Andrew Gluck of IrrvrntVC: Unconventional Investments & Controlling Your Brand’s Destiny

The Profit Forecast: The eComm CEO's Podcast

Andrew Gluck of IrrvrntVC

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Transcript

Ben Tregoe: Andrew, it's awesome to have you on the Bainbridge podcast. Thanks for joining. 

Andrew Gluck: My pleasure. Thanks for having me. 

Ben Tregoe: Andrew your background is incredible in e-com. You got started in E-com, like almost right at, right away. It looks like you did one brief sojourn and teach for America. . And you've had a lot of different roles at a lot of different types of companies, so you have this incredible experience, across the breadth of the space, both in types of companies and experiences and roles, but also in time.

And now you're a VCA at Irrvrnt. So I think it's like a really interesting journey. I'd love to hear how you got started. What attracted you to e-com and then ultimately to venture? 

Andrew Gluck: Yeah, sure. I actually, I studied economics in undergrad. I also studied psychology. Both of my parents were psychologists which is why I'm the way I am, good and bad, but really loved the elements of economics and rational, or even irrational, but the idea of trade offs and things like that, I actually really love, like behavioral economics, read a lot of cast stein. , a lot of Thaler, Dan Arielli. And so really loved like the application of economic combined psychology.

So out of after I graduated I went to Brandis. And then after I graduated, I got a job in digital marketing. Those were the roles that I was like interviewing for at the time that, that, that appealed to me. Ended up working at a company called Smart Sign. Smart Sign was like, Amazon is street signs.

They sold street signs, stop signs, no parking signs to small municipalities, to apartment building owners. A little bit consumer, but mostly that b2b. And most of their revenue and traffic was driven from, repeat customers, but also all the new customer acquisitions was digital and through paid search and through Google and through big paid search.

. And so started there, learned everything about paid search. , they got me this like giant book. It was like a 300 page book that's, 20 10, 20 11. This is what, how people were learning the world of paid search at the time that I used to read on the subway on the way there and the way back.

Yeah. Really fell in love with the discipline. The idea of the immediate feedback loop and scorecard that you got every day. The ability to make tweaks and see the performance adjust. And then I've always, again good or bad but been attracted to trying to be as close to that revenue point as possible.

, the revenue generation side. I think that there's a lot of value that comes from that. And so after that I worked at a company called Quid. Quidsi was an Amazon subsidiary. I joined shortly after. They were required by Amazon. Yeah. And. I ran digital customer acquisition for diapers.com, which was their flagship site and for wag.com, their pet site.

Yeah. And there learned just breadth of additional channels, comparison shopping engines affiliate, and at Quincy, they were really big on customer lifetime value. So they were okay acquiring a customer. Making up numbers at this point, but for a hundred dollars, knowing that customer would over their three, four year lifetime, spend hundreds of dollars.

make up more than that in gross margin dollars over the course of the lifetime, because these were consumable goods that were sticky, and the customer service was excellent. The pricing was excellent, the experience and customer experience was excellent. So they were really focused on that customer ltv.

After that I went over and worked at the vitamin shop there, ran digital customer acquisition for their a hundred million e-com biz. They also had, Little under a thousand stores nationwide doing a billion dollars a year in annual revenue roughly. And yeah, that was also really really interesting, exciting.

And one of the big lessons there was they were really great at time, like online and offline data together. They were fantastic. I think it was like, 70% plus customers who checked out in store, used like a loyalty, a phone number or something. Whoa. Which again, 20 12, 20 13, 20 14. Pretty impressive at the time.

They had a really good loyalty program. Perks and benefits and discounts and everything else. And and the store associates and managers were really big on it. And it really helped tie that online and offline experience together in terms of for. For us on the digital side to have that cohesive view of customer shop cross channel and those customers who shop cross-channel were a lot more valuable.

Obviously there's correlation, not necessarily causation, but there was some causation. If you can get customers to do both and know that, oh, okay, need. , I ran a protein powder. I need to go to the store today. Or Oh, okay. I'm signing up for their emails or having a promotion on this new brand that I haven't tried.

Let me test it out. I know that, I know if I don't like it, I can bring it back to the store. Then I don't even need to chip it back if I don't like, I can bring it back to the store. That's how good the, the customer experience was. If you can get folks to have that holistic, customer view for us and customer experience for them where it was cohesive there was a lot of value created.

And then in, in the end of 2014, beginning of 2015, left co-founded an agency called Agency Within which is now called Within. We grew it with a co-founder to be one of, if not the largest independent digital marketing agency in the us. Worked with enterprise brands like Nike, Intuit, shake, shacks, banks, Etsy, and then a startup.

Brands like Goop Roth, these Helix Bandi, Billy Zola, Lola Pet Flow, Trey Coffee, TWI. And others. And, we're very fortunate, timing wise location wise with proliferation of D two C, brand proliferation of advertising on Facebook to be able to grow that business to a hundred plus clients, a hundred plus employees.

Like I mentioned, one of the largest independent DMAs in the US based on annual spend under management. I had a successful exit from the agency in 2018. . And then after that, when I was trying to I did the whole semi-retired thing, stayed at home, played a lot of golf and tennis. My wife was after a certain point like, you gotta, do something else with your life.

Picked up my head, realized all right, lemme go out there, see what's, see what's going on in the world. Did the, a hundred coffee meetings with friends. Friends or friends former colleagues, former just partners in the business and things like that, that I'd worked with.

And realized, the passion that I had in the digital marketing e-commerce landscape was still there. But I really loved the passion of working with those early stage. . And really with founders and founding teams, there's just something about working with founders that just really struck the chord with me as a former founder, as a entrepreneur, as the son of entrepreneurs.

My parents, like I mentioned psychologists. My dad had his own practice. My mom had a real estate business that her Yeah. Parents had started that she continue to, grow and develop. So just, that entrepreneurship was. In the blood. And so really resonated with with founders.

So started to just get more involved in the LSH space. From 2019, beginning of 2019 to the middle end of 2021. Angel invested in 25 companies directly. Advised a few companies as well, made some investments in SPVs. In addition to that, just learned a lot about the, that the ecosystem. I was pre covid taking the subway in every morning, would read all the rags all the.

10 15 newsletters that I've subscribed to read every single day on the way in. Yeah. Send out articles to people, get their opinion like, oh, , what are your thoughts on this? Or, this looks like some, business you could partner with. And really just use that to, have those conversations.

Gain a real foothold in the industry and try start to understand, how things operated. And then was going to the into the city, into Manhattan. Three, four days a week and would stay after two, two days a week and go to the happy hours, go to the pitch competitions, go to the events, meet people and just have a great experience of being part of that New York City like ecosystem.

Yeah. So that was how I like, made that transition from marketing agency to really start to learn even more about, startups int. 

Ben Tregoe: How long did that transition take you when you first started doing Angel to, setting up your reverend as a, your full-time gig?

Andrew Gluck: Yeah, I so it's a great question. I think it was a slow transition in terms of. Time, but it was just building on building blocks. So at the beginning, all the United say took about two and a half years or so at the beginning as I was angel investing was investing my own capital. At a certain point in time I started to send deals that I was seeing that I liked to friends and folks that I met an ecosystem to the point where there are times where I send deals to folks and they're like, oh, it's an e.

you're investing, you believe in it. I don't need to, I don't need to do my own diligence. I'm just following on your diligence. Wow. There was a time when that happened. When I started to realize, okay, people are trusting me because of my track record, my background, my ability to diligence and add value.

That, I could potentially go out and raise a fund and I'm really enjoying this and wanna be doing this. Cause the funds a really long-term commitment. Right fund itself is tenure commitments. But, going out and starting a, a firm that's built around, multiple series of funds is a real commitment.

So start to realize that this is what I want to do long term. Actually try to. , have some kind of formal or informal interviews for some roles at funds. Nothing really lined up. And worked out. So just went out was like, all right, I can do myself. Went out, was originally targeting a five, six, 7 million fund.

Ended up getting an anchor investor come in apple Core hold, apple Core Holdings. , I ended up raising a nine and a half, 10 million fund with a two year deployment schedule, and about halfway through that fund right now. 

Ben Tregoe: Nice. Wow, that's awesome. And then it is the goal, you I guess then you're going out and raising your next fund pretty soon then, right?

Because you're halfway through. 

Andrew Gluck: Yeah, so we'll probably start raising after I, I say like aft af like April, may, probably after Passover. . So starting to think about working on the fund deck and everything else, it starts to have the informal conversations with a lot of more, some more institutional investors.

I think, one of the challenges of the first fund, good and bad, and I wouldn't change it was I did as a rolling fund through AngelList. The way a rolling fund works is technically every single quarter is its own fund. LPs who invest in multiple quarters are cross collateralized. You can make minimums across quarters and.

It's a little bit more complicated. And so for institutional funds, it's a little more difficult for them to do it. But for me it was a great opportunity to like crawl, walk, run, crawl with the angel portfolio, walk with this one, and then eventually run with more moving into more institutionalized fund setup.

And it was great also because I got to meet LPs along the way. . That's a really great thing about the rolling funds. that if you meet an LP in the third quarter or fifth quarter of your fund life cycle, in a typical fund, if you're stuck there, you might, you might have already had your final close.

You might be like, all right, let's stay in touch with the next fund. Maybe you don't. here. It's okay. You wanna come in, you could come in right now. And had the opportunity to have some large LPs come in, even mid fund, which you wouldn't be able to in a traditional fund model.

And those LPs will hopefully continue with me into fund too. 

Ben Tregoe: Does so does cross collateral, meaning that if I were to invest in the first quarter and somebody invested in the third quarter, we still. Exposure to all the investments or what does that mean? 

Andrew Gluck: No, so you LPs who invest in a quarter or multi quarters, they have exposure only to the quarters that they're invested in.

I see. But they're cross collateralized, so just use really easy numbers. Let's say they invested. a hundred thousand dollars across four quarters, so 25 K to four quarters. If we had an exit from the fourth quarter and that was the first, and we haven't had exits or liquidity events from any of the other quarters, their principle needs to be paid back in full before carry gets calculated.

Got, so they would got paid back not just a 25 K for that quarter, but the other 75 K for the other quarters. So they would need to get back their full a hundred k. , let's say there's 200 K of value created, they'll get back to their a hundred K. Then that additional a hundred k would be subject to, to carry to the 20% carry.

Ben Tregoe: Got it. And then, okay. So as you get more successful and bigger, you can start the term, start changing more in your favor. And I would imagine for in, in terms of. . You know what I guess actually if you move off of a rolling fund, then it doesn't matter. You're going to a committed fund and then everybody just splits in and you get what you get in terms of management fees and carry and things like that.

Andrew Gluck: Yeah, no, so it. The rolling fund is oh, I think probably, if I had to say it's probably like a little bit worse for LPs, for a lot of the more larger LPs, institutional style LPs, like my anchor lp, they're in for the entire, eight quarters. So it's it almost acts like a traditional fund for them.

There's some elements of the rolling fund that are a little difficult in terms of timing and other things. Traditional funds slightly better, I think for LPs. And certainly more traditional and more, more accepted and just easier, you don't have to deal with the questions for, listen for a lot of my investors and the first fund, they were, it was their first time investing in venture oh, for, forget about explaining rolling fund versus traditional fund to them I was explaining, carry and and parallel returns and things like that to.

Which I'm always happy to have those conversations with folks. Those are always exciting. I coined the term with with someone else emerging LPs that, I think we're gonna see less of that for the next year or two, but from, certainly from 2018 to 2021 or so, there are a bunch of em, emerging LPs, folks who are making a lot of money in the stock market and real estate and other areas that were starting to, from their own exits and in their own, traditional, SMBs or even, venture, they.

Employees, other places that start to want exposure to venture. Yeah. And we're starting to lean in on that space. I think we'll probably see a little bit less of that over the next few years as the economy is cool. But it's certainly a place where I'm very comfortable having conversations with folks.

Yeah. Just to educate them. No 

Ben Tregoe: you've started when did you start first doing your angel investments? Was that 2018 or 2019? I'm sorry, 

Andrew Gluck: I. is tail end of 2018 is when I started to go and meet with folks and get exposure to space go to events start to understand more about the space.

Started making investments at the beginning of 2019. So it took about three, four months to get comfortable. I think I probably committed to my first two deals in like February, 2019. My first few deals have done pretty well. First three were that, I did all that at the same time. Were lunchbox branch furniture and caraway, which is well done pretty well.

So some good nice beginners luck there. 

Ben Tregoe: That's awesome. And did, has your thesis changed? When you started were you like, oh, I'm gonna invest in brands, It's expanded to, 

Andrew Gluck: yeah, I think I always wanted to invest in kind of brands, ad tech and then e-com enablement tools, infrastructure.

I actually started to shy away from brands even before I moved to the fund, even before I moved to the fund. My last investment in a brand was probably in at the tail end of of 2019. Beginning of 20, 20 20. Really? I started to see with rising valuations at the early stages at the late stages impacting the early stages, companies raising, pre-product, pre-revenue at eight to 10 million when they hadn't even launched a product yet.

It was tough. Seeing just from some of the brands I worked with, they were having a lot of. on the revenue side, how hard that is to actually get and flow through to, to, to ebitda and how capital intensive some of these businesses were. Yes there's debt financing and funding and all these other things going on in the space.

But I, I think. Started to realize that, as I was moving towards thinking more like a fund manager than an angel investor, that there's not those same opportunities for five for the five x opportunities, 10 x opportunities that you can have. So angel and listen, if you can get a five or 10 x, you do that all day every day.

But if that's the upside on the opportunity, it becomes a lot more challenging. From a fun perspective. And I remember meeting with the brand like in the grip space, and they're raising it 10 million pre-money, 10 million before they had to even produce, produced a product or revenue.

And they were talking about, okay. And then, we're talking. this minus on that last on that, and then they're like, yeah, and then we exit for a hundred million. I'm like, yeah, if you can 10 x my money, amazing. But if that's the like upside opportunity, for a fund that's like making 20, 25 investments, it's like it doesn't, a 10 x is great.

It doesn't move the needle in the way that you need it to. If that's, again, if that's a home run grand slam for you. It's great for founders, it's good for early investors, it's good for angels, but from, for a fund manager, it's just not, it's just not the. 

Ben Tregoe: So what, there's this the sort of conventional wisdom about, oh, VC's got disillusioned with brands and, who do you think is the investor for brands now?

Is there any VC that's set up to with a fund that would work at 10 x max returns? Or do you think it's oh no, this is just like individual investor have to support these brands like, or is not institutional at all? 

Andrew Gluck: I think it's gonna be, challenging for some of these brands. I look at some of the brands, I'll give an example.

And we also serve as fractional CMO at school area. It's a men's clothing company. I've worked with them at the agency for a long time, and then I've been working with them in this capacity for about two, three years now. And listen they raised very little money outside of money. Funded, self-funded a lot, quote unquote bootstrapped line of credits, things like that.

And yeah, they're fortunate, that the founders are, older and a little bit more established to be able to do some of those things. But they have an opportunity where they're now in control of their own destiny, right? They're deciding, how much you want to grow, how profitable do you wanna be?

Do you wanna focus on growth? Do we wanna focus on this? Because they don't need that, 500 million exit to get out from underneath a preference stack they need. , whatever it is, a hundred million would be, fan fantastic, right? So and, they're growing. They can get there.

It's in, in sight. And so I think that's the that's the

challenge for these brands is, are you really creating something where you could have. Upside opportunity where you really can build, a real generational brand. You look at some of these brands, listen, there's a lot of luxury brands that have built to huge opportunities.

L Vmh is, incredible . They're, buying more brands. The space, there's prime with with Jake Paul and Ksi that they're building and they're, , they do 500 million, a billion in revenue this year, right? So there, there are those crazy outside opportunities, but you also have to think about like, how much are these brands really gonna be worth at exit, right?

. And I spoke to a fund recently called listen Venture. . And Jeff there the founder of gp there is, he understands the space intimately. I'm like, that's all they do. And they have a very different model. It's very concentrated. They take a big stake in these brands.

They're not underwriting a billion dollar exits. They're underwriting a hundred million exits. And that's, if you just have to understand where the upside opportunity. As a founder and, maybe you do wanna control your own destiny and maybe you do want to get a little bit farther along and maybe it does take more time.

Maybe instead of raising capital, in year one or year two, you wait till you're three, till you're at a million, $2 million a year in run, in, in revenue run rate, and. , then you're raising at, a reasonable val valuation. And the goal is really to, to growth. And maybe that is the last round you ever raised, right?

And the goal, and you're, you're transparent, Hey we're gonna get this to 10 million and then sell, or we're gonna get this to 30, 40 million and then sell, or 30, 40 million, and then we're gonna just distribute profits or whatever the case is, or, , we're gonna get to 30, 40 million and then we're gonna take some debt and buy some other companies and expand the product line.

But there's no right or wrong way necessarily to grow a business. But VC is not necessarily the best, catalyst and funding mechanism for everyone. 

Ben Tregoe: Yeah. What you said something really interesting, you started with like lvmh, right? So I hear that and I'm like, wow. Those brands were multi-generation.

Like some of the brands under there have been around for 50 for a really long time. That's right. So what do you think 

Andrew Gluck: is Polars coming up on its 10th year? Is it really They survive, they grind. Yeah. They grind who they survive. And again, like it's a process that like, not everyone is necessarily impeaching enough these days to be that, have.

low and slow growth mentality. It's hard, it's challenging. I'm not gonna say it's easy. I'm not gonna say that they're necessarily gonna get exactly everything that they, exactly everything that they want, but, they're in a really good spot because they've been thoughtful about their growth along the way.

Ben Tregoe: Yeah. So if you were talking to a brand, I know this is a hard question, but if you're talking to a founder now, and you were saying, Hey, if you're thinking of. building a brand, you assume you're not gonna take VC money, at least not in the beginning. How many years do you think it is before you're, you've got to TWI is okay, I can control my destiny. It could be in year one, right? 

Andrew Gluck: It could be in year one. If you stay lean and mean and you have, product and everything that works and unit economics that work and. , you don't get over your skis and say, Hey oh, we know what our LTV is gonna be in year five, and we could spend up to this.

More and more you need to really start focusing on payback period more than ltv, right? . And thinking about I was at an event the other night one of the founders was talking to me about they're supposed five year olds. Again, I'm. No one wants to hear that anymore.

I was just direct with him. No one wants to hear that anymore. It's about your payback period. I'm like, . Think about, five year ltv. Money costs 10, 15% nowadays, or year three, four, and five. LTV is worthless, at the time value of money. So you really gotta look at, okay, we're paying X to acquire company.

We know that our payback period is six months or nine months, or 12 months. Okay. Those are, reasonable for consumer companies. How correct you are on some of those assumptions, what those kind of cohorts look like. You gotta be constantly updating and figuring out, especially as you scale.

You see a lot of companies that you're acquiring $200 of cu 200 customers a month. Their cohorts look nice, they start to scale to a thousand customers a month. Those cohorts start to look a lot more flaky, just. As you expand your marketing, as more of your customers come through pay channels, as you go more upper funnel, you get people who are a little farther away from the brand.

Those people aren't gonna be as sticky and as high value as your best core customers who're finding you other ways or finding you through a friend or coming to you organically or who you didn't really have to mark through that much. And . Yeah. In terms of controlling your own destiny could in theory be your one if you're really, running lean and meat.

Ben Tregoe: You I love that you're talking about like the rising CS as you move further out into the tam, or away from the easy or low hanging fruit. You've done, you've built your career in performance and customer acquisition. Like how do you measure that? How do you know , how quickly you're getting into the man, maybe it's not worth the incremental dollar here to try to acquire this customer.

Andrew Gluck: We're too far away from our, yeah, I think I think you need to measure it, right? So having a really tight There's a lot there's, attribution, incrementality, marginality, right? When you talk about these things. So attribution is, okay, who and which channel get credit for acquiring this customer?

And. , there's no necessarily one right answer. There's a few different tools out there. An investor in a company called Revenue Role that does attribution, that helps you try to really align, which channel should get credit for a part of this customer, that's one thing, right?

Then there's Incrementality, how incremental were those channels, right? So let's say you turned all those channels off or that channel off, right? Would you actually drive? Would that customer come anyways? Or this, they were on their way, they were on their way through the funnel and like you hit them on the way, on the right.

On the way in and so I think that's, that's another thing to consider especially with some of what's going on with Google and Pmax and Facebook. And if you're not running, incrementality. if you're spending over, a hundred hundred 50 K a month on marketing and you're not thinking through the incre mentality of some of these channels and you're just taking them at face value.

I'd recommend you, you start looking at that, and then there's marginality, and then let's say you have a good handle and attribution and good handle and act incrementality. When I say good handle, getting 80, 90% of the way there is probably as good as you're gonna get it on these. Then the next thing is marginality.

As we scale these channels, what is the performance? So not looking at just the average, but looking at, okay, when we were spending a hundred K and we were getting a thousand customers, that's a hundred dollars cap. Let's say I'm okay with the $200. , just because I spent 200 k, I could get zero new customers and I'm still at a $200 cap.

And I could still say, this channel looks good, right? But thinking about it, what is your marginal cap? So now I spent another a hundred thousand dollars. If I got another 50 customers, is that a good cac? No, that's not great. But your average is still gonna say, oh, this channel looks good in an average basis.

Yeah. So thinking about that, as you scale out your channels, as you scale out, Google, Facebook, Pinterest, Snapchat, TikTok app, all these channels direct. , like, how much more are you spending? And looking at that incremental spend against that incremental customer acquisition and listen, nothing is perfect and you're not gonna have this super, clean test.

But understanding, okay, we used to spend three k a day in this channel, now we're spending 4k. What are we. Yeah, maybe some things are, there's some seasonality week over week and like we have a sale and promotion, but understanding, oh, okay. For the last two weeks we've been spending three k a day.

Now the two weeks after that, we're spending four K a day. Okay. We spent an extra $14,000 over those two weeks. What do we get not just looking at the averages again? Cause the averages are misleading. 

Ben Tregoe: Yeah. Do you, one thing that we hear from founders sometimes, or and you often read about this, is I think people overestimate.

Addressable audience or Tam, and they assume that, they're like, oh, I could keep growing and everybody's gonna want my thing. If I just advertise well enough or find a new channel, I can do that. Yeah. Do you, and then I think what happens with, in that case is then the founders get focused on doing that, right?

I gotta get more budget, I gotta, growing out there and then they can get themselves in a lot of trouble cuz their payback periods get way extended. , they're making decisions on cac, assuming a five year ltv, yeah. And then all of a sudden it's holy shit, I don't have any money.

So like, how do you, yeah. Advise as a founder to think through that. 

Andrew Gluck: Yeah. I've seen this a lot. I'm not gonna, mention names. I'm sure I have companies I've worked with personally that I've been guilty of. This said companies, my portfolio, other ones, I remember talking to a founder of a company.

That he's yeah, we're this vc, we were this media darling. We were one of these early Q2 c companies, we're doing, tens of millions of dollars a year in revenue and look up after five years, it's like we've produced $0 in ida. Because all we do is we take VC money, we put it onto Facebook and Google, and we buy customers and then rinse and repeat and rinse and repeat and yeah, our revenue is going up.

That's only because we keep spending more and more, more money on marketing. So I think it's important to understand like how realistic are those LTV numbers and those payback periods. Like we talked about, like having a five year ltv. Great to think about, in theory. Just think about yourself.

What products do you, are you still buying five years later? Yeah, listen I'll tell you like. One brand I personally love and shop a lot for me, which is like literally like once or twice a year, is like Lululemon. Like I'll probably buy two new, new pair of Lululemon pans and shorts, like literally like once a year.

my five year old TV for them is not that high. Again, you gotta look at the time value of money, right? Yeah. They acquired me, however many years ago and I keep paying dividends and whatever. But again that the dollars upfront are worth so much more than dollars in the long run, especially in this environment.

, yeah. Tam, for a lot of these consumer companies, is everyone in the US or 50 million people or whatever. Oh yeah. But look at some of the big brands in your space and see how much have they been able to capture and how have they captured it? Has it been by going. , through distribution, through through wholesale, through Costco or grocery stores or whatever the channel is that makes sense for your brand and your category.

Or is it, hey, we're gonna disrupt and we're gonna spend money online and we're gonna buy our customers that way. You're just paying another middleman. That middleman is Google or Facebook marketing channel. A lot of stores, a lot of bra, these brands opened up a bunch of stores.

Now they're closing a bunch of store. they thought stores were gonna be the answer. I think it's really understanding that, your customer base of customers that you could acquire at a reasonable c might not be as large as you once thought. And also just stay alive and grow and you don't need to necessarily continue to grow at these astronomical rates.

Again if you can control your own destiny a little bit. And just continue to grow and survive. And then, you know what happens, those customers that you paid for in year one and year two, they start to come back. And that starts to be, that EBITDA that you get that really weren't accounting for and like you're running marketing and break even.

And then all these repeat customers from the first two, three years start coming back. And that's when you start to see like those things really compound and that revenue really starts to stack. Okay. Yeah. We're spending money on these customers trying to break even 3, 6, 9 months, 12 months.

And we aren't doing that on the marketing side. And and then we have all these previous customer revenue come back and those are paying for our SGNA costs. And also, by the way they're going above and beyond and Wow. Actually we made money last month and like that in our p and l.

That's something nice to come see in there. 

Ben Tregoe: The cash went up. Oh my god. So you, you mentioned payback period. I love it. We, you still hear a lot of people talking about running their campaigns off of like roaz or which I think they really just mean sales, and or m e r s, like what do you think is the, how do you think about the metrics of customer acquisition and ad.

Andrew Gluck: it's challenging in this environment. CPMs are higher than ever before, although maybe not than ever before I come down a little bit. But you really, again, have to, I think one of the big mistakes was auditing a company recently. And one of the things that I saw there was like, This disconnect between what was happening at the C-suite level and what everyone was understanding.

And then this this is a temporary tattoo for anyone who's curious. . My daughter's birthday was on Tuesday and was giving all the kids tattoos. She wanted me to get a tattoo. I was like, all right, I'll put this little one on . I just needed a disclaimer there. Orthodox, I wouldn't put on a tattoo.

Not that I against tattoos personally. There was this like big disconnect in my mind between kind of what was happening at the C-suite level and then what was happening, boots on the ground at the execution level. , like there, they were talking about, hitting these revenue targets.

They're talking about, again, these like average tax and payback periods, but there isn't that like deeper connection and not, don't necess say trust, but think combination, trust, understanding. Where you can be like, listen, like we're gonna make these changes in the platforms and the metrics in the platforms might not look good.

But the reason for that, and I'll give you a concrete example here. Google used to have smart shopping, forted shopping campaign for said product listening has, and they had shopping campaigns and they had smart Cho campaigns. Now they have Performance Max. And with one of the big changes in Performance, max was by the way, you can't layer an audiences.

Now, a recent change in Performance Max is you could bid differently for new customers and repeat customers or just exclusively target new. . And so what I see is a lot of companies not making that change, only target new customers. I'm like, listen, you don't know how much of the revenue and how much of the conversion is coming through this channel are repeat customer revenue.

So it might not be a lot of your spend, but again, going back, it's in fleeting that metric, the average row that you're seeing or the average cap that you're seeing because you're counting those conversions of new customers for, so for example, you might be. $10,000 here, getting $50,000 in revenue and being like, great, we're at a five x return on enhance spend.

That's amazing. A thousand dollars of that spend might be driving $20,000 of repeat customer revenue. And really what you should be doing is discounting it or not counting it at all and being like, listen, like that revenue okay. Yes, we want it, we're happy to get it. But that's repeat customer revenue.

We, we already paid 3, 6, 9 months ago to acquire that customer. We baked in their ltv, we can't pay for it. Again, I can't keep paying for customers to come back in, or if I am, I at least need a account for that. But by the way, then we're still, we're really spending nine K and driving 30 K revenue.

It still might be good, but it's not the same as 10 and 50 and understanding that. And so that's like some of the conversations that I'm seeing and happening across a few different brands here is Is understanding that there needs to be between, C-suite execution, whether it's agency, internal, that understanding of what we can actually do, boots on the ground to account for some of these things.

And how do we create, hopefully you can even create, for brands that are spending serious money, like that brand, like really had a deep understanding of, hey, these customers Having CDP set up, having your pixel set up in a way that actually passes back information in terms of predictive ltv at a minimum, Hey, is this a new customer, repeat customer?

Oh, we only want to fire the pixel if it's a new customer, or, oh, okay. If it's a repeat customer, take the revenue and only take 10% of the revenue as revenue, because that. That's the value we would pay for to drive a repeat customer. And so you gotta get more sophisticated as you scale up because it makes sense.

Again, you're spending a hundred, 150 k, that's when you start to think about going back to it. You did be thinking about payback periods from the beginning. Then, attribution. Incrementality, marginality. Then start to think about new customer, repeat customers, especially as your brand gets older and as you scale up with all these repeat customers coming back through some of these channels, making sure that you're looking at, you're looking at the performance of those repeat customers separately or if you're accounting for them in some way, thinking through actually passing back and setting up systems to pass back.

Predictive ltv actually at the point of conversion at the point of ac customer acquisi. 

Ben Tregoe: And do you, that's fascinating cuz as you were talking, I was like, what is the relationship between your, repeat your cohorts, right? So you're saying like, oh, I've got these customers and like they're coming back.

But what's the relationship between them coming back and your ad spend and you're saying, is it like an 80% thing? You can probably get an 80% answer, but it's better to try than Yeah. 

Andrew Gluck: I mean it all. Try to get, yeah, if you could get 89% of the way there, you're in a good spot. For example, again, it'll just go back to tool already.

Like we look at how much we're spending on, like retention marketing and brand marketing and think through that. And in some ways allocate that to, to this repeat customer, trend. So like, all right, great. These customers are bringing back and this is what their LTV is, but what's their ltv?

what's their LTV in terms of revenue? What's their LTV in terms of gross product, gross profit margin what's their LTV after you account for returns? And everything else? What's their ltv? Gross product. Dollar Gross profit dollars. After you account for cac, what's their ltv? Gross Pro Gross Profit dollars.

After you account for cac, I don't if you account for any retention market knowledge that you put customers and that's really how you wanna, again, this is a mature business. It's been around for 10. . That's how you want to get to, and again it's not about getting to perfection, it's about getting 89% of the way there.

Said you couldn't allocate your dollars the best place as possible, right? Yeah. The goal is not that as nice for your report that says X, Y, Z. The goal is, okay, this is what's happening and these are the adjustments we're gonna make based on that, and this is how much we're allowed to spend in these channels based on what we're actually seeing.

And let's update this monthly or quarterly or whatever the case in cadence that makes sense for your business as you're. . 

Ben Tregoe: Yeah. And who, who owns that? It sounds like you own that at Tillery, but is that often in marketing or is that the CEO or finance or who typically 

Andrew Gluck: Yeah, I think it's it's probably, yeah, it's not that, that, that's probably like a CMO type thing.

And I think I, I think one of the trends that I saw on the CMO side for the past few years that I think you're seeing is it was very brand heavy. . I'm not a brand person and I'm not disparaging brand in any way. It's wildly important, that's how come you're able to charge, that's, , LVMH is able to charge what they charge for ads that are, guests they're great, but their margins are, insane.

They're charging a couple thousand dollars for bags that cost a couple hundred dollars to make. But I think having someone who understands understands analytics and understands the channels and that where you're deploying most of your dollars is widely important to have someone with that purview, in the C-Suite.

Yeah. 

Ben Tregoe: Andrew, switching gears. Tell tell me what you guys, what you're looking at now, for, you have half your fund to deploy, you're obviously gonna go out and raise more. What are the things that you're looking for? 

Andrew Gluck: Yeah. Areas that I'm really excited about are e-commerce enablement, commerce, tech marketplace.

Ad tech places that really help these brands whether they're startups or, older brands, more traditional brands start to drive more, more gmv, more revenue. Examples of that include companies like, Maple. What they do is they help brands that are in the us get live internationally.

They work with p euphoric and a few other like CPG and beverage and makeup brands. They enable you to basically have two, three day shipping internationally price really competitively. One thing that I love about what they're building is they're also building a space where there's already.

A lot of these brands already have 15, 20% of their traffic is international. They don't have a real way to serve it, a real good way to serve it. So they're stepping in and meeting that demand. Recently invested in a company called Skip D. What they do is they power rental running a test right now with about 20 stores for Home Depot.

And again, home Depot does about a billion dollars a year in annual rental volume. Going to a place where it makes sense. Talk. to Staples and Walmart, staples complaints. A bunch of people rent a bunch of projectors or buy a bunch of projectors from them and the end of January, or turn them in the middle of February.

Right around the Super Bowl time, they're like, we'd rather just rent them to them. These people don't need, new inbox. They don't wanna pay, a restocking fee, but they'd happily pay 20, $30 to rent a couple hundred dollars projector and they don't need a brand new one.

 Guitar Center does a bunch of rental, all paper and pen. You gotta call the store, go in. So trying to get a contact there if anyone has a contact there or if Guitar Center, C-Suite, you're listening to this give me, gimme a ping. But again, this idea of taking the assets, the revenue the assets, the products, the stuff that you already have, and how do we get more gmv, more revenue, more profit out of these places.

Ben Tregoe: Nice. , so you e-com enablement obviously depends on brands being successful or more brands what's your view, here in end of February, 2023 of d toc and e-comm over the next 12 months? 

Andrew Gluck: I think it's a good opportunity to stand out in terms of, again, if you can survive, 2023 in a place where.

Continue to grow or stay into kind of the same spot that you were. There's opportunities to just continue to build that brand again. Every year you're alive. You have all those customers that you got previously, you can come back and spend revenue with you. So really how do you make sure you get to get to that stage and then also just continue.

ideally continue to grow. Growing five, 10% a month over month really does compound. So figuring out the ways to do that is that, hey, like we need to get our OV up. Let's figure out how to maybe. Offer some bundle pricing, right? Realizing, Hey, maybe we have these some channels that we haven't really tapped.

We don't have a refer friend program. Let's spin that up. Let's do it. It's not, the most difficult thing. It's not the most costly. There's apps for it. Or even just sending out emails to your customers around it and personalize the brand and having them become, be, become refers is valuable.

Are there ways to. Get on new platforms, whether again, it's wholesale, whether it's, maybe it's not wholesale, maybe it's maybe it's getting live on Amazon and spinning up Amazon and being like, listen, that's another channel that we gonna get live. You pay for performance in terms of the revenue and everything else is the, your fees are based on the revenue.

There's, some setup fees. Twitter, we just got live on app. We used to be live on Amazon, didn't work out so well and they were live again recently, and it's growing and compounding. , yeah. It's not gonna be a huge channel for us in the next six months, but it takes time. But it can be a big channel if if you expend your resources against it.

Stay alive, grow. Try to get to controlling your own destiny. Think wisely about the, the dollars that you're spending on marketing. Are they really driving incremental gross profit dollars? within a payback period of time that's acceptable relative to how much you're gonna be able to raise your next time and et cetera.

Ben Tregoe: That's awesome. That was a huge, you dropped a lot of gems in there, so I'm sure this will be. But thank you, Andrew. It's great having you on. 

Andrew Gluck: Likewise. Thanks for having me, man. I appreciate it.

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