind of like private equity style thing where you go and you buy these distressed companies and you turn them around? So how did that happen?

   2. MBMehtab Bhogal11:32

      Yeah. So i- in the Great Recession, when I was a kid reading about it, I always thought it was interesting reading about private equity firms that made money no matter what, like if the company did well or it failed. And I thought, hey, that sounds great. Uh, I hate being an entrepreneur because obviously if the company doesn't do well, you fail, right? And that's still the case. It's not like... You know, um, it's just not as black and white anymore. So I started, um, I just raised a TAM-

   3. SPShaan Puri11:53

      But, but explain that. Why would a, why would it make... Why would it work whether the company does well [laughs] or not d- not does well? Explain how that works.

   4. MBMehtab Bhogal12:00

      Yeah, we can jump into that a little later, but part of our thesis is essentially investing on how much liquidity or cash the company can generate in a short-term basis. Um, so if you can invest today and pull most of your cash out within two or three months, there's a lot less risk, right? Um, versus say, you bootstrap something new, you're always putting more and more cash, um, uh, on the working capital side. You need to fuel growth, right? If, if you're doing a traditional consumer brand. It's less of an issue for something asset light like SaaS, right? Um-

   5. SPShaan Puri12:27

      Yeah

   6. MBMehtab Bhogal12:27

      ... but, but that's the case, then you, you don't actually end up pulling cash out of it for so long.

   7. SPShaan Puri12:32

      So where most people focus on equity appreciation, you guys focus on liquidity. You guys focus on how quickly can we pull cash out, whereas most business people just think, "How do I make this worth more?" Which often results in putting more cash in. Is that correct?

   8. MBMehtab Bhogal12:47

      Right, and that's just one facet of it. We're okay with holding for the long term or being more long-term focused if, if it makes sense. And sometimes we're just more of a short-term partner.

   9. SPShaan Puri12:55

      And like, uh, it's not uncommon for a software company to sell on the low end for three times revenue, on the high end, if it's fast-growing, 10 times revenue. What you just said was you're gonna buy a company for basically, uh, uh, uh, one-sixth times-

   10. MBMehtab Bhogal13:10

       [laughs]

   11. SPShaan Puri13:11

       ... because you said you wanna get your cash in... I can't do that math, but you wanna get your, your cash back in two or three months, so you're buying it, uh, one-sixth times profit or ca- uh, uh, cash flow.

   12. MBMehtab Bhogal13:21

       Cash flow.

   13. SPShaan Puri13:22

       I mean, like, like nothing, right?

   14. MBMehtab Bhogal13:23

       So gi- give us, give us a sample deal economics. So, uh, in a situation where that happened. Yeah. So we invested in an adult health and wellness retailer, um, which is a nice way of saying sex toys.

   15. SPShaan Puri13:33

       [laughs]

   16. MBMehtab Bhogal13:34

       Um, that's... I'm in Utah, so you know.

   17. SPShaan Puri13:36

       But what, what-

   18. MBMehtab Bhogal13:37

       I can't use that phrase

   19. SPShaan Puri13:37

       ... why don't you ever say the name of the brands? Are you... 'Cause you don't wanna, you don't wanna talk about it?

   20. MBMehtab Bhogal13:41

       Um, well, if they're distressed, it's just kind of-

   21. SPShaan Puri13:44

       Got it. Okay.

   22. MBMehtab Bhogal13:44

       Um, yeah, just culturally kind of mean to them, so I- I'm not like that. But the... And I, I can send them over. I think I shot them over to Shaan. But, um, yeah, so we, we invested essentially at, um, I'd say a fairly far below market valuation just because others were unwilling to invest in a, in that kind of company. And this was 2018, back when it was a little bit more taboo than it is now. Um, now there's a few publicly venture funded brands like Dame, et cetera, in that space, so it's become more socially acceptable. But we, we got in far below kind of market valuation. Uh, the com-

   23. SPShaan Puri14:17

       Well, well give, give us a-

   24. MBMehtab Bhogal14:18

       Yeah

   25. SPShaan Puri14:18

       ... give us a sense. So revenue was about X, and then what was-

   26. MBMehtab Bhogal14:21

       Yeah

   27. SPShaan Puri14:21

       ... the distress? Wh- why was it distressed? They had too much inventory, they had a debt problem? What was the problem?

   28. MBMehtab Bhogal14:26

       I would say it was more of a case of really bad margins. Um, and there was a clear case to improve those margins. They were so just originally a drop shipper, they're doing like 6 million a year. This is one of our first deals, so they're very small. They're only doing 6 million a year. Um, and I'd say market for that, for valuation, like the growth equity side would've been like 10, 15 million as far as valuation back then. Um, we got in at like one, and then the company paid us a royalty until we were paid back in full on that initial cash investment. And then there's a few other kind of structural things going in, but we got involved, and we helped boot up their initial ops.

   29. SPShaan Puri15:00

       But, but why, why would a company like that sell for $1 million? I think that's... I think if I'm listening, that's my question, right? Like-

   30. MBMehtab Bhogal15:07

       Yeah. No, totally
3. 18:50 – 23:50

   Josh's Frogs

   1. MBMehtab Bhogal18:50

      he's been doing this for 15, 20 years, and, uh, he's... he still loves frogs.

   2. SPSam Parr18:54

      And frogs basically-

   3. SPShaan Puri18:55

      By the way, Sam, do you know the price of a frog?

   4. SPSam Parr18:57

      I'm looking-

   5. SPShaan Puri18:57

      Do you know what frogs are going for? [laughs]

   6. SPSam Parr18:58

      Dude, I'm looking at it, I'm looking at it now. I would've thought, like... So you can buy a chicken at Tractor, uh, Tractor Supply for, like, five bucks, like a chick, or-

   7. SPShaan Puri19:06

      Yeah

   8. SPSam Parr19:06

      ... frogs are way more expensive.

   9. SPShaan Puri19:08

      This is a $60 frog.

   10. MBMehtab Bhogal19:09

       And they're not delicious.

   11. SPShaan Puri19:09

       [laughs]

   12. SPSam Parr19:11

       Yeah, I mean, they're, the frogs here ran- the most expensive one is $400. It looks like the average one is, like, 60 to 100 bucks for a frog. They're-

   13. SPShaan Puri19:18

       These are pe-

   14. SPSam Parr19:19

       They're beautiful, but, like, you know, I don't-

   15. SPShaan Puri19:21

       These are for pets? Like, people want a pet frog, so they go buy-

   16. MBMehtab Bhogal19:23

       Oh, totally. Yeah

   17. SPShaan Puri19:24

       ... this, this, uh, $60 black poisonous dart frog? All right. That's fair enough. Uh-

   18. MBMehtab Bhogal19:28

       Later on you, you guys should watch the, uh, tour of his facilities. It's really cool.

   19. SPShaan Puri19:32

       And so you like this business because what?

   20. MBMehtab Bhogal19:36

       Um, so what I, what I really like is the steep ops moat. So no one else, your typical e-commerce guy, is not gonna go out and boot up a frog operation, right? Um, it, it's just too intense for them. They don't really like physical things where you have to show up. A lot of guys just use 3PLs, and it requires a lot of specialized knowledge. At the same time, you know that someone overseas is not gonna undercut you, and it doesn't become a race to the bottom with commoditized products, because you, you can't really ship a live frog from China or directly overseas to the US. It's just not viable.

   21. SPShaan Puri20:04

       Thank God.

   22. MBMehtab Bhogal20:05

       So with that, there's a very strong operating moat, and you're only really competing against other companies in the US, right? So your-

   23. SPShaan Puri20:12

       Yeah

   24. MBMehtab Bhogal20:12

       ... your c- cost per acquisition stays the same.

   25. SPShaan Puri20:14

       So he- he's competing against, like, only people weirder than himself, which is-

   26. MBMehtab Bhogal20:17

       Yeah, exactly

   27. SPShaan Puri20:18

       ... only gonna be like three other dudes in the country. [laughs]

   28. MBMehtab Bhogal20:19

       Yeah, your CPA, your C- your cost per acquisition of customers stays consistent. Doesn't really spike the way you see it spike in other, um, you know, spaces with B2C.

   29. SPShaan Puri20:27

       Josh's Frogs, Jack's Frogs, Sam's Frogs, and, [laughs] you know, H- Herbert's Frogs. Those are the... [laughs] That's the fr- the big four in the frog industry. [laughs]

   30. SPSam Parr20:36

       If you're Josh, if you're Josh, if you're Josh from Josh's Frogs, what, what would you sell this business for? Or, like, what would be the threshold of, "Okay, this is interesting. I'll take the offer," or, "I'll maybe take the offer"?
4. 23:50 – 28:40

   Fast Growing Trees

   1. MBMehtab Bhogal23:50

      Sam, when the company was being sold six or seven years ago, and I think it went for between 100 million to 120 million, and it looks like they've grown quite a bit since then. I wouldn't be surprised if they're worth closer to double that now, just with their website rehaul, et cetera. They had a very, like, early 2000s site before.

   2. SPShaan Puri24:04

      Dude, their traffic estimate shows it went from... It's, like, at almost three million uniques a month. That's pretty crazy for a-

   3. MBMehtab Bhogal24:11

      Yeah

   4. SPShaan Puri24:11

      ... free website.

   5. SPSam Parr24:12

      Their website says-

   6. MBMehtab Bhogal24:13

      It's so cool

   7. SPSam Parr24:14

      ... uh, flower... So here's their H1. "Flowering trees are it." You'd hate to miss out on the hottest trees of the season, wouldn't you? Shop now. Over 1.5 million happy customers. And so what you see is, I don't know what type of tree this is, but it's like a grown tree that's purple. It, it does look beautiful. It looks... It's a beautiful tree, and, uh, I just think it's hilarious. You'd, uh, you'd hate to miss out-

   8. SPShaan Puri24:37

      Flowering trees

   9. SPSam Parr24:37

      ... on the hottest [laughs]

   10. SPShaan Puri24:39

       Flowering trees are it. That's like, you know, like the, like Gen Z people are like, "He is him."

   11. SPSam Parr24:44

       [laughs]

   12. SPShaan Puri24:44

       "She is her." Have you seen this, [laughs] like this trend? [laughs] The flow- trees are it. [laughs]

   13. SPSam Parr24:51

       This is awesome.

   14. MBMehtab Bhogal24:51

       Yeah, I mean, it's, it's a really defensible business. It's cool. Um, it kind of... No, no one real- would really expect something like that to be that large, right? Um-

   15. SPSam Parr24:58

       And so what do you buy? You buy a tree that's mostly grown already, and then they come and plant it?

   16. MBMehtab Bhogal25:03

       Uh, I think you plant it. I think it shows up, and then you plant it-

   17. SPSam Parr25:06

       Oh my God

   18. MBMehtab Bhogal25:06

       ... in your property. So if you want, if you want a tree to like, uh, for more privacy, say, privacy hedges or something similar, or just trees in general, this is where you go-

   19. SPSam Parr25:14

       How much revenue do you think they do?

   20. MBMehtab Bhogal25:15

       ... get, get your fix. Um, I have no clue now. Again, I'd be really surprised if it was less than 100 million.

   21. SPSam Parr25:21

       In revenue? This is crazy.

   22. MBMehtab Bhogal25:23

       Yeah, I'd say probably closer to, like, 150.

   23. SPSam Parr25:25

       And what type of pro- what about, uh, net margins would this be? Or net income or EBITDA?

   24. MBMehtab Bhogal25:31

       Uh, I'd be really surprised if it was below 20%. Probably closer to 20, 25.

   25. SPSam Parr25:36

       This is crazy. And they probably don't-

   26. MBMehtab Bhogal25:37

       I-

   27. SPSam Parr25:38

       ... uh, they probably aren't buying too many ads. I, I... They had a couple Google ads, but, like, it seems... I bet you this is a type of company that they... I mean, they called their company Fast Growing Trees for a reason. I, I imagine that was a search thing.

   28. MBMehtab Bhogal25:49

       Yeah. Yeah, it's an older company. It's been around for a while, um, under a few different owners. I think a private equity firm owns it now.

   29. SPShaan Puri25:56

       Man, who would've thought that, like, you know, when the internet came out, it's like, yeah, people are gonna be able to, like, buy things online. It's like, there's some guy out there who's like, "They'll buy trees online." [laughs] It's like, uh, "No, no. No way. No way. Why would I buy a tree online?" [laughs] That sounds like the most far-fetched thing, and then here we are, $100 million selling fast-growing trees online. You could buy this, by the way. Look at this Italian Cypress. It's like this-

   30. MBMehtab Bhogal26:21

       That'd be perfect for the Airbnb, Sam
5. 28:40 – 30:50

   What is your differentiator?

   1. SPSam Parr28:40

      particularly things that people don't think are true? Like, for example, like, in the cool kids circle and when you're 22, you wanna create, like, you know, cool shit that Gen Z-

   2. MBMehtab Bhogal28:49

      Right

   3. SPSam Parr28:49

      ... buys. Your... None of... Nothing that you've mentioned fits in that category.

   4. MBMehtab Bhogal28:54

      Right. For us, what we found is the most consistent moat, and some people are, are different, right? This is just the moat that's worked for us, is that operating moat. So anything that requires physical manufacturing, it has good reason for the manufacturing to be in the US or Mexico, is great. Um, and we found that, like, I'm not sure if you guys are familiar with lean manufacturing. Um, it's just, like, a philosophy behind, I guess, running a manufacturing operation.

   5. SPShaan Puri29:16

      Like a Toyota thing, right?

   6. MBMehtab Bhogal29:17

      Yeah, exactly. It, it ports over very cleanly from company to company, but marketing does not, right? What worked with your paid ads for a company with, let's say, low AOV, but really fast consideration period. So, you know, something like clothing. I see clothing, I buy it. It's very simple compared to the marketing side for something with a long consideration period. That's very different, different teams, totally different strategy. Nothing will really carry over cleanly, but on the manufacturing end, it cl- it carries over cleanly company to company to company. Um, so for us, that's, that's our favorite moat.

   7. SPSam Parr29:46

      So to, to summarize, you, you want a low consideration period, and you want something that can be made in America because it has some type of manufacturing moat. Anything else?

   8. MBMehtab Bhogal29:56

      Well-

   9. SPSam Parr29:56

      Sorry

   10. MBMehtab Bhogal29:56

       ... we, we don't actually care about the consideration period. Um, I think it's just, like, a natural challenge in any vertical that you get into, right? Um, if, if, if that's there. But for us, we only really care about the manufacturing end now, and then obviously the way we enter the deal is really important, too. Um, and that just... You know, if you pay next to nothing for something, the odds of making it work and making money on it are much, much higher than if you overpay on entry.

   11. SPSam Parr30:19

       I wanna talk about, uh, this agency stuff because, you know, the interesting thing about, you know, people like you in the D2C world is they're oftentimes really, really good at acquiring customers because it's-

   12. MBMehtab Bhogal30:31

       Right

   13. SPSam Parr30:31

       ... kinda like, like the D2C folks oftentimes are pretty good now. Before, it was the gaming companies. So like if you met someone from-

   14. MBMehtab Bhogal30:37

       Right

   15. SPSam Parr30:37

       ... a gaming company or from the ad tech world-

   16. MBMehtab Bhogal30:40

       Totally

   17. SPSam Parr30:40

       ... like that meant that their internet marketing chops were like pretty good. Now that, uh, D2C, or now that Facebook is harder to buy ads on, the people who are succeeding oftentimes are

6. 30:50 – 1:00:00

   Hiring Agencies

   1. SPSam Parr30:50

      quite good at that. And Shaan and I have a bunch of friends who are starting recruiting companies, and-

   2. MBMehtab Bhogal30:56

      Right

   3. SPSam Parr30:56

      ... which is, uh, really interesting because recruiting companies isn't new, outsourcing isn't new, but people are putting-

   4. MBMehtab Bhogal31:03

      No

   5. SPSam Parr31:03

      ... sexy new packaging on it, and I guess w- from what I'm guessing, because you have it on here, is they're doing a really good job, or historically they've done a poor job of acquiring customers, and you wanna apply that to that space. Is that right?

   6. MBMehtab Bhogal31:16

      Yeah, I just think it's a really interesting space in general. But, uh, I, I think some of these agencies are really heavily focused on, say, the Philippines or other countries in Southeast Asia. Um, we've noticed there's a lot higher quality talent in places like Mexico, and you don't lose... The same negatives associated with hiring in the Philippines are not there in Mexico. So for example, you could build an office out there and fly out and be there in person in a few hours-

   7. SPSam Parr31:39

      Yeah

   8. MBMehtab Bhogal31:39

      ... if you live in Texas, right? And the wage disparity's not as high as you would think for really, really good talent. You're only paying, uh, this is a large number, but, you know, it's not actually that bad, uh, 30% more than you would be for someone who's great in the Philippines. Maybe 40% more in Mexico. But again, you can visit them in person, which is really big. You can have them fly out. And again, it's big for us because we do a lot of manufacturing, right? So they can actually understand the product or interact with the team in person, so your retention goes up. The quality of work is much higher. And we've found the quality of applicants is much, much higher in Mexico, too. Um, so if I did start an agency, it would be focused on solely talent in Mexico. And, um, uh, just for, for example, when we're hiring a customer service role, like an area manager or director, um, we're getting people who used to head up Uline. Are you guys familiar with Uline?

   9. SPSam Parr32:26

      I just use it to buy, like, boxes.

   10. MBMehtab Bhogal32:29

       Yeah.

   11. SPShaan Puri32:29

       Yeah, we-

   12. MBMehtab Bhogal32:29

       Yeah, yeah

   13. SPShaan Puri32:29

       ... we use it a ton for, like, the, when we had our, our warehouse.

   14. MBMehtab Bhogal32:33

       Yeah, so their customer service is awesome, but we got one of their former directors, and his salary ask was really reasonable. It was like, I think $5,000 a month, but his talent was the equivalent of someone who's $200,000 in the US. [upbeat music] I can't find this client info.

   15. SPSpeaker32:47

       Have you heard of HubSpot? HubSpot is a CRM platform, so it shares its data across every application. Every team can stay aligned. No out-of-sync spreadsheets or dueling databases. HubSpot, grow better.

   16. SPShaan Puri33:01

       Yeah, the, uh, you have one agency idea on here that I think is a, is a no-brainer-

   17. MBMehtab Bhogal33:05

       Ah

   18. SPShaan Puri33:05

       ... which is site speed, so-

   19. MBMehtab Bhogal33:07

       Yes

   20. SPShaan Puri33:07

       ... we have this problem with our store, but I think everybody ha- everybody has this problem. Like, uh-

   21. MBMehtab Bhogal33:11

       Yep

   22. SPShaan Puri33:11

       ... basically, if you're selling something on the internet, one of the easiest levers or the biggest levers you have is your site speed. Because if you have a slow-loading thing, you're just gonna lose traffic. You're gonna lose customers, um-

   23. MBMehtab Bhogal33:24

       Totally

   24. SPShaan Puri33:24

       ... as you have a slow-loading page. You're also gonna g- suffer in terms of your Google rank because Google takes into account your, your page speed as well. And it's really easy in the e-com space to have slow pages because what happens is you start with a Shopify store. You install 15 plugins just to get your, your Shopify store to do anything 'cause, like, you, you can't basically run a Shopify store just out of the box. You have to... You're gonna end up installing a bunch of apps, and each app injects a bunch of code into your page. And even if you delete the app, the code stays. You, there's no-

   25. MBMehtab Bhogal33:55

       Yeah

   26. SPShaan Puri33:55

       ... like, you have to, like, manually clean that up, which is kind of insane and probably a business of its own. But basically, site speed is a problem that we... I think we've hired three different folks to try to fix our site speed, and all of them, I'm like, they claim to do something. I have no idea really if they're, if they're doing a great job or not. Um, I don't think that they are because the next guy comes in and says, "Oh man, your site speed sucks. Let me fix it."

   27. MBMehtab Bhogal34:16

       [laughs]

   28. SPShaan Puri34:17

       So, um, so I think this is a, this is a, a, a product that I wish existed and I think could clean up because it's a, it's clearly accretive to the person. But explain your thinking on it. What did I miss?

   29. MBMehtab Bhogal34:28

       Yeah. Um, so it doesn't really require much in terms of dev skill. It's not like you don't have to be great, uh, at the dev end to actually do most of these changes, and it's almost like a checklist that's very portable company to company to company. It applies very cleanly. Um, so for example, changing the order in which your pixels fire for Google Analytics, Facebook ads, et cetera, you can delay some of those very slightly and dramatically increase site speed, and it won't really hurt the business that much.

   30. SPShaan Puri34:52

       Right.
7. 1:00:00 – 1:14:16

   Oprah

   1. SPSam Parr1:00:00

      Yeah, it works. Um, Mehtab, you, I'm looking to you on Twitter. You have 5,000 followers. I think that being popular on social media doesn't really matter in most all of business. It, it, in fact, sometimes it's, like, negatively correlated to how popular you are. But in your case, I, at least I know with Andrew, like, when he's buying a lot of companies-

   2. MBMehtab Bhogal1:00:19

      Mm-hmm

   3. SPSam Parr1:00:19

      ... having some, um, like, you know, it's basically being on Twitter is a billboard for him, so when he reaches out to someone-

   4. MBMehtab Bhogal1:00:24

      Right

   5. SPSam Parr1:00:24

      ... they're like, "Oh, you know, I think I've heard of you. Fine, let's have a conversation." For how good it seems like you're doing and how smart you are, your, um, your social presence is significantly smaller. Is there a reason f- uh, for that?

   6. MBMehtab Bhogal1:00:37

      No, I just don't really like it. Um, I, I just like to post content about stuff that I actually care about. Um, and I'm fairly open. And then I guess, too, on the distressed side when you're buying a business, they're more of a forced seller, right? Um, and when you're talking to a lot of these senior lenders who you're working with, it's a lot of guys that are in their 50s or 60s and they're very conservative, traditional, um, like, banker types, right? They're not... They don't really care about social media or anything like that, so. I mean, I'm sure it does help with deal flow on the growth equity side or buying healthy businesses, but, um, I've just never really been into it.

   7. SPSam Parr1:01:10

      Yeah, I mean, you have, you have... You do tweet interesting stuff. It looks like... What's a Daniel Roth watch? It looks like a pretty fancy, fancy watch that you just bought.

   8. MBMehtab Bhogal1:01:16

      Oh, I'm just, I'm just a nerd about, like, neo-vintage and vintage watches, and then as well as some newer brands, but mostly smaller ones. Um, it's just kind of... It's... A lot of it's, like, angel investing. It... Like, if you buy into an early independent brand, um, which is just, like, a watchmaker basically going at it, sometimes they can appreciate in value significantly, and you get a pretty cool watch for the money, plus you support a small business. They'll build you whatever you want, so it's like a win-win.

   9. SPSam Parr1:01:41

      Yeah, your, your social media's actually pretty cool. I'm gonna follow you, but you have some interesting stuff. But, like, compared to some of the stuff you're doing, I know a whole lot of people in the D2C space that are significantly bigger than you-

   10. MBMehtab Bhogal1:01:52

       Totally

   11. SPSam Parr1:01:52

       ... and are much more of a little pipsqueak, and don't ever walk the walk-

   12. MBMehtab Bhogal1:01:57

       [laughs]

   13. SPSam Parr1:01:57

       ... like you, like you are, you know what I'm saying?

   14. MBMehtab Bhogal1:01:59

       Yeah, yeah. No, I know what you mean.

   15. SPShaan Puri1:02:01

       L- uh, leave us with this example of this Weight Watchers thing. So, uh, explain, explain what happened with Weight Watch- Weight Watchers, then we'll, we'll wrap it up from there.

   16. MBMehtab Bhogal1:02:08

       So super high level, Weight Watchers was not doing so well, and this guy, this tiny firm, not, not super small, but relatively small, he convinced Oprah to join them, and they absolutely crush it. That's the very high level overview-

   17. SPShaan Puri1:02:21

       [laughs]

   18. MBMehtab Bhogal1:02:21

       ... of what he did.

   19. SPShaan Puri1:02:22

       And so this guy... Uh, what, what, what were, like, what were the numbers? So they, what did they buy it for roughly-

   20. MBMehtab Bhogal1:02:26

       I'd have to pull it up

   21. SPShaan Puri1:02:27

       ... and then what, what does it turn out?

   22. MBMehtab Bhogal1:02:28

       I, I, I'd have to pull it up.

   23. SPShaan Puri1:02:29

       Okay.

   24. MBMehtab Bhogal1:02:29

       Um...

   25. SPShaan Puri1:02:30

       So how did this guy know Oprah, by the way? That sounds like, you know... Oh, s- simple. He got Oprah on board. That, that sound... doesn't sound that easy.

   26. SPSam Parr1:02:36

       Yeah, 2015 Oprah is, uh, was a big deal.

   27. SPShaan Puri1:02:39

       That's peak... Yeah, that's-

   28. SPSam Parr1:02:40

       That's peak Oprah

   29. SPShaan Puri1:02:41

       ... [laughs] that's like 2012, 2012 Obama, like, you know? [laughs]

   30. SPSam Parr1:02:43

       Yeah. That's peak Oprah.

Episode duration: 1:14:16