Damona Hoffman: This is the I Make A Living podcast, brought to you by FreshBooks, the number one cloud accounting solution for small business owners and their teams. I’m your host Damona Hoffman, and I’m one of you, an entrepreneur with a family. Since I am a relationship coach, Valentine’s day is basically my Super Bowl. So, to celebrate we found three couples who are partners in business and partners in life to feature over the next three episodes, in which we’ll discuss the unique challenges of working in a partnership.
Damona Hoffman: On top of that, we’ll be addressing how our business plans are often impacted by what’s happening in our relationships or our families. In fact, I started my own relationship coaching business, because I wanted to create a healthier, more balanced life for me and my daughter.
Damona Hoffman: Why do you think it’s important to take your vitamins?
Speaker 1: So you have enough calcium, enough vitamin A, B, C, D.
Speaker 2: So you don’t get sick.
Damona Hoffman: Yep, those are my kids and the vitamins they just took were made by SmartyPants. I sat down with the company’s founders, Courtney Nichols Gould, and Gordon Gould, to understand why they started their business. Previously, Courtney was the founding COO of FlyClear, that service that helps you speed through security at the airport. She was a senior executive at many tech and media companies.
Damona Hoffman: Gordon was an internet and media entrepreneur as well as the co-founder of ThisNext, a venture-backed social shopping platform. So, for both of them starting a health and wellness company was completely new territory.
Courtney: It really came about, because it’s something we care about as people, and obviously as parents, it’s a focus for us. It’s funny, tech is such a different experience. I think for me being a part of Clear, which was a fast pass for airport security, that for me was the first time I got involved in something where someone used my product and then communicated with me about it.
Courtney: Because, being in tech you don’t get that, you know what I mean? When you’re making software, you just don’t have that human exchange. That’s really when the light went on for me. That was amazing to me, that someone would write an email and say, “Now, I don’t have to add an extra hour on to my commute. I get to spend more time with my kids in the morning, because I know I’m going to get to the airport, I’m going to get through security in 30 minutes.”
Courtney: That was so cool to me. I realized that’s a pretty fundamental human experience. So, SmartyPants is not only the next evolution, in that you’re making an actual good, like a hard good, but also it’s intervening in someone’s health, right? And then, the health of their family, which as we know as parents, that’s sort of paramount.
Damona Hoffman: Let’s talk a little bit more about the business and the different iterations that you’ve been through. You started with this mission of health and wellness. I want to hear more about why SmartyPants, and how you designed your product to be in alignment with that mission?
Courtney: It’s interesting, as I said, it kind of came about organically. Gordon, I definitely did not have a plan to build a big vitamin company.
Courtney: It was, “Oh, there’s this one problem we have”, right, “which is finding something that we and our friends and our co-founders had a hard time finding, which is a vitamin”. There were vitamins that the kids would take. There were ones that were affordable, and then there were ones that used really premium nutrients that we knew were more bioavailable, but those were three different products.
Courtney: So, it was like, “Can we not just combine those things? It doesn’t seem like it should be that hard.” Turns out it’s really hard, but it shouldn’t be that hard. That’s kind of where it started. But, what happened was, when we launched the product in 2011, it was just for kids, just on Amazon. But, we all of a sudden got all these parents who wrote us saying, “I really wish you would make one for me, because now I’m stealing my kid’s vitamins.”
Courtney: That to us was the game changer. It’s kind of when we say the company came into being, which is now like the summer of 2012. Frankly, it didn’t occur to us that adults gummy vitamins would be a thing. It’s not like we were-
Damona Hoffman: Oh, I steal my kid’s vitamins all the time.
Courtney: Yeah, but you know what I mean? It’s not like we were these huge visionaries. You’re like, “Ah, I’ve got a master plan.” It was really listening to what people told us, which is like, “Oh, we have that same problem.”
Courtney: That’s when we realized, “Oh, actually the big problem applies to everybody. It’s not just for parents.” Everyone has a problem sticking with the regimen, and they’re forgetting the benefit. Could we take this same idea of making comprehensive, that’s affordable, using premium nutrients and an enjoyable experience, whether that’s a pill that actually has a nice flavor to it as well, or gummy, or whatever it might be, and now SmartyPaws, where we make them for dogs as well. But, could we extend that to everybody?
Courtney: If we could, we might be able to really move the needle in health. If we could affect not just our own customers, but then show the rest of the industry that you don’t have to compromise. There’s a way to solve this problem. Because, if we can get everyone copying what we’re doing, then you’ve really affected a huge group of people and that would be amazing. It was the same thing with Vitamin Angels and this matching grant we put in place.
Damona Hoffman: Tell me what you do with Vitamin Angels. What that is exactly?
Courtney: When we were starting the company, Blake Mycoskie had just started Tom’s, maybe a year or two earlier. I thought what he had done was quite brilliant. He built it in from day one, before he was profitable and would go to investors and say, “Look, I’ve made this commitment of a one-to-one matching.” In our world-
Damona Hoffman: Just to clarify that, you buy a shoe and he-
Courtney: He donates [crosstalk 00:05:28] a pair of shoes-
Damona Hoffman: He donates a pair of shoes to someone in need.
Courtney: Correct. In the world of vitamins, the only tweak is, you don’t necessarily want to give SmartyPants to someone in Peru, living at 14,000 feet who doesn’t have access to a varied diet, because they need more vitamin A than we need here. So, we don’t want to give them our exact product, but we do make a matching nutrient grant to give a year’s worth of nutrients to a child in need or expectant mother.
Courtney: The reality is, it’s not that expensive. I’ll do this again just to shame any potential CEOs of vitamin companies listening. You should be making matching nutrient grants for every bottle that you sell. We are a relatively small business, growing fast, but now we just… Think I passed 11 million matching grants that we’ve made, since we started the company and that is unbelievable.
Courtney: It’s so exciting to us that we could do that. It matters to all the employees here. I mean even our investors, we’ve never had an investor say, “Oh, if you cut that out, you would have gotten to profitability faster.” Never. I think they all get how important it is to everybody that works here. It just says something about the company. It helps us when things get intense, which they do. It’s an anchor for us, really.
Damona Hoffman: Yeah, you can see the big picture.
Damona Hoffman: You were talking about the different ingredients in the vitamins. I know one challenge for people who are making a product, is that sometimes availability of certain elements changes, and then you have to iterate. I was reading something about how in 2012, the vitamin E market became a little bit more challenging. Can you talk about how you navigated that and the impact that it had on your business?
Courtney: Yeah. This happens not just with vitamin E, it happens all the time, which is again something I didn’t know, having never made a thing before. That stuff runs out. As you can imagine, if you’re not one of the really big companies, you are not on the top of the list. If there’s a shortage of something like… because we tend to use these more bioavailable nutrients, so we use what are called Methylated B Vitamins. All of those things are less available than the really cheap, probably not as good for you, stuff.
Courtney: So, folic acid versus methylfolate, right? There’s a lot more folic acid out in the world, because it’s used to fortify cereals and everything else, right? For us, it was really a question, “Do we make the product with something that we don’t feel as good about, or do we take it out?” It’s a decision you’ve got about like 45 minutes to make. You’re this new start-up, and everything’s on the line, and you’ve just gotten into retail for the first time. Our answer was to really ask the community what people thought, “Hey, here…”, and by community I mean going on to social saying, “Look, we’re facing this challenge. What do people think? We feel like the right thing to do is to just not include the ingredient or we can use this less bioavailable.”
Courtney: I think that was a really important moment for us, to sort of walk the walk, and walk the walk means being transparent. We can’t always be perfect, but we always want to be upfront about where we are on our way to being as good as we can be.
Damona Hoffman: What did your audience say? What did your…?
Courtney: They said leave it in, as long as you know that it’s safe. If it’s still available, just not as bioavailable, we’d still rather get the nutrient. So, that’s what we did until we could switch back, which we did the next run.
Damona Hoffman: It seems like there’s a theme here, of listening to your customer and being able to improve your product and make products that are really serving them as opposed to… I think a lot of people come from the point of view of, “I think this is a good idea, so I’ll just put this into the world. If people don’t like it, well then they’re an idiot. That’s a great product.”
Damona Hoffman: But, you have a very different framework of taking in the feedback, and then moving your business forward off of that.
Courtney: I think if you’re in a science-based business, it’s the two. It’s like you both want to take feedback, because there’s no point in creating a perfect product that no one takes. There is a lot of that. There are a lot of really amazing products that are either too expensive, all those things I mentioned before, but no one’s taking them.
Courtney: You need to hear the feedback, because that for us is about the experience of taking it. So, how can we listen to feedback about that? That said, we’re science led. So, we know there are certain things we want to do, irrespective of what a consumer tells us.
Courtney: An individual person doesn’t know that there’s an emerging choline deficiency in the population, but we know that. So, we’re going to start introducing choline into all of our products, where we didn’t before. It’s that, it’s like the marriage of knowing when to listen and also knowing when there’s information they don’t have access to that we do. That’s our job, is to make it easy for them. It’s to demonstrate to them that we deserve their trust. So then, we can go out and do the research that they don’t have to, but end up with a product that they love taking. I think it’s really the marriage of those two things.
Damona Hoffman: You brought up the word marriage. We’re now here with your husband, Gordon. I wonder how much of that ability to listen and communicate with your customers is inspired by the way that the two of you communicate, within the business and communicate also with the rest of your team. Do you think that the fact that this is a couple-owned business has anything to do with that strategy?
Gordon Gould: For sure. I think… You can go first.
Courtney: Just demonstrating our ability to communicate. For sure. I mean, look, the advantage of it, is that we trust each other completely. So, you know that someone’s agenda is the same as your agenda, right? There’s a lot of benefit that comes from listening, but it’s also hard.
Courtney: Like we just had this, this morning. We had a lack of listening moment between the two of us, right, where we get frustrated. We have a different style of communicating. But, the difference is, what is so phenomenal about being in a business with your beloved, is that you have to communicate through it. In other words, you can’t just let it go. So, we always find a way to get through it. It’s not you listen differently at home than you do at work. You’re just a person, being a person all over the place, right?
Courtney: So, for us, I think the cool thing has just been that it’s forced us to understand that we always have to clean stuff up, you know what I mean? If we have a misunderstanding or there’s something that we’re having a hard time communicating through, it always gets cleaned up. That’s been a difference, I think in building a really strong foundation. It gives people faith in the company, that they know they’re in good hands. It’s not like… They know we know how to work together really productively. I don’t know, that would be my…
Gordon Gould: Yeah. No, I would agree with that. I mean, there’s no leaving it at the office, because the office comes home with you a lot of the times. So, that has pluses and minuses. But, it’s definitely helps force communications, issues to be worked out or addressed, however they need to be addressed. Because, otherwise you’re turning your whole life upside down, which can get really old really fast.
Gordon Gould: I think it’s not easy, but it’s a good strategy and it helps sort of accelerate the development of our personal relationship. But, I also think it helps, take Courtney’s point, about giving the company comfort that the leadership at the top is in sync and is not going to sort of try to run a coup or something like that, which happens in companies. I think it is helpful. It’s not for everyone, that’s for sure. But, yeah, it’s a positive.
Gordon Gould: It’s got positive. Sometimes, it feels like a CrossFit workout [crosstalk 00:00:13:04]. But yes, it’s a good thing.
Damona Hoffman: We’ve heard a lot about their business story, but if you’re anything like me, you also love a good love story and Courtney and Gordon’s does not disappoint.
Damona Hoffman: You started this business with the man who is now your husband.
Courtney: I did.
Damona Hoffman: But, that wasn’t always the case. When you began SmartyPants, what was your relationship at that time?
Courtney: We knew each other from the internet business in New York before. I was in L.A., and I had been talking to several different venture groups, thinking what I was going to do next, and looking for maybe my next gig as a CEO. They said, “Oh, you should talk to Gordon Gould. I think you guys would make an amazing team.” It’s so funny, because I knew him already from New York, hadn’t seen him in a long time. So, we had coffee and started talking about this idea that became SmartyPants.
Courtney: I was very lit up, kind of around the Vitamin Angels. We do a matching grant for every product that we sell and the giving back idea. I was very focused on health and wellness and he is an internet technology expert really, and also a futurist. So, we just got more and more excited about the idea.
Courtney: That is really where it started. It started as a partnership. He was separating, he got divorced from his wife. I was in a relationship with someone else, and after, I don’t know, we’d been working together maybe a year, having never been on a date, and then out of the blue…
Gordon Gould: I said, “I love you.” It was kind of like an out of the blue thing, but it was pretty clear to me. So, yeah.
Courtney: Here we are, almost-
Gordon Gould: Here we are, 10 years later.
Courtney: I know, right [crosstalk 00:14:48].
Damona Hoffman: That’s a big risk to-
Courtney: Oh, yeah.
Damona Hoffman: … take that step when you’re starting this business and you’re working long hours together, and begin a new relationship at that point when you’re also beginning a new business.
Courtney: So challenging. I think it was either going to be extremely successful or extremely unsuccessful.
Damona Hoffman: Now, are you talking about the relationship or the business?
Courtney: All of it. All of it. It’s true though, because there’s so much in the mix, and really the priority is the kids. They come first, and then our family unit, but we’re also running the business together. We had two other co-founders and we had to sit with them and talk about it. We wanted it all to be… As soon as it became clear, we kind of sat with everyone and said, “Guys, we weren’t expecting this. This is what’s happened.”
Courtney: Really, the thing that changed it for us, is we worked with a coach. So, one of our co-founders is a big coach in L.A., and we met with him twice a week, every week for like the first year and a half.
Damona Hoffman: Twice a week?
Damona Hoffman: That’s quite a commitment.
Courtney: There’s just so much to navigate though, and you’ve got to make sure you’ve got… The good news is we have very complimentary roles, right? Like I run the company on a day-to-day basis, he’s really the chief technology officer and the chief data officer. So, we’re really lucky that we’re so complimentary, both here, really, and in parenting and everything else. So-
PART 1 OF 3 ENDS [00:16:04]
Courtney: … that were so complementary both here really and in parenting and everything else. And so it worked out, but it did take a lot of work and communication. And you want to be cool in front of the person that you’re in love with, and that can be really challenging when you’ve got to have constant, intense conversations about work, right, and what’s going on. And same thing with parenting. Everyone has different parenting styles. So there was a lot to integrate, and I don’t think we frankly would have been as successful if we hadn’t done that with somebody in there helping us navigate that. And I’m really happy to say it’s worked out extremely well and we’re obviously still very much in love and our kids are great and the business is doing well. So it’s all worked out. But it took an enormous commitment and a lot of work. The first two years were so intense.
Damona Hoffman: Since you do work together, live together, you have a family at home, do you have certain rules about the place of business in your home? Do you have rules around technology coming from a tech background? What are the rules for your household?
Gordon Gould: I mean, it’s not super hard and fast, but it’s a pretty strong rule about no technology in the bedroom. I mean, there are occasional sort of breaks in that, and we try not to talk about business in the bedroom, but we talk about business in the rest of the house a lot. We also try to make sure that we have topics beyond the kids and the dogs and business to talk about because that set of topics could consume your life if you let it. So if your brain isn’t getting fed with something else in addition to that, it can get a little claustrophobic, I think.
Courtney: I think that’s a good point. Yeah. We definitely do, I think, make an effort. But SmartyPants is a creative act for us. It’s a fun thing to talk about. It can be a stressful thing to talk about. It depends on what’s happening at the company. But there’s also a lot of really cool things that we get to talk about. So we’ve never said we’ll never … We just try to not talk about it right before we go to sleep. If there’s a stressful thing happening, we just wait and talk about it in the morning because that’s not going to help anyone, right? Then we’re not sleeping basically, which is not good, but I think we’re actually pretty good. The home thing, I think we are pretty good about.
Courtney: Listen, the company was actually in our house for the first five years. We literally had nowhere to go. We had 12 people working in our little house with us every day. So I think one of the biggest changes, frankly, was just getting an actual office eventually. I mean, now we have 70 people. That would be a lot harder to do, but that made a big difference because that was a lot, because then you really feel like you never get a break, but it doesn’t feel like that now.
Gordon Gould: Yeah, I mean, and the team was great. I mean, they stayed late and then we also have people shipping things early so there would literally be people there from 6:30 in the morning until 8:00 PM at night. So there wasn’t really a lot of downtime.
Courtney: Me time, us time.
Damona Hoffman: Well, I have to ask as a health and wellness company then, how did you maintain your own sanity and your own health and wellness then and how do you do it now?
Courtney: Great question.
Gordon Gould: A lot of working out, for me, basically. So exercise is a very meditative process for me. So I focus on making sure that I get enough of that so that I can be functional for everybody else.
Courtney: Yeah, I think we know that it matters. I think that’s the key. I remember talking about this from the very beginning. It was one of the commitments even in our vows actually, that we committed to take care of ourselves for each other and our family and the business so we could be the best person that we wanted to be. And so we do. We always make time to exercise. I do meditate every morning and that has been extremely helpful to me. I’ve been doing it for 10 years or something and I do it before my feet touch the floor, because once they do, it’s like game on and kids and everything else. But I think that’s made a big difference. Frankly, having dogs also helps because-
Gordon Gould: Yeah, the dog are great.
Courtney: They are. It’s just something else, and the kids. It’s just great I think for everybody in the family. That makes a big difference. And we take care of each other. I think we have made it a priority to talk about what we bring to each other and the relationship and with the kids. So I think that we’re really fortunate. But again, this is like you’re seeing us now in our most evolved. We were always working out. But all this productive communicating and how do we take care of ourselves when we know we need to-
Gordon Gould: Snakes in a bag.
Courtney: Yeah, it’s what we call snakes in a bag when we get really mad very fast. Have you ever seen snakes in a bag?
Damona Hoffman: No.
Courtney: It’s when they fight, it’s like [inaudible 00:20:34] and then they’re fine. So you learn sort of how to do all that stuff constructively. And I think we’re very fortunate in that I think already as people we understood the idea that you cannot get something from an empty cup, and you got to take care of yourself. And being an entrepreneur is super intense. It just is. It doesn’t mean that it’s harder necessarily than something else, but it is a very specific kind of intense because there is no one to call. You are the final thing, and that is a very draining experience and it is very up and down. It’s very high, low, high, low, high, low. And I think you’ve got to recognize that so you can take care of yourself.
Damona Hoffman: I find that a lot of times for entrepreneurs, the first thing to go is the self-care, when they’re looking at their calendar and they’re like, “I have a family, I have dogs, I have this business.”
Gordon Gould: It’s a mistake. It’s not sustainable.
Damona Hoffman: How do you make it a priority other than just saying, “I’d like to exercise”?
Courtney: It’s like muscle memory. I think it’s muscle memory. Just like that, you just decide, “My life will not be the same if I don’t do this.” And I have enough experience watching the outcomes tied to when I do and do not do that that it’s developed very strong aversion. I know the price that I will pay down the road if I don’t do this today.
Damona Hoffman: Right. Is that same for you, Gordon?
Gordon Gould: Yeah. I mean, for me it’s a must have in that it is a priority because it’s kind of a gating condition for me to be able to sustain sort of high performance in other areas of my life, because otherwise I sort of feel like I’m holding my breath. So I can go for a little while, but eventually performance will degrade and I’ll be fidgety and irritable and just generally not as productive.
Damona Hoffman: Coaches have been shown to enhance your business performance. According to a study by Stanford, the ROI in coaching is seven times the initial investment. So even if you don’t think you have the money for coaching right now, that coach might even pay for itself.
Damona Hoffman: I want to talk a little bit more about the coaching process. As a coach myself, I can see the value in having a coach, but I think a lot of people, it can be a very big expense if you’re not at a place where you’re having positive cashflow.
Courtney: Cashflow. Right. Exactly.
Damona Hoffman: Can you talk about the things that you worked with your coach on and more specifics on the reason why you think having that coaching was so crucial in those years?
Courtney: It is expensive. I mean, for us, I think I was used to … I was a competitive athlete in high school and I have always had a coach. So to me, I love that relationship, the dynamic, so it was always a worthwhile investment for me. So I think just the idea of always getting better, always learning. There’s always more to learn about yourself and how you occur in the world. It’s critical as a leader and more than anything else, and as a parent frankly, that you understand what you come with so that you can compensate, find complementary strengths, all the things that I think will make you successful. So to us, it was worthwhile.
Courtney: I think there are things you can do. You could make a coach part of your advisory board and give them options so that they’re willing to maybe not get the cash that they would normally, right? So make it more affordable, or you go out and raise money. I think to an investor, it’s a pretty positive sign that you’re investing in that way. So you say, “Look, we’re raising this amount of money. I want to say that I’ve set aside $10,000 or whatever over a year so that I can meet with a coach on a weekly basis and make sure I’m doing everything I need to do to be the best leader and founder and CEO I can be.” I think most investors would find that to be a pretty positive reflection of how you go about things.
Damona Hoffman: Yeah, it’s just sometimes it’s challenging to vet the coach. There’s a lot of people out there offering different services.
Courtney: It’s so hard. Yeah.
Damona Hoffman: How do you know-
Courtney: That’s a great question.
Damona Hoffman: … who will be the right coach for you or what you actually need to focus on since coaches can focus on many different aspects of your life or your business?
Courtney: Yeah, and the word coach I think is tricky because so many people can call themselves a coach with six months experience and all of a sudden they’re an expert. So in my case it’s been one, referrals through someone I trust and know, and two, in our case, both coaches that I’ve worked with are people who’ve been doing it for 20 years, right? So there are people that have a very demonstrated, not only experience, and not just certifications because the reality is in the coaching world, people can get those certifications without necessarily having aptitude, but other kinds of training or other kinds of experience or education that clearly signals to you that they have the ability to read other people in a way that’s going to be helpful to you.
Damona Hoffman: Something that really inspired me about the SmartyPants story is that Courtney and Gordon actually invested all of their own savings into this business and ran this company out of their house. Then, on top of it all, they didn’t even take salary for several years. I had to know why.
Courtney: We went quite a few years. Basically, we used up our savings by taking no salary, either one of us, for about five years, so we went down to zero with our savings. We did. And it sounds so foolhardy when we say it out loud like that. Oh my God, what were we thinking? Really glad it worked out, Gordon.
Gordon Gould: Yeah, yeah, exactly.
Damona Hoffman: Were you just so sure at that point that you had something special?
Courtney: I think it’s more because it was every month. It’s not like we were saying, “Oh, for the next five years we’re not going to,” so you’re not making that decision for long-term. You’re saying, “Right now, are we willing to forgo this because where we are today it makes sense? Yes.” And it kept making sense and because the business kept growing and we were adding investors, I think our confidence level was increasing every year that it was going to be sustainable and also that we were going to be able to take salary at some point.
Courtney: So it is, it’s kind of like data in. Data is coming in every month on which we’re making those decisions because the retention rate, we kept customers, so we knew we were headed in the right direction. So it wasn’t a blind bet for five years we were going to take no salary. It’s like we were making that decision on a monthly basis, but we always felt comfortable making it. Does that make sense?
Damona Hoffman: Gordon, at the beginning though, you have a family, you have kids that you’re responsible for. That’s a big risk to invest your savings in a company, in an idea. So what was the calculus for you and what did you need to see from in terms of revenue or growth to be able to continue and develop?
Gordon Gould: I mean, it’s not like … We talked about it and we looked at our budget and figured out that we could afford on a monthly basis to keep the kids in school and to be able to spend time with them. I mean, look, it does sound crazy when you say in an aggregate of five years. At the time it was … how do I-
Courtney: And family help, too.
Gordon Gould: Yeah. Family help too, for sure. I mean, I think it was mostly like, Courtney and I … These were not blind decisions. Courtney and I made a family decision to move forward with this on sort of month-to-month basis. And as the business grew, it did become more obvious the equity value of the company was going to be worth a lot. And so we were fortunate and that we could do that.
Courtney: That’s right, and the kids knew.
Gordon Gould: And the kids knew.
Courtney: It was a conversation we all had as a family, like, “Hey, we’re tightening our belts. This is a commitment and investment we’re making,” but we care about kids all over the world, right? We care about you guys as customers, but we care about the donors. This is something we’re all in together. And I think they were onboard for that, too.
Gordon Gould: Yeah. And Courtney and I, it’s not our first time at the fundraising rodeo. We had confidence that our metrics were going in the right direction and that the macro trends for wellness were going in the right direction. And one of the unfortunate realities of the fundraising market at that time was that consumer package goods, physical goods, there wasn’t a very evolved angel ecosystem around it. Today, you can get funded for any wellness idea. I mean, there’s a lot of really bad ones on the market, but there’s also a lot of money out there that is willing to sort of fund people’s new product idea, physical product ideas.
Gordon Gould: But nine years ago, that was not the case. And so we would have these escalating purchase orders from retailers, which we had a high degree of confidence we were going to sell because the retailers are not in the business of taking risks from the brands. They’re only going to order what they can sell, so we knew we would sell it. But the unfortunate reality was because we elected to opt for growth as opposed to becoming profitable because we figured market share was more important than just sort of eking out small profits along the way, that it meant we had to raise equity funding to fund inventory. So whatever we could do to maintain our equity positions was worth doing.
Damona Hoffman: How did you end up raising money for SmartyPants in the initial round of funding?
Courtney: First, a lot of meetings. So we met with a lot of people who said no, which any other entrepreneur I’m sure can identify with. And then we just learned we had to talk to different people. We weren’t talking to the right people. We had to find a way to network and find some folks that really understood consumer packaged goods and would see the opportunity that way. And that’s really where it started. We happened to find one person who understood how this stuff worked and really understood our mission and appreciated the mission and gave us our first check for the baby amount of financing, and Gordon and I really bankrolled it with our own money.
Courtney: We gave up all of our savings to get it off the ground so that we could really make the first product, because in this world people do want to see it. They want to be able to taste it and say, “Okay, this is real, this is viable. I can see why people would take this product.” So we needed to raise a small amount of money to just make that first run. And then from there, it got easier to raise money. We went to Circle Up, which is a fundraising platform really focused on people and making consumer packaged goods, and so we just hustled frankly until we could find new people because those weren’t contacts that we had.
Damona Hoffman: You said something that I think will really resonate with a lot of our listeners about hearing a lot of nos, and I like to look at nos, a no to something is a yes to something else. How did you interpret those nos and how did you iterate once you were hearing the nos to be able to improve your pitch or improve the product going forward?
Courtney: Well, I like that, first of all, about the sort of as a yes to something else. That’s right. I think it’s actually a great process because it’s how you learn. You shouldn’t be afraid of the nos. That’s basically a feedback loop, right? Just like what you said. So what we would do is pick the people you probably care about the least in terms of getting a yes from to practice, right, to do the pitch. And then once you feel like you’ve really nailed it, go to the two or three people that you feel like would be the biggest home run for the …
PART 2 OF 3 ENDS [00:32:04]
Courtney: Hold it. Go to the two or three people that you feel like would be the biggest home run for the business. And I think for me, I think I was pretty well trained on the “no” part being a learning experience, and that that’s just basically how you get smarter. You just have to combine it with an enormous amount of persistence.
Courtney: But you’ve heard so many story, J.K. Rowling, all these people who all they heard was no, but they still have had incredible success. You just have to combine it, I think, with a lot of persistence.
Damona Hoffman: When we’re talking about the numbers, that’s something that creates a lot of anxiety for me, and I’m sure for a lot of entrepreneurs.
Courtney: For me, too, still. Yeah, 100%.
Damona Hoffman: As you’re trying to figure out how much do I need to get this off the ground, and then also when you’re talking to investors, you have to make projections. Obviously, they want to get their money back, too. How do you look at the planning and break it down into digestible goals when you’re really looking at these numbers of something that you’ve never done before, that hasn’t really existed before.
Courtney: Really, the first thing I think is humility. So what’s important is, “Hey, guys, I haven’t done this before. This is my best …” That’s why in these early stages, they’re not really evaluating the numbers. They’re evaluating you. So it’s more are you not overestimating? Are you someone who over promises, or under promises and over delivers? And I think that’s actually what they’re trying to suss out, because they know you don’t know.
Courtney: So what you have to do is show, one, I have a demonstrated appetite for paying attention to what’s going on around me and feedback, so I can tweak things as I go. Two, I know what I don’t know, because that’s the only way I’m going to go find those things out. I’m not an expert in X, Y, Z, but I do know who the experts are, and I’m going to go find them to help me do this. Right?
Courtney: Most investors always say to you it’s going to cost twice what you think it’s going to cost you, and it’s going to take twice as long. Right? So that’s kind of like a rule of thumb when I’m talking to entrepreneurs. I always say, “Look, whatever forecasts you come up with, assume it’s going to take you three times as long, and it’s going to cost you twice as much, and then what does that look like?” But you don’t need to finance the whole thing out of the gate.
Courtney: And, look, there are two very different schools of thought. One is I’m going to go raise everything, but I don’t know how you do that when you’re starting from scratch. If you’re a brand new entrepreneur, right, how are you just going to go to someone and fund your whole business when you haven’t even gotten … I think it’s better to start knowing you’re going to have to do it multiple times, but ask for a smaller amount and say, “Look, this is what I need to get to proof of concept, and then I’m going to prove to you that I know what I’m doing, and that I’m good at asking questions. I’m good at learning from other people. I’m good at getting advice.” For the early entrepreneur, it’s like how good are you at paying attention to feedback? How good are you at getting advice? How good are you at doing a lot with very little? That’s what will then get you more and more investment.
Courtney: And one of the things you see now is there’s so much money out in the market. It’s easy to go raise your first round. You might be able to raise $200,000 or half a million dollars, but then when it gets time to raise your $5 million, your $10 million, it gets a lot more challenging because people want to see the evidence of your effectiveness. So better not to set yourself up, right. Set goals that you know you can reach, that you can actually outperform, and then all of your subsequent rounds will be a lot easier.
Damona Hoffman: What Courtney said here is really important for those of us who don’t have years of experience with raising venture capital. For Courtney and Gordon, this wasn’t their first rodeo, and they built themselves up before they bet the farm. So don’t try this at home.
Damona Hoffman: However, if you don’t have any experience raising capital for your genius product, all is not lost. Make sure you start slow, and show investors that you’re here for a good time and a long time.
Damona Hoffman: So you want to go for a long time. You’ve already been in business now for what, eight years? Nine years?
Courtney: Yeah, eight years.
Damona Hoffman: Eight years.
Courtney: Nine years next year.
Gordon Gould: Nine, yeah.
Damona Hoffman: So what’s next? What’s next? Smarty Pants. Smarty Paws. What’s the next evolution of this business?
Courtney: Well, we did launch this year the pills, which were important for us because it’s a no-sugar alternative for people who really like the comprehensive design. And I think we just keep looking at where is there an opportunity that’s actually solving a problem? Because that was a commitment of ours. We’re never going to make a “me too” product. Right? It’s like, “Oh, now the latest thing is apples.”
Gordon Gould: Apple cider vinegar.
Courtney: Oh, my God. Gummies. It’s ridiculous, but it’s a trend, and then everyone’s making it. So we just try to avoid those things. It’s like what do we know is actually serving a purpose, and solving a problem, and anything that does that, that is within the confines of being better for you ingredients, comprehensive, I think that’s an opportunity for us to play.
Courtney: And Smarty Paws is really exciting. We love being able to do for our dogs what we know we’ve been doing with the rest of the folks in our family. And, yeah, so I think for us, that’s kind of the … It’s greenfields, and there’s still so much that we can do, and we want to help.
Courtney: Obviously, Vitamin Angels, our new goal is 100 million. So 10 million was our original goal. We want to reach 100 million people with those matching grants, so needless to say, we’ve set some, I think, big goals for ourselves for the next few years.
Gordon Gould: Yeah, I think also operationally, just it’s interesting to see how consumer brands evolve in the technology landscape. So that’s an interesting opportunity to continue to maintain competitive dominance there. So I don’t want to get down in the weeds of our strategy, but that’s an area that we focus on a lot. And so we think that there’s big greenfield opportunities, to Courtney’s point. So both the product category is large, and consumer demand is growing in our category, so it’s all about reaching them in the right place at the right time.
Damona Hoffman: Nice.
Courtney: One of the things actually I remember that I thought it was so smart that I heard someone say which is risk is what got you here, and the problem comes when you start operating from holding onto something you have instead of going for something you want, which is very common. So when you get to our stage, you’re over a hundred million in revenue, you’re getting to be a big … You can start trying to just keep what you have as opposed to doing the things that got you here. And that’s actually my biggest focus for the next year is to make sure that I’m living in the place of taking the big swings, because that’s where the magic is. Stay out on the skinny branches where all the interesting stuff is. That’s true obviously in a relationship, too, as opposed to your safe little, “Oh, I want to protect.”
Courtney: And it’s really hard because the more investors, the higher profile you get, the bigger the instinct is to hold on and protect what you have. And we’ve become high-profile enough, a lot of people are gunning for us. We get lots of people trying to copy what we do. And I realized that that is what is, for me as a leader, the number one thing has to be to stay out in the imaginative place of doing the impossible, what people say we can’t do, as opposed to just trying to protect where we are. Does that make sense?
Gordon Gould: Yeah. Ray Dalio said something that I thought was smart, not surprisingly, given who he is, but he was making the point that common thought produces common outcomes, and so as you scale up, as the organization gets bigger, there’s definitely a lot of pressures to do things the way other people have done it, or to think about unifying practices, even within the company sometimes. And sometimes that makes sense, but sometimes you have to be careful of just opting into things because that’s how they’ve been done in the past. And had we launched Smarty Pants the way that other people launched vitamin products, supplement products, we probably would not have been successful, I think.
Damona Hoffman: Could you share a tip or a tool with our audience that has made Smarty Pants what it is, or made your life more livable?
Courtney: My tip would be always remember why you are doing what you’re doing. In other words, for me, I always come back to why I started doing this in the first place, and that’s to help people. And that’s my true north. And having a true north, given how unpredictable and crazy things can be, is the game changer.
Gordon Gould: Yeah, I guess there’s two things. One is be honest about what the data is telling you.
Courtney: Can you tell he’s our Chief Data Officer?
Gordon Gould: Yeah. That’s something that people don’t necessarily want to hear sometimes, or I don’t necessarily want to hear it sometimes, but if you’re getting a story out of it that you don’t like, definitely look again and make sure that it’s accurate. And this goes back to a lot of the times doing things the way people have done it in the past. And so I remember there have been several occasions where people have given me averages, and I’m like, well, an average doesn’t really matter in a lot of ways. One of my favorite thinkers is Nicholas [Asimtolab 00:41:12], who talks about never crossing a river that’s on average four feet deep.
Gordon Gould: So, yeah. [crosstalk 00:41:22].
Courtney: If you happen to be there on a 12 foot day …
Gordon Gould: Yeah. Unless the variance is really small, it’s probably quite deep in the middle, so you better be prepared to swim. So I think it’s getting super granular, and thinking through analyses in ways that may be non-conventional, but are mathematically is important.
Courtney: And a competitive advantage.
Gordon Gould: And a competitive advantage.
Gordon Gould: And then there’s one that I struggle to maintain, and I don’t know if he coined it or not, but a guy named Mark Divine talks about embracing the suck. You have to just enjoy the struggle, and so I’m good at that in sports. I’m not always so good at that in relationships or in work, and so I try to translate that enjoyment of the struggle into the rest of my life.
Damona Hoffman: It’s hard to enjoy the struggle.
Courtney: It is.
Damona Hoffman: I typically say when I’m in the struggle, I look for the lesson, and sometimes the lesson isn’t apparent in that moment, but it’s going to come later. So I remember the business happening for some reason, even though [crosstalk 00:10:40]-
Gordon Gould: Yeah, there might not even be a lesson. It might just be hard.
Damona Hoffman: Yeah. That might be the lesson.
Courtney: Exactly. I think it’s that there’s going to be some outcome, you’re going to be better at something as a result, right. That it’s going to suck in the moment, but at least there is something that will come out of it. And you don’t know. That’s the other thing. You don’t know till the very end what was good and what was bad in your life, right?
Gordon Gould: Yeah. Almost like that [crosstalk 00:43:04] story.
Courtney: Right. You don’t know what is the thing that got you to whatever the branch in your tree is that ended up creating this profound experience, or relationship. All the greatest things I’ve been a part of building were never things I would have predicted or been able to predict at all.
Gordon Gould: It’s like Kierkegaard says “Life only makes sense in retrospect.”
Damona Hoffman: This interview reminds me of a quote from Paulo Coelho in The Alchemist. He said, “When we love, we always strive to become better than we are. When we strive to become better than we are, everything around us becomes better, too.” Gordon and Courtney are key examples of that, and they’ve left us with these important takeaways in today’s episode.
Damona Hoffman: Have complete conviction in your business idea. Would you be willing to put everything on the line for your company?
Damona Hoffman: Let your mission guide you in every product decision you make.
Damona Hoffman: Even if you’re not part of a couple, have regular check ins with someone who keeps you accountable, like a coach.
Damona Hoffman: And no matter how busy you are, try to create space for a regular wellness routine, including your mental health, which is something that we’ll cover later in the season.
Damona Hoffman: Check out Smarty Pants online at smartypantsvitamins.com, or pick up Smarty Pants Vitamins for the whole family and for your pets on Amazon.
Damona Hoffman: This podcast was brought to you by FreshBooks, the number one Cloud accounting solution for small business owners and their teams. If you want to know more about how you can save hours on accounting paperwork, and focus more on your business, then head over to freshbooks.com/imal for an exclusive offer for our podcast listeners. That’s freshbooks.com/imal, short for I Make a Living.
Damona Hoffman: Our audio engineer and composer is James Morris. Paco Arizmendi is our producer and director. And I’m Damona Hoffman, your host and producer.
Damona Hoffman: If you want to chat with me about relationships, business, or anything else, you can find me @damonahoffman, or at damonahoffman.com. Also, we can connect in person at an I Make a Living live event. Find out when we’ll be in a city near you at imakealiving.com.
Damona Hoffman: And don’t lose sight of the thing that inspires you most, because it’s your business. I’ll see you next week.
PART 3 OF 3 ENDS [00:45:28]