hero image

Starting a Business From a Failed Startup with Matthew Berk - Honest Ecommerce Ep. 174

Berk started his career as a software engineer and considers himself a product-focused builder. 

He is the creator of the first local search engine and is the author of a wide range of patents on everything from VoIP to data mining. 

He's an equal-opportunity coffee drinker but is most fond of fresh crop Geishas from Colombia. 

As the co-founder and chief executive officer of Bean Box, a global marketplace for specialty coffees, coffee subscriptions, and coffee gifts, Matthew Berk is responsible for the development, growth, and vision of the brand. 

In This Conversation We Discuss:

  • [00:00] Intro
  • [01:12] How Matthew conceptualized Bean Box
  • [04:19] The parallels to Lean Startup principles
  • [05:08]Try things even if you get it wrong 
  • [07:11] Doing Ecom is trying to sell 2 products
  • [09:26] Focus on getting the products into people’s hands
  • [10:59] 2 areas where you could easily get lost in
  • [11:43] How to avoid “price spiraling”
  • [16:14] Competitor comparison can be pointless
  • [17:54] Sponsor: Electric Eye electriceye.io
  • [18:14] Sponsor: Mesa apps.shopify.com/mesa
  • [18:58] Sponsor: Gorgias gorgias.grsm.io/honest
  • [20:24] Sponsor: Rewind rewind.com/honestecommerce
  • [20:55] Sponsor: Klaviyo klaviyo.com/honest
  • [21:42] The ratio between capital raised and revenue generated
  • [22:47] Investing in people is a rocket fuel for business
  • [24:15] Capital can obfuscate your problems
  • [27:05] The entrepreneur’s job is prioritizing problems
  • [28:31] You don’t have to grow if you don’t want to
  • [32:09] When should you go custom
  • [37:10] Would Bean Box’s strategy 8 yrs ago work today?
  • [39:02] Where to find Bean Box

Resources:

If you’re enjoying the show, we’d love it if you left Honest Ecommerce a review on Apple Podcasts. It makes a huge impact on the success of the podcast, and we love reading every one of your reviews!

  Transcript:

Chase Clymer  

Before we get started, if you're enjoying this content, you can do us a favor by subscribing to our YouTube channel and ringing the bell.

That will let the algorithm know that you like this content and it will help us produce more.

Matthew Berk  

Getting products into customers' hands, even if you have to give it away, is absolutely critical to growing a product business.

Chase Clymer  

Welcome to Honest Ecommerce, a podcast dedicated to cutting through the BS and finding actionable advice for online store owners. I'm your host, Chase Clymer. And I believe running a direct-to-consumer brand does not have to be complicated or a guessing game. 

On this podcast, we interview founders and experts who are putting in the work and creating real results. 

I also share my own insights from running our top Shopify consultancy, Electric Eye. We cut the fluff in favor of facts to help you grow your Ecommerce business.

Let's get on with the show.

Hey everybody, welcome back to another episode of Honest Ecommerce. I'm your host, Chase Clymer. And today, we're welcoming to the show a fantastic guest. 

For the past 8 years, Matthew Berk has been slinging coffee beans on the internet subscriptions and gifts. 

So we're gonna dive into all of that. How are you doing today, Matthew?

Matthew Berk  

I'm well. Thanks for having me.

Chase Clymer  

Awesome. So as I just said, you've been doing coffee on the internet for quite some time. And you might be one of the [people] in the forefront of that. 

So tell me how you conceptualized Bean Box and where you got started way back when.

Matthew Berk  

Yeah. So rolling back 8 years ago... 

I'll just say up front, my background is in software and writing software and being a CTO and developing products. I am nowhere near a coffee expert. 

I think I've become a coffee aficionado. But we started the business out of a failed startup. And that startup was about person to person recommendations. 

It just wasn't growing fast enough and we thought, "Alright, we need to pivot really quickly."

And we looked at our data. And we saw all the things you'd expect: People exchanging recommendations around where to eat, or books to read, or movies to watch, or products to buy... And there was this weird little peak around coffee. 

Coffee brands, coffee equipment, types of coffee... And we thought "Coffee? What are you talking about?" We drink coffee all the time. Whenever we talk to a potential user, we want to do a user interview, we treat them to coffee.

And we thought, "Oh, maybe there's something here." We're in Seattle and we're sort of surrounded by this coffee culture. And the more we looked into it, the more we realized that we were coffee lovers, we just didn't know it. 

We would go to the local Starbucks and get whatever they gave us. And at the time, we were working in a tiny little office in a little neighborhood and they had a roaster with a cafe. And the coffee was just different there. It was great. 

And so we realized we were sort of surrounded by this coffee culture, and that there was a really great appetite for folks having better coffee, ever better coffee. 8 years later, that's more true than it certainly was then. 

And so we said, "You know what, let's pivot our business. We're good at building products. We're good at building software." There's something here around coffee. 

And what we learned is that there's this big appetite to have better coffee, not just in the cafe, but at home. And so we built a business around that. Our products are around helping people taste and experience better coffees at home. 

And we started building an Ecommerce platform. We built the bulk of it, for what it was back then, in a weekend, and we launched it. And out of nowhere, we had people buying coffee. 

And the amazing thing is when we went to our coffee roasting partners and told them what we were doing, they said, "Uh, yeah. You guys... Don't you know that you can't sell coffee online? You can sell coffee in a cafe in a supermarket, but no one's gonna buy it." 

And 8 years later, that pivoted business is going really strong. And as I said, people, now more than ever after spending 2 years holed up at home, they want to have a better coffee experience at home and our products are built to do that.

Chase Clymer  

Absolutely. It's interesting that you built this on the back of a failed startup. Was that pivot... 

As you were talking about that it made me think of The Lean Startup. Are you a fan of that mentality in that book?

Matthew Berk  

Yes. Yes. Absolutely. We're big fans of timeboxing, effort boxing, thin slicing, getting data really quickly, error by action as opposed to inaction... 

And so I think we have a culture around "Just try it. Just get it done. Just get it out there. Because at a minimum, you're going to learn, even if it's not perfect." 

And we've always tried to operate that way.

Chase Clymer  

Absolutely. I think that just analysis paralysis and just being indecisive is probably more detrimental to most [entrepreneur's] journeys than just making the wrong choice.

Matthew Berk  

Yeah. Sometimes you'll make the wrong choice, but you're going to learn, you're really going to learn from it. So we have a great example. 

And maybe this is getting too deep, too quickly. But a year and a half ago, we were... 

So we have these seasonal peaks for holidays, because people love buying coffee as a gift. And the calendar pushed us past the time when we'd be able to ship products to people for a gift. 

And so we said, "Well, people should just be able to buy a gift." And the recipient, instead of getting the gift in the mail, they get a... "It's an E-gift." And lots of platforms have this but it was new to us. 

And so we said, "Well, we have 3 days left before the holiday. Let's  hack something together real quick and put it out there and see if anybody actually uses it." And out of nowhere, we said "These are the minimum requirements." 

We had it up very, very quickly. And sure enough, over those 3 days, 20% of all of our sales went to those E-gifts. And the implementation... 

We didn't have the right emails going out. It wasn't really connected to the core of our platform. But we filled in those blanks over time. And now people buying E-gifts is just a standard part of what we do. But it's that... 

You have to try. And even if you get it wrong or it's not complete, you will learn. And that'll tell you, should you keep a feature on? Should you invest more in it? And we just keep doing that over and over and over again.

Chase Clymer  

Absolutely. So you... I know you danced through some part of that story. So I really want to drill down. So you identified... You think there's a market here from a failed startup. 

And then you guys go all in on, "Let's sell coffee on the internet." And you build an MVP over a hackathon over a weekend, right? 

From there to actually selling things, is there something going on there? So how did you guys find those first initial customers? And then I'll just... 

Immediately, the second follow up question would be, do you think you could still do that same strategy today?

Matthew Berk  

Oh. 100%. I think that strategy is always open. And we erred more towards like, Let's think about Ecommerce for a second. 

There are really 2 products that you have to think about. One is the digital product, which is how you sell and how that feels to a customer --What is their experience? What is their journey?-- and the second is the product that you deliver to them. 

And we've actually always erred on the side of "We have a much better product than sort of a digital experience." I think the digital experience is catching up. 

But when you do Ecommerce, those are the 2 things that you're concerned with: What's the user experience on your site? First experience through to conversion through to account management, that's bundle A. 

And then bundle B is "We've got a coffee product. And that's a physical product. And how do we ship that? And how does it arrive? And how do you open the box? And what's in the box?.." And all that stuff. 

I think for us to jumpstart it, there were 2 things that really helped. 

Number 1, we sent free products everywhere we could. So we sent it to journalists that we knew, we sent it to friends, we send it to people we knew on the East Coast, --they were like, "Oh, Seattle Coffee is special." -- and so we seeded a very small portion of the market with our physical product. And that I think really, really helped.

I think the second thing that helped us, we turned it on in September. That was our first shipment ever. 

And by the time we got to December, we were in a gifting season. And so we went from about 80 products shipped in September to, I think, it was about 800 in December. 

And so we timed the launch with a sort of natural buying period. So those two things I think helped kickstart it. Again, number 1 is getting products in people's hands and we got tons of feedback from that. 

And people started to be aware of word of mouth and that helped. And then the second is we timed it coincident with a gifting season where we knew there would be demand for gifts. 

And we could step in and help them jump start the business that way.

Chase Clymer  

So I fully agree, I think product seeding is a fantastic strategy that I don't think will ever not work. I don't think that that one will ever go away.

Matthew Berk  

Yeah. Just to add to that, I know tons of folks who are just starting their entrepreneurial career. And it's not a question of analysis paralysis, but they're so well-intentioned around having a great product that often…

They have the sort of core of their product. Let's say it's a food product. And rather than take the core of that and... Forget about the packaging, the branding, the labels, how you describe it, where you sell it, how you... They just need to get that product in people's hands... 

And I think many entrepreneurs, they forget that and they focus on: "What's the perfect packaging? And how are we going to distribute them? What's the right amount?.." And you can really get lost in that. 

And as we've developed new products, we've always said, "Let's just get this out into people's hands. And they're going to tell us whether or not it works. Whether or not they want it, whether there's sort of an appetite there..." 

But getting products into customers' hands, even if you have to give it away, is absolutely critical to growing a product business.

Chase Clymer  

You are 100% correct. Obviously, when you launch your product, you want it to be great. 

But when you're in that phase, where you're honestly just trying to find product-market fit, and find things to improve, that's the time where you can kind of put a --not half-assed effort-- but like... 

It doesn't have to be fully fleshed out. You just need to get feedback. Because you're so close to it, that you can't really see what's going on anymore. 

And you need that outside opinion. And it can't be your mom or your dad or your girlfriend or your brother. It's got to be a stranger.

Matthew Berk  

Yes. And I think 2 areas where it's very easy to get lost are packaging and branding. 

Chase Clymer  

Yeah.

Matthew Berk  

If the core of your product experience is what people want, they'll tell you. And even if it comes in... Even if you have to hand it to them, it can come in the worst possible packaging. And you can just develop that over time. 

The same thing with your branding. You can develop that over time. Brand is as brand does. And it takes a long time to figure out what that is. 

But it's easy to get lost in that work. And thankfully, we just... 

As I said, we erred on the side of like, "We've got a product. Let's get it out there really quickly. And we'll figure it out afterwards."

Chase Clymer  

Absolutely. So within your interview questionnaire that most guests fill out, --for those that want to know the secret behind the sauce here-- you mentioned a phrase that I actually had not heard before. 

So I want to understand this. You mentioned that you could discuss how to avoid “price spiraling”. What is that? Because I'm not aware of that term. But I think it'd be a fun conversation. 

Matthew Berk  

Yeah. So this happens in the life of every startup where they have... They have a product, and maybe they have... 

Maybe they don't know who their competitors are or it takes a while before they have enough penetration to see competitors in the market. 

And what happens very quickly is that you start doing point-by-point comparisons. And those very quickly go from the difficult stuff; "This is where they source their coffee or this is how they package their coffee." or all of the hard stuff. 

It goes very quickly to like, "Oh well, they're offering it for $8.99. And ours is $22.99. And so how can we expect to convert someone if our price is higher? So let's drop our price to match theirs." 

And sure enough, they're watching you and they're like, "Oh, you know what? Well, maybe for a first box on a subscription, we're gonna drop our price too." And there's a temptation to…

I call it price spiraling. But it's essentially looking at your competitors and trying to play a "Who can sell for a lower price" game as a key to either upping volume, upping conversion, and/or both. And so one thing that was very, very hard for us... 

When you're young and you're growing as a company, you just want volume. And you... 

Time is very expensive and very risky. And so I think the temptation is to drop your prices, so that you get more. And I'm not saying that one-off sales, and customized offers, and discounts... I'm not saying you shouldn't ever do those. We do those all the time. 

But the core of your product has to sustain its value over time. Value is not the same thing as price. And so we... 

It took a long time to learn this lesson that where we need to focus is telling people what the value is, and communicating that, and proving it in the product. And if you do that, then you will feel comfortable coming to the market and having a higher price because it's justified. 

And we've spoken to so many people that they're like, "Whoa, Look, you can go to so and so coffee club and they're going to be less expensive. Why would they go to you?"

And you say "Okay, well, number 1, we have free shipping. We don't tack that on number 2, you get 10% back... Or 5% to 10% depending upon what you buy in Bean Box credits that you can use elsewhere." 

There are like all of these benefits and they're about half a dozen other ones. And if you hew to those benefits, then you don't have to play a price game. But the moment you play a price game, what you really do is you drop to the floor of the market. 

We never imagined this but there have been times when we've upped the price as a test to price elasticity. And as we increase the price, we actually get more demand because people see the value and they associate that with your brand. So if you're... 

If your product is a commodity product, then you can play the price game. And that's just a question of "Can you afford to play it?" 

But if you are selling a premium product, the last thing you want to do is undercut your own value by selling it for as cheap as possible just to get volume. There are other ways to get more volume that don't undercut the value of what you do. So it's a very, very complicated topic. 

But we've tried to avoid playing competitive pricing games, because our coffee is different. The way we handle it is different, the presentation is different, the benefits that accrue is... 

They're all different from our competitors. And so we want to play the game of proving our value to a customer with every shipment as opposed to saying, "You know what, we're the cheapest." 

And if we wanted to be the cheapest, we wouldn't be selling online. We wouldn't be sourcing coffee from 50 different roasters. We might be a roaster and bring in tons of coffee and then sell it at a grocery store. 

We don't want to be the cheapest. We want to have the highest value and best experience. And in order to do that... If you start playing the pricing game, it undercuts your brand and who you are.

Chase Clymer  

You just shared so much gold there. And I want to double down on... Any entrepreneur out there that is... There's something where you get caught up in looking at your competition. Just stop. 

You don't know their margins, you don't know their finances, you don't know if they're bootstrapped like you might be, or if they've got a backer that is willing to spend money to acquire customers at a loss. 

You don't understand their goals in business. There's so much... 

And then their product is different, their target demo is probably different. There's so much that's different between you and your competitors. 

So getting caught up and playing that comparison game, honestly, it's just a net loss. It's just not even worth your time. 

Matthew Berk  

Yeah, I think you put it very, very well, which is... We have competitors where they've raised a ton of venture, and they're going to drop the price in exchange for volume and they're gonna keep doing that all day every day, and it's not going to hurt them. 

And they're going to spend tons of money on marketing. And they have an agency and everything is slick and well produced. And we don't want to compete with that. 

We want to have the best product and service that we can provide. And if we don't get a customer because they're going to them for price reasons, maybe they're not our best customer. 

And over time, we think those customers will come back to us because of what we provide. But you're totally right. 

Don't get lost in your perception of a competitor because you don't know what's driving the behavior there. It could just be that they have a ton of capital and they need to spend it... 

Chase Clymer  

It could be a bad... They could be making bad decisions and you don't want to emulate that activity. 

Matthew Berk  

Yes, that's exactly right. 

Sponsor: Electric Eye

If you're struggling with scaling your sales, maybe Electric Eye can help. 

Our team has helped our clients generate millions of dollars in additional revenue through our unique brand scaling framework. You can learn more about our agency at electriceye.io. That's E-L-E-C-T-R-I-C-E-Y-E.io. 

Sponsor: Mesa

Mesa is the Shopify expansion pack to level up your brand. 

By turning all your internet connected apps into your business epicenter, Mesa can lighten your workload and tame the day-to-day chaos of running your store. 

Join the other successful brands that have learned how to balance clever workflows with a solid infrastructure to get more done without additional overhead. 

Whether you need to order data in Google Sheets, add products on Etsy, or get customers added to HubSpot, Mesa has you covered. 

Peace of mind is right around the corner when all your apps are working seamlessly together. 

To put it quite simply, mesa is a better way to work. 

Search Mesa --that's M-E-S-A-- in the Shopify App Store and download it today. 

Sponsor: Gorgias

Is your store holiday ready? Now is the time to make sure you and your team are prepared for the busy season ahead. 

Gorgias, an omnichannel help desk built for Ecommerce has machine learning functionality that takes the pressure off small support teams and gives them the tools to manage a large number of inquiries at scale, especially during the holiday season. 

Gorgias combines all your different communication channels like email, SMS, social media, live chat, and even phone into 1 platform and gives you an organized view of all of your customer inquiries. 

Their powerful functionality can save your support team hours per day and makes managing customer orders a breeze. 

They have allowed online merchants to close tickets faster than ever with the help of pre-written responses integrated with customer data to increase the overall efficiency of customer support.

Their built-in automations also free up time for support agents to give better answers to complex product-related questions, providing next level support, which helps increase sales, brand loyalty, and recognition. 

Eric Bandholz, the founder of Beardbrand says "We're a 7-figure business and we have, essentially, 1 person on customer support and experience. It's impossible to do it without tools like Gorgias to help us innovate." 

Learn how to level up your customer support by speaking to their team here. Visit gorgias.grsm.io/honest. That's G-O-R-G-I-A-S.G-R-S-M.I-O/H-O-N-E-S-T

Sponsor: Rewind

Our partner, Rewind, can protect your Shopify store  by automatically backing up your business critical data. 

Rewind should be the first app you install to protect your store against human error misbehaving apps or collaborators gone bad. 

It's like having your very own magic undo button.

Trusted by over 100,000 businesses from side hustles to the biggest online retailers like Knix, Paul Mitchell, and Pampers.

Best of all, visit rewind.com/honestecommerce to get your first month absolutely free. 

Sponsor: Klaviyo

Getting an online business off the ground isn't easy. 

So if you find yourself working late, tackling the to-do list that's a mile long with your 5th cup of coffee by your side, remember, great email doesn't have to be complicated. That's what Klaviyo is for. 

It's the email and SMS platform built to help Ecommerce brands earn more money by creating genuine customer relationships. 

Once you set up a free Klaviyo account, you can start sending beautiful branded messages in minutes thanks to drag and drop design templates and built-in guidance. 

And with Ecommerce specific recommendations and insights, you can keep growing your business as you go. 

Get started with a free account at klaviyo.com/honest. that's K-L-A-V-I-Y-O.COM/HONEST.  

Chase Clymer  

Talking about fundraising, and capital, and bootstrapping, I know that you've got some opinions on that. So what can you share with our listeners around that?

Matthew Berk  

Yeah. We haven't really taken any venture. So 8 years in a row, we've raised a total of about 6 million. That's all from local angels, people that we know. And so we've been very conservative on fundraising. 

And we've done that mostly because one of the ratios we look at in terms of the long term health of our business is the capital raised to revenue generated ratio

And so for us, that's just shy of 5x. And what that means is that, out of that 6 or so million that we've raised over 8 years, we've generated over 30 million in revenue. 

And so that, in our opinion, is pretty capital efficient. There are companies where they might do a $15 million raise. 

But the amount of revenue generated out of that is not that much more. And so we think about, like, what's your long term capital efficiency. 

I think the other area where we've focused is trying to stay pretty lean. And for probably our first 7 years, we were very lean on people. And it wasn't until the past year that we started to invest very heavily in people who had... I call it "they had seen the movie". 

And so people who had been in similar businesses, had scaled those businesses knew what they were looking at. 

And it wasn't really until the past year that we invested really heavily in people. And that's rocket fuel for a business. 

Once you get to a place where you can start to afford those people, they can really be force multipliers in your business. But it can take a long time to get there. 

And before you get there, your best bet is to bring in people who are really smart, who will just figure stuff out. But over time, as your business enters a new lifecycle, you can start to bring in people who... 

They'll look at a problem that maybe you've had for 5 years, and they'll say, "This isn't a problem. This hasn't even started to become a problem. Have you done this thing and this thing?" 

And you say, "Well, what are those things?" 

And they'll say, "Oh, that's really easy. we'll do this. And now it's no longer a problem." 

Now your problem has moved to something bigger and more valuable. So investing in people is like... 

It's very expensive, but it's the best investment, one of the best investments you can make for your business. 

Chase Clymer  

I know that there's some listeners out there that would yell at me if I didn't ask this specific question, which is you are good at this capital multiplier, this efficiency that you're talking about. 

And so I know some people out there, it's just like, "Well, if they're that good, why aren't you taking $10 million to make it a $50 million business and just sell it?" 

Why aren't you doing that?

Matthew Berk  

That's a good question and a really difficult one. It's like, as an entrepreneur, you have to ask the question, "What is the... What's the cost of capital?" 

So how much does that cost your business and how much does it cost you personally, in terms of either ownership or control? 

And so we've always looked at it as more of less of an ownership issue and more of a control issue, which is... And we've been through this too. And it's very painful. 

Sometimes when you bring in capital, and capital ceases to be a constraint, you don't make the best decisions. 

And you might, for example, change the way you operate and say, "Oh! Look, we took $15 million and we're gonna grow our top line and everything else doesn't matter." 

Or if you start your business that way and you have a lot of capital early, capital makes problems go away, but they come back. 

So I know tons of folks who are in businesses where their margin might be 15% margin. They take a ton of capital. 

They're like, "Why would I worry about margin right now? I'm just trying to capture the market. I'm trying to cement my position in the market with the right fit. And I'm worried about the product, and growing my customer base, and all of that stuff." which is great. 

But at some point, their P&L and their cash flow is going to look at that margin and say, "15% is not sustainable. You need to be at like 40% or more." which is hard to do in E commerce, hard to do with shipping. 

And so because capital will remove that problem from the consideration set, you will grow your business around a different assumption of where the big problems are. 

And so we've had years where we've been incredibly lean where we said, "Look, the only way we're gonna get through the year is if we focus relentlessly on margin." 

And so we've come out of that a stronger business. And so I think we've been reluctant to take big chunks of capital so far, because they make these really difficult and very important problems temporarily disappear. 

But they will come roaring back if you want to keep going and going and going. 

Chase Clymer  

Yeah, absolutely. You mentioned something about how money makes problems go away, but not necessarily at the right time. 

I had a friend of mine who basically said his startup failed because they took money and they were throwing money at problems instead of being creative and just solving the problem.

Matthew Berk  

That's a great way to put it. I just look at it this way. It's like when you're in a business, whether you’re taking venture or not, whether you have a ton of money or not, whether or not you have a great product-market fit or you're still working to create that or discover it... 

I look at it as like your business as an entrepreneur is to move the problems around. And what will happen when you solve one is another one will rear its head. And we... Because we're... 

We're manufacturers. And when you start to scale manufacturing, what you find is that you solve this problem, but it moves it over here. 

Or you solve the problem on the input but it creates a problem on the output. And so like your job as an entrepreneur is to prioritize those problems and know that when you solve one, it's going to turn into a different one.

But when you inject capital, I think the real danger is the really important problems, they cease to be on your radar, and you go and focus on…

I've been in lots of startups. Your job is to spend that money and increase the valuation and make sure you get to the next round. 

And that work is not always the same as improving your manufacturing or lowering your shipping costs or bettering your margin or going deeper on customer repurchase rates or juicing your lifetime value

Those are really, really hard things to solve. And money, money doesn't solve them at all, to your point.

Chase Clymer  

Absolutely. So I got a similar question. And maybe this is kind of an assumption on my end. It's like, there's also the whole thing that like, you don't have to make that choice. 

You don't have to grow. You own the business. And if you like the size you are and your growth rate that you're at, like that's perfectly fine. Taking on more capital means you have to grow. 

And as a founder or CEO or whatever, all of that stress is now on your shoulders and  there is such a thing as a lifestyle business where being good [is] enough. And you can focus on other things.

Matthew Berk  

Yeah. But we've learned painfully that not acting like a venture funding funded business, doesn't mean that you're a lifestyle business, which is usually deployed in the pejorative [sense].

Chase Clymer  

Yeah, I want to put it out there. I think lifestyle business is perfectly fine. And if you disagree with me, stop listening to my show. I don't care. It's fine. 

Matthew Berk  

(laughs)

Chase Clymer  

It's a perfectly valid way to live your life and to build a business that you love. Do it.

Matthew Berk  

Yeah. The thing about whether... 

You could call it a lifestyle business, but you can definitely have options on amazing, very large scale outcomes with what what looks like a lifestyle business. I think the really hard lesson is…

I think once you become a venture business, what you think is that your whole job is growth, growth, growth. But it isn't. Because growth is never enough under that model. So if you... 

And we've asked potential investors this question, "Okay, next year. If you put all this money in next year, are you going to be happy if we grow 30%?" 

“No, no. 30% is... That's... Wow.” 

"Okay, what if we grow 60%? Are you gonna be happy?" 

"Oh, I don't know about 60%?" 

"What if we grow 100%?" 

"Oh. That's good growth." 

But if we grow 250%, that's really good growth, but and the answer is growth is a proxy for your next valuation and your next round. And so your real job is to improve your valuation. 

And again, this is not the same as improving your business. It's different. 

The 2 can dovetail and coincide. But your job is not really growth. Growth is just a proxy for how you increase your valuation. 

And for us, we think about like we want to run an efficient business. We want to make sure our customers are happy. We want to make sure that we can manufacture high quality at scale. 

And those are really hard businesses and they are worth 95% of all your effort day-to-day and that remaining 5%. 

My co-founder and I go for long walks and we have really difficult conversations about "What does it mean to be capital constrained? And when should we raise more money?" 

And we do that all the time, because we look around us and that's what's in the ecosystem. Those are the competitive forces. And those are hard questions. 

But to date, we've erred on the side of little smaller, a little scrappier. And despite that, last year, we grew 60% year over year. 

And many would look at 60% and say, "That's really extreme growth." 

And others would look at it and poopoo it and say, "Oh well, this business over here, they grew 1000%." And it's all relative. 

And this is a hard lesson but it's like a personal lesson is at a certain point, you want to stop keeping score. And the only thing you want to worry about is what you do and the quality of that. 

And when you stop keeping score, I think you end up focusing on really important, really hard problems and making a ton of headway.

Chase Clymer  

Absolutely. This has been such a great episode so far. My final question for you is one that we talked about in the pre-show, which is this "build versus buy". 

And so I'm a nerd. I know the site. I believe the site's pretty custom built. I'm assuming your history in software leads you down that path. 

But do you have any opinions on when to make that decision to go fully custom and any other solutions out there in the ecosystem these days?

Matthew Berk  

Yeah. It's kind of use-case specific. So I'll give you an example like checkout. Checkout is really hard to do. Really hard. 

And the folks at Shopify, they do a great, great job of it or the other folks at Bolt, they have a great checkout experience. But it depends on your use case. 

So like if you go to a Bolt or you go to a Shopify and you're like, "Look, we sell subscriptions and individual items. And by the way, when people buy gifts, they have to be able to send it to multiple recipients. And sometimes it's dozens of recipients.” 

“And we need that support. And we need a custom promotional support, where a discount can get you a discount off the initial or it can get you a discount off the ongoing recharges, and dot dot dot dot dot..." 

And so when you start looking at those platforms as your business tries to support more and more valuable use cases, they don't always fit anymore. 

And so we took this approach from the start, which was "We're going to build our stuff until we realize it's not core to what we're doing. And then we're going to hand it off." 

And the areas that have remained core for us are we do have a custom checkout. We do have custom recharge... 

A recharge engine that we built ourselves. We have a custom catalog because the products we manage are... They're not the same as a t-shirt. 

And we manage our supply chain through all that software. But we have identified places where we add no value. A great example is shipping software. 

We had zero value trying to integrate FedEx and USPS. And we've always picked a partner there. And it's been great where we don't have to worry about writing a bunch of code. 

And they take care of the use-case completely. So for shipping, we use EasyPost. Another example is when we started, we had all these custom lifecycle flows for customers and visitors for email. 

And so we wrote all the code and who gets what email and when did they get and what happens if they convert and this and that and we realized that there are platforms that do that better. So we migrated a couple years ago to Klaviyo. 

And that puts all of this sort of power and strength in the hands of our marketing folks. And we don't have to write a lick of code to support it. It's all supported. 

And so that's an area where it's not within our wheelhouse. It doesn't add value. But when we turn to someone like Klaviyo, it adds a ton of value. And we're not writing code for the wrong reasons. 

So we try to kind of walk up a line between figuring out what's better done by a third party versus doing it in-house. And that's just how we've always operated for us. 

One of the key considerations is that planning our product, sourcing our product, receiving our product, manufacturing our product, the product catalog, how we display that, inventory, allocation, and reservation against inventory, checkout and all of its use cases, and fulfillment, and so on down the line, those are all kind of one big integrated system. 

And I know that as we grow, for example, inventory might be the next thing that we carve off and give to a third party because after a certain amount of revenue, you're not just talking about inventory, you're talking about finance. And so finance sees it a little differently than we do.

And so over time, we'll take different parts of our system and carve it out to third parties. But I think if you're just getting started, remember, Ecommerce is 2 businesses, you have a digital business, and then you have a product business. 

And so I think if you're just getting started and you want to focus on the product, you can go a really long way with something like Shopify.

And so you ever have to think about "Well, are we going to do something custom? Is it already supported? Are there like businesses doing $100 million that use that functionality? And are we going to need something different?" 

And the answer to that, if you're just getting started and focusing on the actual product, is you can probably get away with using third party stuff for a long, long time. 

Or if it's at the heart of what you do, if you want to be a technology oriented company, then it might be worth investing in it. 

But always the rule is just do the minimum required to sell your product and get it in people's hands. And then you can make decisions as you grow.

Chase Clymer  

Yeah, that was a fantastic way to put it. Was there anything I forgot to ask you that you think would resonate with our audience today?

Matthew Berk  

I would say, like you asked a really good question, “The way that you started 8 years ago, can you do that today?” 

And I think the only caveat I would add is some things are different and they're really important to note. like the tools now that are available. They're much better. And they enable much, much more than we had. 

Like if you wanted to do a referral campaign 8 years ago, you were writing some code or even the people who built businesses around referral campaigns, they were brand new. 

Similarly, Shopify was around, but it was still relatively new. 

Email providers were much more primitive than they are now. 

Sending SMS is something that we wrote code to do and respond to. And now SMS is a whole category, with companies raising hundreds of millions of dollars just for SMS functionality. So the tools now are much more powerful. 

But the flip side is that especially after 2 years in the pandemic, where everyone who had previously done only, for example, retail or wholesale or manufacturing businesses, they all got their act together. They all went online. 

And so if you looked at this Q4 holiday peak, it was the first time in a really, really long time that Ecommerce was, for lack of a better term, materially more crowded than it's ever been. 

And so I think, the pandemic has re-oriented consumers to want even more product at home. 

But it's also re-oriented companies who otherwise might not have had an online presence or sold direct-to-consumer to get into that business quickly. 

And so it is much more crowded than it has been previously. And that's that's really important to acknowledge as well,

Chase Clymer  

Absolutely. Matthew, I can't thank you enough for coming on the show. This has been an extremely valuable episode. 

Now for the listeners that are curious about the product, where should they head?

Matthew Berk  

Oh, just go to beanbox.com. And if you're a first time visitor, my guess is we'll show you a great offer either for a subscription or to just try our coffee. 

And our hope is that you bring it to your home, you brew it in the morning, you have a better morning and then a better day. And that's what we're all about. 

Chase Clymer  

Oh absolutely.

Alright. I can't thank our guests enough for coming on the show and sharing their knowledge and journey with us. 

We've got a lot to think about and potentially add into our own business. You can find all the links in the show notes. 

Make sure you head over to honestecommerce.co to check out all the other amazing content that we have. Make sure you subscribe, leave a review. 
And obviously if you're thinking about growing your business, check out our agency at electriceye.io. Until next time.