PODCASTS / E54
SEPTEMBER 15, 2021
Let me tell you about a recent client experience, a breakthrough really.
It’s a bit of an edge case, yes, but it lives on a common continuum of error in launching cash-intensive CPG startups. It’s just very extreme.
This client was a foreign client (not on my website’s testimonials section, so don’t bother looking). They had a base business that gave them unique access to a magical ingredient already known in the U.S. They wanted to sell value-added products from this supply chain under a cool, upmarket brand.
Great. Supply chain becomes one of their key weapons. It will allow them to relax pricing earlier than almost any of their competitors.
However, they made the mistake of entering the U.S. tentatively as a remote control operation. They described their original belief as follows: “Once there is traction in the U.S., we will invest more and set up HQ.”
That approach did not go well.
The importer, poor guy, had no earthly idea how to support a fast-growth curve. 90% of his clients are just specialty food purveyors from Europe who simply want to shove a catalogue of hot sellers in Italy or France into the U.S. and get their fair, lazy share of U.S. market share. Most food exporters don’t care much about rapid growth. Come on. Have you been to the Fancy Food show, vale of non-ambition that it is? The importers there just want stable and reliable USD earnings in large part.
And for the exporter, this is almost always accomplished by spraying the product into 3-5,000 natural/specialty outlets instantly, letting the wave crest and monetizing the baseline results for years.
The approach is completely remote control – just contact a master importer who brokers their way into the stores haphazardly and even dumps product at Big Lots if it’s about to expire, so you don’t lose money on unsold inventory.
And importers, just like most brokers, love clients with a big catalogue of stuff to pitch. The more UPCs to pitch, the more opportunities to hear a casual ‘yes’ and get your client’s case volume up. All of this works against strategic selling and against saying ‘no’ to accounts misaligned to your offering.
In this highly remote-control approach, the founder basically becomes a glorified laptop administrator. They spend their time checking in on brokers, who manage distributors who service retail merchandisers.
And you can hear in my description how completely remote they are from the buyer in this narration?
If you’re cringing as you listen to this story, you have the right emotional response.
You’re cringing because remote control operations force you to work entirely through middle-persons and third parties who are vastly less-than-motivated than you, the startup founder. These middle-people are motivated for much larger companies or the high-growth companies on their client roster.
Your agencies and vendors may be more motivated than my figurative importer dude, sure, but not nearly as motivated as you. And an agency can’t throw in tons of overtime and still make money, to double-down on anything that is working. But your own employees can.
Look, if you wanted to get your spouse to fold the laundry, would you get your youngest child to ask your oldest child to ask your spouse to do it? I doubt it.
You sleep with this person, so it’s not like you have a hard time approaching them, I hope. If you’re a BDSM ‘slave,’ though you’re excused…. excused for group therapy.
Staring at your laptop and sending emails to a broker is just about the dumbest way to manage a vulnerable startup’s growth in an over-supplied market more than happy to extract fees from your mile-high pile of hope.
You need to be doing everything that requires a founder’s passion to excel at…at least early on until you can hire full-timers with almost as much passion and certainly more than your various agencies.
I’m not saying you should avoid brokers or middle-men completely. I’m saying you have to work the route-to-shelf from the buyer back as early as possible. Like now. You have nothing to lose in trying, for sure, if retail is critical to your initial growth.
And this is where hobbyists and fence-sitting founders still working their day job become the largest pool of remote control founders I encounter.
The fence-sitters are avoiding the financial risk of low or no income but they simply don’t have the time to be a passionate, high-performing founder.
Instead, you sit on the fence in your day job and remote control everything like your precious startup is just another open browser tab. THis may indeed be the smartest possible financial move for you…
…but you’re undeserving your business by delaying your ability to learn and iterate. And almost always, the assumption is that your product is basically done, so you will get very quick, Skinnypop market validation, and be able to sensibly quit your job as your baby explodes into topline glory.
Gimme a break. That basically never happens statistically. 99% of founders have an imperfect product that needs market learnings to fine tune and all this takes a lot of time and attention.
just like my foreign client who more or less had to be remote control initially….until I got a hold of the data on their first 18 months in market…ouch, cringe, yikes, ooh,
In the case of the affluent fence-sitter with a cushy day job, you haven’t committed to putting your current lifestyle at risk. The foreign company hasn’t committed physically to being on the ground.
You need all your time, the ability to take financial risk AND physical sweat on the ground, folks.The remote control founder isn’t willing to engage with the latter variable.
Yet, there is no other way as an undercapitalized startup in Phases 1 and 2.
I had one serial founder who reacted to my suggestion that he hit every major farmer’s market every week to build early trial as follows: “Yeah, but I don’t want to do that.”
Huh? His initial success with startup #1 clearly deluded him into thinking he was above the sweat and bullshit…no, not really.
If you’ve been reading about $million dollar software apps started in someone’s spare time while working at Facebook, please stop, just stop…I don’t care if some of these anecdotes are true.
I’m not impressed by a software coder in 2008 who drank too much Rockstar, had no family, not even a pet, who busted out an app in a totally non-competitive app marketplace. Not difficult. Not impressive. No one cares. Plus, most of these guys sold $1-5M in app downloads and then watched it evaporate anyways as the pros took over.
Look, without you yourself doing the highest value, passion-dependent tasks with your time and sweat, you are doomed, whether you are fence-sitting at McKinsey or just a dude with a lot of family money.
You have only yourself to blame if your rack of vendors and agencies disappoint you. Having too much initial seed capital actually encourages this problem a lot. Could be an inheritance, a severance deal, a wife’s family money. Whatever.