The Simple Business Model Used to Build a $2.4 Million Business

Colin McIntosh turned the end of a tech startup career into a new beginning for building his own brand. 

Built on a cheeky pun, Sheets & Giggles grew from a simple business model of offering sustainable and comfortable bedding directly to consumers into a brand that's projecting $2.4 million in sales this year. 

In this episode of Shopify Masters, you'll learn from Colin McIntosh of Sheets & Giggles on how he builds a successful crowdfunding campaign and found his niche with eucalyptus lyocell sheets.

If you don't have $1,000 to spend on ads, you shouldn't launch a company.

Tune in to learn

• The business model you should follow to improve your chances of success
• How they created an 11,000 subscriber email list before launching
• Why a completely unrelated Reddit post drives them traffic and sales

  

Show Notes

• Store: Sheets & Giggles
• Social Profiles: Facebook,Twitter, Instagram
• Recommendations: Kickoff Labs, Russell Marketing (agency)

Transcript 

Felix: Today, I'm joined by Colin McIntosh from Sheets & Giggles. Sheets & Giggles makes the world's most sustainable bedding out of eucalyptus fibers that are naturally softer, more breathable and more moisture-wicking than even the best cotton sheets and was starting in 2018, and based out of Denver Colorado and it is on track this year to $2.4 million in sales. Welcome, Colin.

Colin: Hey Felix, thanks for having me.

Felix: Yeah, excited to have you on. So your story actually starts from a darker time then the very optimistic picture I just painted. So you mentioned to us that you ran Bizdev at a wearable tech startup in the same town that you're in today, or in Denver, same place you are today, and you guys raised $3 million of seed round and grew to a team of 25. And you were everywhere. Things were looking good and all of a sudden everything's ended in September 2017. And from that day on, you recognized that this is the best opportunity for you to go off on yourself. Tell us about that day. Tell us about that realization that you had after that fallout.

Colin: Sure. And so basically at that point, I had just been laid off on a Monday from a company that I put a lot of heart and soul and energy into. I had actually written part of the original business plan years before this. And so it was really hard to see it come to such an abrupt end. And, basically, at least for me, the company technically still just of course. But basically, I think the next day I slept until about noon, and then I took about a week off, cleaned up my apartment, got my head had together, and then I decided I'm going to do one of two things. I'm going to go work at a large company, maybe move back to Seattle where I was living before, go work at Amazon, slide back into my old life out there, or start my own company. And I figured that I was in a really good position to do so. I was in Denver, Colorado. I had really good connections from the prior two years of working in the community in both the Boulder and Denver area. And I had some mentors who were encouraging me to think about my own company.

Colin: And so basically at that point, I built a business model that I felt really passionate about. It happened to be a direct-to-consumer business model because of everything that I had learned at my last company. And I incorporated it in October 2017 and Sheets & Giggles is born.

Felix: Awesome. I like how you're hinting at like a methodical process that you went through to come up with Sheets & Giggles. So you decided to start a company. Let's start off with how did you figure it out what you even wanted to build, and what you would you even wanted to sell?

Colin: Sure. So bottom line was, my last company, I had a physical product that I got really good at selling and distributing through retail, amazon.com and I had learned a ton over those couple of years running Bizdev there. And so I knew first and foremost, my initial criteria was I need my physical product that is my own brand. And from a high level, you're absolutely right where I said, "I'm going to build a business model that's going to work for me that I'm going to think I'm going to be best at the world. And then I'm going to build and adapt the product to fit into that model." Which is the opposite of what most startup founders do, to be totally honest. Most people spend years of their life building a product that they're very, very passionate about. And then they tried to go to market with it and they find it very difficult to build a business model that's profitable, scalable, and sustainable around this product that they've been building for so many years. 

Felix: Take a quick pause here. I want to ask this question, if you build a business model, you can essentially plug more than one type of product, even more than one industry into it?

Colin: You could. Yeah. And if you think about it like this with Sheets & Giggles and bedding, basically, my initial criteria was physical product, low complexity supply chain, massive commodities market, a highly fragmented marketplace with no market leader that I had to chip away at, no brand differentiation or loyalty across the industry. And then something that was largely traditionally physical retail that I could help bring online with the direct-to-consumer model. And so I basically looked across from being totally honest, all of the websites that I owned, and I owned sheetsgiggles.com, because I buy domain names whenever I think of a business idea, and I had thought of this may be a year prior, and bedding fit the criteria almost perfectly. But that's not to say it's the only thing that did. It was just the one that I, both had the model almost locked in perfectly, and that I had a fantastic brand name for, where I feel like it really builds a brand that was my own personality. Because I think a company's brand has to be the founder's personality. And just to zig when everybody else zags in this really boring old space.

Felix: Got you. Let's talk about the list of criteria that you've mentioned. So we'll walk through it. So the first thing you mentioned is that a large commodities market. What does that mean? And why is that important?

Colin: Bedding is a $12 billion category in the US alone, and home textiles, which includes towels and drapes and throw blankets, is about $22 billion. And it's growing about 10% year-over-year. And so, there's been some noise in this space, but really it's a big boring space when you ask people, "Where you buy your bedding." They normally say Bed Bath or Target or Amazon and these are all retail brands that sell vendors. And so I really like the opportunity for ... And when you think about it, other commodities spaces is really anything that is just mostly price-sensitive, very little product differentiation, and that is a really massive every day needs type category. And you can see there's examples of people who have done this in other spaces, right? Casper and other brands in the mattress industry. You've got Native deodorant, Quip toothbrushes.

Colin: And so I really love this model where you can take something that's an everyday item, and you can differentiate meaningfully on the product side, which, our sheets are softer and more breathable and more sustainable than cotton. The eucalyptus lyocell is absolutely incredible. And then you can differentiate meaningfully on your brand, and customer service and customer experience. And then because you're not going into retail, you also have better and more competitive pricing. And so it's just a really, I think, really important in order to lock in to why you're choosing the market that you're choosing. And it's got to be all about business model reasons, not necessarily product reasons. Because I think a lot of people get hung up on that.

Felix: Got It. So how do you know what you should be focusing on to differentiate on the product and on the brand. Is being different enough? Or how do you know what you should be focusing your time, energy, your capital, your resources on to make better than what's already out there?

Colin: That's a great question. To take it to a more tactical level, because I think a lot of people might be more interested in this on the strategic side, basically we were going to do a crowd-funding campaign. I always knew I wanted to do crowd-funding campaign. I didn't want to raise venture capital right away. I knew the dangers of that. I knew the time commitment of that, and I knew the failure rate of that quite frankly. And I'm starting a bedding company based off a pun. I didn't know if venture capitalists were going to be super stoked on this. And so basically I knew I was going to do a crowd funding campaign out of Kickstarter or Indiegogo. And generally speaking on a high-level for those crowdfunding campaigns, you need three core value props of differentiation for your product. And so for us, it was that it is literally softer, lower surface friction than cotton, and for hot sleepers it's obviously more breathable, and more cooling. And it's just, again, I keep saying it's the best product. Shameless product plug.

Colin: Number two is that it's incredibly sustainable. Uses 96% less water than cotton sheets. No insecticides, no pesticides. It's considered the most sustainable fabric in the world. And then number three is that because we weren't doing deals with any retailers at the time, we were only doing our .com, we were able to offer on our Indiegogo our sheets for I think $69 for any size set, which frankly was under-priced. But compared to Bed Bath & Beyond's eucalyptus option, they have a eucalyptus origin set for $180 for a king. We obliterated them from a pricing perspective. And so, people really responded well to those three value props. And so not everybody's value property to be the same. But I do think you need a meaningful differentiation in three distinct spaces in order to convince people to give you a shot over another existing brand.

Felix: So now once you decide what the value prop is, do you then have to ... I guess obviously balance that with what is actually achievable? Like what kind of ... Can I create this? What was that next step for you? Did you actually start with the value prop first, or took a look at what's possible in terms of sourcing, in terms of building actual products?

Colin: That's such an interesting question. So I actually started with the idea for bamboo sheets because it was a large existing market, and I really wanted to make some noise on Amazon in a pretty big category that was already on the upswing. Ended up realizing that bamboo frankly just wasn't exciting enough for people from the crowd-funding perspective. Did a lot more material sourcing and product research, met with a bunch of different manufacturers all across the globe. And that's when I discovered the eucalyptus material, which was really untapped in terms of market penetration. And so for me as an average American, it really felt like something special. Did a lot more research into the durability of the product, into the color fastness, the sustainability. Did some different designs and sampling. And so I think that when you decide your value props, they should fit into the business model, right?

Colin: So everything is goal-oriented. The goal was we need to have a six figure crowdfunding campaign in order to get off the ground. And then the tasks in order to do that, you can literally be completely agnostic as to the tasks. And that's, I think what has made S&G grow so quickly, is that I set these goals, and then I'm completely dispassionate about the tasks I need to shake to achieve them. So my initial task was source of bamboo sheets manufacturer. And it very quickly morphed into source a well established, stable eucalyptus fiber bedsheets manufacturer, who is ethical and someone that I felt comfortable doing business with. And then we had to obviously do our designs and tech packs. But we didn't really begin manufacturing or invest in that side of the business until after the product that was pre-sold on Indiegogo. We basically waited for the first week of sales in order to have our sizing and color distribution sample size. And then we were off to the races from there. But we did have that agreement in writing with our manufacturer ahead of the Indiegogo. But yeah, everything should follow the business model and should be frankly changed on a dime if need be to suit the business.

Felix: Yeah, that's what you mean by be agnostic and dispassionate about the tasks so that you're not reacting emotionally and instead actually looking at it objectively.

Colin: Exactly. Tons and tons of founders and CEOs, and I just went through a startup a program called Techstars. I'm not sure if you're familiar with Techstars. And one of the best accelerators, if not the best accelerator in the world. And I've definitely ... Second time I've been through it. And it's interesting. I love everybody I meet in the ecosystem, but I do see a lot with founders, and it's very obvious as to why, right? They have this baby. They have this idea that they'd been working on forever. Usually it's a solution to a problem that's extremely personal to them. And a lot of times that can be good because it keeps you just completely passionate and engaged on what you're building, no matter what the obstacles are. But a lot of times, it ends up in a founder who's often also the CEO, making decisions that are emotional and not reality-based.

Colin: And so I really am passionate about my business. I'm passionate about my customers. I'm passionate about making people's lives better, making people happy, success. And then the product itself is the best the product can be for the business. And that is, you'll be seeing our evolution of it as a brand, and a company as we release our eucalyptus throw blankets, our eucalyptus comforters, eucalyptus towels down the road. We're going to be building a whole sustainable home textiles brand. And if I was someone who was really passionate about one specific category, I might not feel the same way.

Felix: How do you make sure you aren't, slowly falling in love too much with product, looking at things with rose-tinted glasses? Do you find it difficult to build a brand that is a spitting image of you as the founder, and then also trying to avoid making emotional decisions?

Colin: Well, I sleep in my product every night. So I'm very close to it. And my family sleeps in it, my friends, my investors. I get emails and phone calls everyday from ... We have tens of thousands of customers across the country now. And people love this stuff. And it's interesting. I think when I started out, I don't think I realized exactly the impact. I'm a big person when it comes to sustainability and climate change is a hot button issue of mine. So I'm very happy to be building a sustainable home textiles brand. Trust me, it's what gets me out of bed some mornings. But I think I underestimated the impact that the sheets would have on certain people's lives. When you're talking about a hot sleepers, women who are pregnant, women in menopause, people who have extremely sensitive skin, eczema, really bad allergies, it's really awesome to me to have built a product and to now have shipped tens of thousands of units of that product to people who are sleeping better through the night and who email us and let us know what a game changer it is for them.

Colin: I think I probably took that for granted when I was first starting the business to be totally honest with you. And so that, that keeps me more engaged, I think on the product side is ... Again, it always goes back to the customer. It always goes back to the person who gets the box, who opens it, who washes it, puts it on their bed, lies down in there for the first time. What do they think to themselves? What do they think when they wake up the next morning? What do they tell people and what do they tell us? And I think that that helps keep me grounded without me saying, "Okay, we're not going to change this because people love this. Or we'll never change this because you've gotten good reception."

Colin: I'm always just thinking about continuous improvement on the product side. And it all goes back to feedback we get from our customers. We literally choose our colors based on customer surveys. We choose the size of our sheets based on customer surveys. We choose our next product lines based on customer surveys. We do everything according to what people tell us they want because frankly I think people are smart enough to tell us what they want.

Felix: That makes sense. So you go in this with this approach of making sure you love the customer first, and then change the product change if you need to, to make sure the customer is happy. You lead with this desire to provide great customer service. That makes sense.

Colin: Yeah. I was inspired actually by Amazon on that side. Their obsession with the customers, obviously legendary and I love that focus. I think it's maniacal and it's great for our business.

Felix: Nice. So you mentioned, so the next thing that we have on his list here is a highly fragmented market with no clear leader. What's the threshold here? How do you know what is considered a fragmented market?

Colin: I think there's two answers here. One is, there's a data-driven answer where you can say, "Okay, who's the biggest brand when it comes to bedding?" And if you look throughout the market and you see that there's some folks who are doing $100 million in revenue, who are doing 75 million in revenue, a bunch of folks in that category, tons of people in the 10 to $50 million revenue range. And on a broader level, it's a $12 billion marketplace, it's not really that hard to see from a data-driven perspective. As long as there's no one with, I would say, at least like a 20% type margin share. I mean, if you look at the home security market, for example, obviously ADT, alarm.com, Vivint and really there's a couple of other players beyond that, that's a perfect example of a highly concentrated marketplace. And so you really want to make sure that there's no one who owns at least 20% of the marketplace.

Colin: And then from a second perspective, an intuitive perspective, you can simply ask people, "Hey, if you were to buy x product tomorrow, socks, sheets, sunglasses, coffee table." You can start naming all these different products that people buy lots of, a lot of them are going to say, "I go to Target." Or, "I'll go to x retailer." And they don't even realize that they're actually buying a brand, half the time when they go to those retail spaces. And so I think there's also an intuitive level to it, and just understanding what people around you think and are saying. And then when you start to get an email list, you can actually do surveys of a thousand plus people and get that qualitative data and in more analytical way.

Felix: Got it. So like walking down this list, I think the next ones make sense. No brand loyalty or affinity. Very tied closely to your answer just from before. And with little brand differentiation ... So this next one, which is a product that was traditionally physical retail that you could help bring on line with the direct-to-consumer model. I think a lot of people will see it as they might see, "Oh this is going to be ..." They could see two ways. One is like an opportunity, which is what you saw. But then also people can see like, "Oh this is like a big lift on my side because there is no model like this that exists yet." So what did you see here with your, in particular to Sheets & Giggles, what'd you see that was available at the time?

Colin: So the biggest inspiration for me in this was Casper. So Casper is the fastest company ever to $100 million in revenues. They did that in 12 months, and they did it because they asked the question in 2014 of, "Will people buy mattresses online?" And they asked at the perfect time. There was no competition. Facebook ads were cheap and highly effective. Smartphone purchasing was that a huge peak adoption curve. And there was a huge inefficiency opportunity in terms of mobile ad buying versus desktop ad buying and the pricing there. And they came in with a very basic $1,000 mattress product, one skew, and ... Well, they haven't got queen and King, and they basically said, "All right, great. Here's the mattress. It's the Casper mattress. Would you like it? It's $1,000. Total happiness guaranteed 100-night sleep. We'll drop it off. You don't have to pick it up at a store. What do you think?"

Colin: And people just jumped at it. And the mattress industry is about a $15 billion US industry, and so it's similar-sized to bedsheets. And so I was very inspired by that, and I took it as more of an opportunity than anything else where I did the research, realized that bedding is mostly a bought at physical retail. And when I say mostly, I'm talking 80, 90%. And it's one of those categories where ... Apparel is another one where apparel is still heavily physical retail. You've got electronics is the opposite. Electronics was I think 70/30 physical/online as of 2016. So it's much worse now. And so it's really doing the research and understanding like where people are buying the product, and does it represent an opportunity or a risk?

Colin: There's stuff like food, for example, that really had a really hard time penetrating online versus brick and mortar. And apparel is another one because of the sizing issues. But I think that there are opportunities in every category that's still heavily physical retail. I think that the coolest one I saw recently is a new bathroom company, called Shine that's doing direct-to-consumer bathroom remodels, just really cool. So there's stuff like that's all out there.

Felix: Are there considerations that you need to look into in terms of investing in the infrastructure to build the road to direct to consumer for your market?

Colin: Well, I may be a little confused by the question because the infrastructure is largely in place. The biggest hurdle is absolutely capital in order to manufacturer, ship and actually do the marketing that's needed to sell the product. I think a lot of people when they started the company, they ... And I see this so many times. They're like, "Alright, great. We can manufacture something for 20 bucks and then we can sell it for 50, and we're going to make a $30 raw margin on that 60%. Awesome." And they don't think about duties, freight, warehousing, shipping, 3PL fees, and then their cost of acquisition on top of all of that. And then the return rate on top of all of that, which is literally just dollars out. And so I think that the infrastructure that's really needed is again, a really robust understanding of your margins.

Colin: And will the business work once you have all the infrastructure set up? I think that's almost more important than the actual setting up of the infrastructure. I think people jump at the opportunity to take on inventory really quickly without thinking about the actual margin breakup of where all the dollars are going to go, and they always leave out that marketing expense. So, the infrastructure is there in terms of Shopify exists. You can spin up an online store very quickly with very little development skillset. You can ... All the Stripe infrastructure and Shopify payments infrastructure's there to take payments and process credit cards without you having to store and be responsible for people's data and security. You've got PayPal, which is fantastic from a brand trust perspective. You've got your Facebook ad ecosystem, your Google ad ecosystem, Instagram, Twitter, all those. Those don't convert as well as Facebook and Google. And so you've got all these items in place.

Colin: And then really, the hardest part is probably manufacturing and supply chain from a logistical perspective. I think that that's where a lot of people also don't understand is, especially around a minimum order quantity issue. A lot of people say, "Oh yeah." Well, actually I just started a startup competition where somebody said this, "We will manufacture for $2 apiece, this piece of plastic, and we're going to start with our manufacturer. We're going to ask them to do a 1000 unit run, so we'll have very little manufacturing startup costs." And I said, "Do you know what the minimum order quantity is for this piece of plastic?" And they said, "What do you mean?" And I said, "They're probably not going to put your mold on the machines on the line and stop what they're doing with everybody else to produce 1,000 units of your $2 item. It doesn't make any sense for them. Their minimum order quantities are probably in the tens or hundreds of thousands of this piece." And they literally had no idea. They'd never asked that question.

Colin: So, a lot of people also don't understand the capital costs that are going to be needed in order to get something off the ground, especially in a commodity space where you really got to convince somebody the contract manufacturer to stop what they're doing and focus on your product and your design, and turn away some business for a certain period of time from the other customers.

Felix: Got it. So I think you answered my questions. So the next thing you said was about having a product that had a low complexity supply chain. And I think we're touching on this right now. Why was that important for you?

Colin: Well, I want to be super clear. Textiles is not as low-complexity as I initial initially assumed. I actually in the last couple of years have had a massive appreciation and much greater understanding, and I've got a huge knowledge-base now when it comes to textile manufacturing. That being said, there is no Bluetooth component. There's no firmware. There are no software engineers on staff. There is no app development. And that's what I mean by that, is most startups, they are going to build something like an IoT product that will help you sleep, or a new connected toy that every kid is going to love, and is going to be on the front shelf of every Target store. And that type of startup cost is astronomical compared to something that has, maybe only a couple of components.

Colin: And while the textile space, in general, is complex, especially when it comes to selecting your skews and making sure that you're not overdoing it on different combos of sizing and colors and patterns, really the two components are the fabric and the elastic when it comes to our sheets. And you've got the thread and sewing. And there is a process to it. It does take time, and you do have to have the initial fiber production in order to create the fabric. But it is not a connected IoT product that never requires millions of dollars to get off the ground.

Felix: Got it. So if someone out there is listening to this, here's those list of criteria, and they want to guarantee their business success, is there any reason why someone would not want to follow this model? Or why someone should not rather?

Colin: Well, it's hard. No one ever starts a company without optimism. I think all founders are a little delusional and it's a good thing. It's actually something that Techstars tells us on day one is, "You're all deluded." And I love that. And I went into this from a really emotional, difficult place in my life where I was very upset. My last company ended with my time there. And I think that if I had been in a slightly better place, I don't know if I would've gone headfirst into my own brand. I might've taken some time to work at a larger company, get a little more money in my bank account. I worked for free for myself for 15 months. Not everybody can do that. I didn't pay myself until February of this year. And so I think a lot of people who are trying to start a company need to ask themselves, have they done the prerequisite pain of maybe learning or failing or trying something else? Potentially at somebody else's company. I think they need to ask themselves, "Can I live off of very little or nothing for an extended period of time?" I'm talking 12 months. And they also need to ask themselves what the goal is of the company.

Colin: For me, the goal initially was to build a lifestyle company that I could live off of and be financially independent off. That's what I wanted to do. And I wanted to do that in order to open myself up to other possibilities in my life and have a little bit more flexibility to see my family. I had a new nephew at the time. Now I have a new niece, two we sold today, which is awesome. And to be honest, I got a bit of a tiger by the tail when we did the Indiegogo. It ended up, people love the brand. They love the product. We ended up doing $284,000 crowdfunded on Indiegogo. And that wasn't by accident. We prepared. We did a lot of prep for about 12 weeks ahead of that crowdfund launch.

Colin: And so I think a lot of people need to ask themselves, "Am I ready? Am I prepared? Do I have the experience? Do I understand what I'm doing from a business model perspective? Do I have a product that's going to be received very well? Is the pricing of the product going to both please people from a value perspective, which ours are very much does, and have enough margin for me to have all of my variable costs covered, plus enough margin leftover to cover my fixed costs?" And these are all questions that are basic, but crucially important. And I don't think people give them enough time of day. And so these are all the risks of starting a business is you could take your entire life savings and put it into something, and then the day of the crowdfund launch, nobody buys it.

Colin: And I've seen that. You go on Reddit and other places on the entrepreneurship sub-Reddit, which I participate in. I enjoy that community. You see tons of people with that story. And you just got to be really careful about being very methodical as you're getting going and being very honest with yourself about what your capabilities are, what they aren't. Like for example, I asked myself, "Should I start a software company?" Because I had some really interesting software ideas. I had been in the startup ecosystem for years, and I had a whole list of business models that I loved. And I ended up choosing a physical good because that was what I thought I was best at, even if the other models were maybe a larger market, or more compelling from a mission ethos, or a tech ethos. And so I think a lot of people need to figure all of these questions out ahead of time, and very few do.

Felix: Right. And then for you, this particular model that you came up with and you're following is specifically for someone that, in your case, wanted this kind of lifestyle business, and also the financial independence and the kind of flexibility that it affords you.

Colin: Yes and no. We went around a circle at Techstars a while ago, 10 founders, and we talked about why we started our companies. And the number one reason that everybody said was that we were sick of taking orders from other people. So I think a lot of the people listening to this podcast can probably relate to that. I love living or dying by my own hand. I don't like having to do things that I disagree with as an employee at other companies and follow marching orders. I've never been really good with authority. I got fired from my first job out of college in five months. It was at the world's largest hedge fund in Connecticut, and I really did not fit in well there.

Colin: And so that's that's just something for me personally is my primary motivation. But also the financial independence, the flexibility. I get to come home to Florida to see my new niece who's two weeks old, and I get to travel abroad when the occasion strikes, and I don't have to ask an employer for time off to visit my family, which is just the weirdest system that we've set up for ourselves. Like, "Can I please go see my family for Christmas?" So yeah, there's a lot baked into why I do what I do.

Felix: Yeah. Because I guess you're on the other side of this now where even like you said, a lot of people are going down this path and I think you're 100% right. A lot of them that are listening are also thinking of this, that they don't like taking marching orders. They don't want to be dragged along by circumstances. They want to be able to design their life. Now that you're on the other side of it, is there anything now that you're looking at that you still cannot free yourself from that maybe people think they might be able to free themselves from by pursuing this route?

Colin: Well, sure. I think especially when you ... And this is a consideration that a lot of people need to think about is, "Is this going to be self-funded, revenue-funded, crowd-funded entirely? Or are we going to have to take on some outside capital at some point?" For us, we did have to take on outside capital and we are continuing to do so in the future. And so that ... At least I assume that we will. And so basically, I think the one thing that I thought I'd be able to get away from that I haven't is the responsibility to others. Both on the ... When you take money from people, you have this really strong fiduciary responsibility to maximize their return and to make sure that you are responsibly managing their money. And the way to offset that, and the way to make sure that you don't have investors breathing over your neck is to be very honest with them upfront about what the company is, and what it isn't.

Colin: And I had conversations with venture capitalists early on who wanted to give me half a million dollars at x million dollar valuation, and they wanted to give me this and that. And a lot of them said, "But I want you to commit to either building this into a massive multi-hundred million dollar brand or to going bankrupt in 12 months." And they didn't say it like that, but that's the undertone; spend all the money and grow as fast as you can, or bust. And I don't like that model. I wanted something where I'm going to be independent. I wanted something that was profitable first, scalable second. And a lot of startups go scalable first, and then profitable second. And that's not what I wanted. And so being very honest with people upfront and setting that expectation, they'll respect you for your honesty. They might say, "Hey, it's not a fit for our fund." But the people who do invest in you are going to be on the total same page as you. And I love that. And then it gives you time to think about what you want the business to be in the future.

Colin: And then on the other side, I do have a responsibility to my employees. I have a full-time team of four. I've got multiple consultants across the country that work with me as well, manufacturing partners, warehousing partners. And I love them all and we're hiring more people. We're going to probably be about 10 full-timers by the end of 2019. And I think about them every day in terms of, "Am I being good to them from a salary perspective? From a bonus perspective, healthcare." They can work at home, they can take as much time off and sick time as they need, so on and so forth. So I think responsibility in both directions is something that I probably didn't anticipate as much. I thought that I would just be free and be able to do my own thing, but that's not really how it works when you get any type of success.

Felix: It sounds like it's still worth the trade-off though for you?

Colin: For me, I think so. Yeah. I'll be happier, I think, when the company is maybe a year from now, and I've got a more robust infrastructure set up underneath me. Right now I'm still doing a lot of the core functions, at least a 50/50 with some of the folks that I have. But some of the people I've hired have all been in core functions; products, supply chain, customer service, marketing. And I love that I've done all those jobs myself so I can hire a little bit more appropriately once I've actually done the position and understand what's needed. But, yeah, I wouldn't trade this for what I was doing two years ago. No way. It could have failed and that's fine. You also have to be fine with failure.

Colin: I even remember when I started it in October 2017, I said, "I'm going to know by about February if this is going to work or not." And by February we were capturing emails ahead of our Indiegogo campaign at like a 46% conversion click, which is nuts. Nobody captures emails at 46%, and we ended up capturing 11,000 emails in seven weeks ahead of our campaign. And that was the best prep we ever did. And so that was when I knew in like February, March 2018, that we've got something pretty special here. But if we had captured emails at a 5% or 1% click and everybody said, "Ah, we're not interested." I would just pack it up and started sending my resume out. And you've got to be okay with that.

Felix: Right? So this is part of that 12 weeks of prep before Indiegogo. What are you guys doing to get 11,000 emails so quickly?

Colin: On a high level, basically you have to think about the crowdfunding campaign as whatever your goal is. And by goal, I mean internal goal. Your external goals should be different than your internal goals. So our internal goal was 100,000. External on the Indiegogo was 50,000. The reason being is because the platforms have algorithms that reward campaigns that fully fund on their first day. And we wanted to have a goal that we thought we could hit on our first couple of days, which is an interesting way for them to set it up, but it is what it is. And so we wanted to do $100,000.

Colin: Generally speaking for your first three days of crowdfund and your first 72 hours, you want to get 30% of your goal. So when you needed $30,000 in our first three days. If our average order value was going to be $100 right, $70 item price multiplied by 1.5 items per order. And that means that we needed to get 300 customers in our first three days. What that meant is that, and generally speaking, an email list converts at about 3% if you have people that are engaged. And so if we want 300 customers in our first three days and we knew all of them are going to come from our email list or most of them, that meant we had to get 10,000 emails period, in order to guarantee ourselves 300 customers in our first 72 hours. And so that's exactly what we did.

Colin: And so we basically, from a tactical level, from an overarching level, that became our goal: 10,000 emails by May 1st, by our launch day last year. And so from a tactical level, we basically set up about 12 different landing pages on using Kickoff Labs, which is a great piece of software. We had that hooked into our Shopify obviously in our Mail Chimp to capture emails, and we had 12 different landing pages of different headers. Each one's different images, different calls to action. And then we did about 50 different Facebook ad variants targeting look-alike audiences of other crowdfunding campaigns. We got those lookalike audiences because we worked with a marketing agency that I actually trust with my life in this space, in the crowdfunding space.

Colin: Just that FYI to everybody listening, there are an outrageous amount of predators and sharks. Don't do business with people willy-nilly. They will promise you the world. They will say, "Oh yeah, give us $2,000 set up the in 20% of every sale that we bring in and we're going to spend money like crazy. And you're going to make so much cash." What they'll do is they'll take your $2,000 setup fee, they'll spend $800 on ads and they will come back to you and they will say, "Sorry, the ad didn't convert like we were hoping them to. We can't just allocate money to campaigns that aren't converting. So, good luck." And then they will take your money and peace. And you'll be lucky if it's only 2000. A lot of them charge 5,000 for a setup.

Colin: And so basically, I found the agency through referrals that I felt really passionately about. They're actually still my agency of record. And-

Felix: Can you say that the agency?

Colin: Yeah, sure. It's Russell Marketing. And I think the website's like Russellmarketing.co. Will Russell's the CEO there. Great guy. A good friend of mine now. Been working together for over a year now. It's crazy to think about it. And Will and the Russell Marketing team, they fill out the Boulder. They helped me identify if this was going to be a big enough opportunity or not for them. I would highly recommend working with them over other agencies that I spoke with. And I spoke with pretty much every major agency in the crowdfunding space. And basically, we were honed in on the same goal, which was 10,000 emails. We knew why we had to get it, and we work together to ...

Colin: I did all the content, all the copywriting, all the photography, videography. I had friends that could help with everything. Still had to pay them, but it's nice to know people who can help with video and photo. And then Will and I set up all the landing pages and all the software together. And I built our Shopify site from the ground up and yeah, we ended up optimizing everything. We ended up having about four different landing pages for two or three core ad sets that were converting super well. Like I said, about 46%, which is nuts. Anything over 10% is great. 20% is epic. And so we were thrilled and just almost couldn't believe it when we saw what was happening with our email capture rates.

Felix: So you were setting up these different ads and driving to different landing pages, and it sounds like it could get pretty complex the matrix of combinations. How did you decide what is worth testing?

Colin: Well you basically just want to A-B test several different core things, right? You want to test images, you want to test H1 text, you want to test H2, and then you want to test your call to action and placements of the call to action, and where the button is. You can test the color and stuff like that, but we were purple so we are always going to have purple buttons. That's always the funniest A-B testing case study that people always cite is like, "Did you test the color like blue or green or red?" But it's the button. But the really interesting thing is understanding where your traffic's coming from. So for us, we're running Facebook ads. Everybody in 2018 and now in 2019 interact with Facebook on their phone. So 70% of our visitors come in from mobile. And so 70% of your visitors are coming from mobile, you don't give a damn what the desktop version looks like. You only care what the mobile version looks like. And the desktop version can basically do what it needs to do.

Colin: And so we really optimize our landing pages for mobile visitors. We were maniacal and obsessive about what people saw the moment they hit the page. They needed to see an incredibly clear, concise value prop, an image that gets the entire brand across and intuitively tells them what we're selling in one image, and then a very concise H2 that describes the product, and then a button all above the fold so they don't have to scroll down whatsoever for them to give us their email. And that was core to what we did. And we tested a bunch of different stuff, and we got that conversion rate up from, I think it was like 30% the first week, 38, 39 all the way up to the mid-40s. And so that was just constantly optimizing. And then once we were about there, we didn't touch anything because we were afraid of breaking anything.

Felix: Do you remember how much time you gave made between each of these optimizations to see if you ... Maybe not. Time's really the question. Maybe the budgets even that you put into this before you decide, "Okay that's not working. That is working.'

Colin: Yeah. So we did it. We did a $1,000 initially of ads for our first week because we were wanting to drive a ton of traffic to see what was happening. And it's not really a time a test. I don't think. I think my philosophy on A-B testing is it's a visitor's test. So if you're getting, let's say 1,000 visitors a day, that's a good enough sample size for you to make decisions on a one to two day basis. If you're only getting 100 visitors a day, it's not really a good enough sample size for you to make sweeping decisions without probably then, seven, or eight or nine days worth of data. But we could make decisions very rapidly because I'm a firm believer that like 1,000 people. And if you've taken a stats course, that's a pretty good sample size as long as it's coming from a broader population. And it was.

Colin: We were basically just targeting people who had done crowdfunding and so they were all part of the same population of people who had backed prior Kickstarter, Indiegogo campaigns. And so we made these decisions within a day or two because we were getting so many visitors to the page, and that's the best way to do it is just get a mass of people in and make calls quickly. You've got to be intuitive with this stuff.

Felix: I think that's a good point. The common approach that you hear out there is to scale your ads up very slowly. But I think when you're starting out, you just have to pay to learn. You have to pay for this data. And you're saying, "Don't dabble with advertising." Get as many people in as possible, so you shorten that iteration, shorten those cycles between what you're learning. And for you guys, $1,000 a week, a lot of people here that, they're like, "Wow, that's way too much money to be spending on ads at once." But you guys learned very quickly if you guys had a product that was desirable or not. And then just knowing that you can move forward with confidence.

Colin: Exactly. And I'll say two things on this cause I know we're coming close I think to the end of the podcast, more or less. I'm a talkative guy. Number one is that if you don't have $1,000 to spend on ads, you shouldn't launch a company. Whether that money is yours or an angel round, friends and family, a loan, like whatever. If you don't have $1,000, $1,000 bucks on ads sound like a lot to you, you might not be at the right time in your life to start a company. That's totally fine. It is what it is.

Colin: And then number two is, I think that I see a lot of people make common mistakes on Facebook and other advertising channels where they're spending money but they're not being targeted in who they're spending. They're not testing different content to see what works. And then this is the weirdest mistake that I see. The weirdest mistake; People don't respond to the comments on their ads. And I don't understand what people are thinking when they don't do that. If somebody has taken the time on their Facebook feed to stop, click, comment on a freaking ad, which we all hate ads, and ask a question or say something, the brand needs to engage with that person. They need to respond. And frankly, they need to respond within 20 minutes. Otherwise, you lose them. And so I've got, the Facebook pages manager on my phone, I've got my whole team, we're always clued into Facebook. We're available by phone at any time of the day. I literally pick up the phone at 3:00 AM in the middle of the night if somebody calls. I'm super obsessive about this stuff. I don't like it when people's questions go on answer because paid and you've done all the work to get them to the point of being interested enough to ask a question. And then some people just don't respond to comments. And I'm like, "What the hell are people doing?"

Colin: And so I think that that was probably the best thing that we ever did was, we were responding to comments in live time, and we were having conversations with people, and it led to ads that had thousands of likes and thousands of comments. And guess what? Our comments all count in the comment count. When people are scrolling through their ads and they see like 2,000 comments, maybe 1,000 of those are from the brand because we're answering 1,000 questions. But that's social proof, that raw comment number, and that raw like number is incredibly crucial to click through on your Facebook ads. And so you have to have very engaging content, and then engage with people.

Felix: Yeah, I think this is a common mistake where a lot of people get into this idea of starting an online business so that they can automate everything and not have to talk to people-

Colin: They want to start a consumer business so they don't have to deal with people.

Felix: Right. So I think that that's a mindset shift that needs to happen where you're still dealing with people, you're still selling people, you're still interacting with people. So act as if you are working with people. So I think that that's a really good point that you make. So actually I want to talk about this one last thing, which was really interesting, which is that you mentioned that one of the key ways that you've been able to grow this business, grow his brand is by helping people before asking for their money. I think that whole part of making sure you're in there and answer people's questions and your comments, it all makes sense. And then one particular example you gave was around a resume advice posts on Reddit that somehow leads to more sales for your Sheets & Giggles products. Tells about why this works.

Colin: Well, it's okay. So for folks that are listening, if you're in the middle of a job hunt in the middle of a job search, just Google resume advice Reddit, fourth largest website in the world. And it's the first Google result that comes up is this post that I wrote in February 2018. And it's honestly the best thing I think I've ever done with my life because it's been viewed over a million times. It's gotten us a ton of traffic to our site. It's been fantastic for our SEO. And from a high-level, I used to be a recruiter back when I was 23, 24 and I know I've seen tens of thousands of resumes. And one thing that always bugged me is that the kids from, and this is like a side rant, has nothing to do with bedding. The kids that came from Harvard, MIT, Yale, Berkeley, Stanford, Emory University where I went to, those kids had the best resumes. And even I if followed them into their 20s and 30s and 40s is people who went to the top three schools had excellent resumes and people who didn't, didn't.

Colin: And unfortunately a lot of times with a screener on a resume, it's the first impression that people see when they're a screener, where they see your resume format and they immediately judge you based on literally the text and the white space and how it's set up and how it looks aesthetically to their eye. And they judge you on other stuff too. Like sexism and racism and other stuff like that. But the format is crucial. You have to fish with the right bait. You can have the best content in the world and you can be the best person in the world, but if someone's not going to give your resume their full attention and sit up straight when they see it across their desk, they're not going to ask you for an interview.

Colin: And so what I did is I put together all the best resumes that I had ever seen from any of my candidates into one cohesive resume format that's one page, super straightforward. You could use of white space. And I basically put it out there for free on Reddit, just as a download link, "Link to our Shopify for downloading from our web store." And I was floored by the response. It became a top upvoted post of all time on the job sub-Reddit. Did not expect that. It's been linked in articles online. It's been linked in, people send it to each other all the time. And I did a followup post and that got a lot of attention too, but this resume post has really taken on a life of its own.

Colin: And so from a high-level, I believe in like helping other people before you help yourself. There's a lot of belief in good Karma around that. And so I wanted to write this post basically because I thought to myself, one is, I've got this resume format I really want to share with people and I love helping people with their job hunts and this is a good way for me to help a lot of people at once, because I'm on Reddit, people ask me a lot for resume advice and I decided to make this one big post about it instead of responding to people individually.

Colin: And then two is, from a business standpoint, for us were commodities product. And so we really just need brand impressions and we need people to see us on Reddit to see us on Jiffy, to see us on Facebook, to see us on their podcasts, and over time, the next time they buy bedding, they might think of Sheets & Giggles. And for a lot of people that frankly we helped out with their job hunt, I've gotten emails from hundreds of people who told me that they got their new jobs straight up because of the resume change when they hadn't gotten an interview for months. And then they say, "To celebrate my new job and my new paycheck, I bought your bedsheets." That to me is the coolest. It makes me feel this unbelievable connection with my customers and the community around Sheets & Giggles.

Colin: And it almost makes me tear up a little bit, honest to God, because I remember when I was a recruiter, I used to have people email me and call me and ask me, "Please, I need a job. My family ... I need health care. I need money for my kids." It broke me when I was a recruiter. And so to be able to have that impact on people while I'm starting a freaking bedding company, and to have that very personal connection with my customers and a lot of them, I don't know. It is just very special to me. And I think the people remember that and they share it on Reddit, and they talk about S&G in a really positive way.

Colin: It has nothing to do with bedding, but I think it has a lot to do with like the brand and the company that we want to build. We even have a little blog post about it where it's like, "Why is a bedding company talking about resumes? I'm sorry, did you want to read about thread counts for the 1,000 times? Go Google other betting content. That's boring. Here's something interesting." And so, that's the brand that I want to build. It's a little Zany, a little off the wall. Very helpful, and it does a lot of good in the world. And that comes down to everything that we do. We plant trees for every order. We donate a lot of sheets to homeless shelters, and we save a lot of water and a lot of pesticides and insecticides, and we have fun doing it. 

Felix: Thank you so much for your time, Colin. Sheetsgiggles.com is their website. Again, thank you so much for coming and sharing your experience.