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With Scott Orn

A Startup Podcast by Kruze Consulting

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Scott Orn

Scott Orn, CFA

Matt Ziser of Tobi on Running eCommerce Operations

Posted on: 12/30/2016

Matt Ziser

Matt Ziser

VP of Operations - Tobi

Matt Ziser of Tobi - Podcast Summary

Matt Ziser of Tobi stopped by to talk about running Operations at a fast growing eCommerce startup. Tobi is an online retailer that compares to Forever 21. The company has successfully bootstrapped into a large eCommerce business. Matt does a great job talking about the challenges and opportunities in eCommerce.

Matt Ziser of Tobi - Podcast Transcript

Scott Orn: Welcome to Founder and Friends podcast, and my very special guest today is Matt Ziser, from Tobi. Welcome Matt.
Matt Ziser: Thank you.
Scott Orn: So Tobi is an e-commerce company just so everyone knows, it’s not your middle name or something like that.
Matt Ziser: No.
Scott Orn: Maybe you can give a quick background on who you are and how you developed your career.
Matt Ziser: Well, I’ve had a varied career since college. I started from post grad school. I went to grad school with you.
Scott Orn: And undergrad.
Matt Ziser: And undergrad. But like a lot of people don’t know what they want to do after grad school, I went into what was a consultancy, they had been for a few years and in Chicago. I knew that I wanted to get back to the Bay Area, and I wanted to be more in an operational role so I went in to a company called QuinStreet, which is an online marketing company. I was there for 4 years in a variety of roles, and just got disillusioned with marketing. I wanted to be closer to an actual product. E-commerce is something that I was always interested in. One thing led to another and I got a ping from a recruiter at LinkedIn for a role at this company tobi.com. I had never heard of that prior to that. It’s women’s clothing, so. I’m not the target market. Initially they were interested in me for a marketing role given my background but as we talked more. I had the consulting background; I went to business school and law school, so I had a broader skill set. They also had an operational role, which opened at the same time, which appealed to me because it allowed me to do a lot of different things which I really liked to do. I get bored if I’m doing the same thing over and over again. Yeah, one thing led to another and I’ve been there a little over 2 years and it’s been great.
Scott Orn: What’s Tobi’s niche? What do you guys do?
Matt Ziser: To simplify it - our brand and marketing people will probably crucify me for saying this but it’s a total 21-forever peer play online. Our product primarily targets 16 to 24 or 25 year olds, and a lot of college students know us very well, but outside of that we’re not super well known.
Scott Orn: You are the VP of Operations?
Matt Ziser: Yes.
Scott Orn: What does the VP of Operations do? If you ask me what the Chief Operating Officer does. I never knew how to describe my job. How do you describe your job?
Matt Ziser: Right. It’s one of those things. It’s sort of a catch on. It’s good and varied by the company. In Tobi’s case, I like to joke that it’s a lot, if not most of the non-sexy stuff because there actually is some sexy stuff that goes on in our company. So I oversee our fulfillment center which is based in south San Francisco. Orders in, orders out - all that stuff. HR, Finance, IT, Customer Care and then my tentacles reach in to other parts of the business as well, but those are the primary areas.
Scott Orn: Is there one functional area? There might be one warehouse that you had to really figure out how to run, like start up from scratch?
Matt Ziser: That one was the newest. Obviously at various points in my career I’ve touched on operational problems, but not really execution. The system was relatively straightforward. It was easy for me to come in and understand how things work. I didn’t have to build fulfillment system from scratch which was good for someone who wasn’t really familiar with it. But understanding the complexities of it and how to really optimize it is difficult. It’s primarily a personality problem. It’s about how do you motivate people, and get the right work force in place and it can be challenging. It’s different. I wouldn’t call it blue collar, that’s an out dated term to me. I grew up in consulting white collar pedigree environments prior to coming to Tobi. Now I’m working alongside people who, some of them may not have finished high school. That person’s challenges, in itself. For me it’s rewarding, I like that but I can understand for other people, it’s a different world. How to motivate those people and to train those people, to get them to understand certain things is challenging.
Scott Orn: Do you guys have automated warehouse, or do you use a lot of manpower?
Matt Ziser: Yes, we have our own warehouse management system, so it’s all the order in, the FIFO prioritization, the wave picking and all of that - some heavy engineering that Tobi built itself. But we pick in everything using the old fashioned arms and legs. We don’t have robots or highly sophisticated Amazon fulfillment system. But it works pretty well. I’ve toured other competitors facilities, or semi-competitor facilities where they spend a bunch of money on bells and whistles, and I think you don’t need that up to a certain point. Obviously for Amazon, you’re getting orders out the same day and stuff like that is a whole different ball game, but for the most part you still need the old fashioned people walking the isles, picking the orders, putting them in packages and shipping them out. It’s the nature of the beast.
Scott Orn: You’ve talked about how the company does women’s clothing forever-21 style clothing, was that hard for you to relate to? Or you just looked at the organizational and operational problems and was super exciting for you?
Matt Ziser: I think for me it wasn’t that hard to relate to because our customers are pretty passionate about the product, about looking good and sharing the products with their friends and all that. So that was really exciting to me. Obviously it’s hard for me to look at a dress and say it was cuter than this other dress. I did have to learn. I learned a lot more about the actual product, and what a skater dress is versus an A-line dress or things like that, but I still don’t have the judgment.
Scott Orn: You’re not a buyer.
Matt Ziser: No, I’m not a buyer. We do a lot o photo-shoots. There are definitely people at the company who have a much better eye for what is good and what is bad, because to me it all looked good. I mean, unless it’s obviously terrible. So there’s subtleties to it, that I obviously have a disadvantage - I didn’t grow up buying dresses. What I really do like about it is, it’s a physical product; it covers a wide range of skill sets within the company, and I like the passion that you see. You can go on our Instagram account. You can go on our Tobi account. Sometimes they are screaming at us, but at least people really feel something about the product and about what we’re offering. To me, coming from a marketing background in this weird world of advertising, that connection to the consumer was very rewarding. It still is. (side note from Kruze - we are a leading ecommerce accountant, check us out!)
Scott Orn: I love the passion on your site. The models and the marketing is so exciting. There’s energy everywhere when you’re going through the site. It’s really cool.
Matt Ziser: It’s a young company. We empower a lot of young people to run the marketing campaign. Marketing has been so ‘democratized,’ I don’t know if that’s the right word. We’re pushing out 2 or 3 Instagram posts a day. We’re not crafting this huge brand story. We’re just taking pictures in our warehouse, taking pictures of a model shoot, and a lot of it is expression of the people in our company. And that’s what resonates with our customers. It may not work for everybody, but for us–Authenticity is a big thing for the younger generation. They don’t want to feel like they’re being pushed, something is being pushed on them. It’s got to have its own real voice, so we really try to do that. Our customer is very well represented in our employee ranks at Tobi, and we want to funnel that message out to our customer.
Scott Orn: So you guys purposefully employ your target audience.
Matt Ziser: Yeah, absolutely. We have to; to stay relevant. Not only to design the product that the customers are going to want, but just to get it out on a message that is it going to resonate and make sense. They understand things like Snap Chat and Instagram and how to use it appropriately and all that stuff is important and constantly changing too. So you want people who are out there on the edge of it to bring that to you, because otherwise you’re going to be out-moded pretty fast.
Scott Orn: The passion definitely comes through on the site. So you’ve talked about managing the warehouse. I’m an IT guy. I’m into HR. For better or for worse, I’m an HR person. What are some of the challenges when you’re learning some of these other functions?
Matt Ziser: IT is a really good example. I still don’t know much. You have to be able to ask the right questions. You have to build a level of trust with the experts who report in to you, and make sure you’re asking the right generic questions that lead to kind of peeling the onion back a little bit. IT is a really difficult area, because it’s so complex and it’s so technical. I could spend all my time trying to understand what our server capacity should be. So, you pick your battles and for me IT is good when I don’t hear anything about it. I’ve got a good IT guy that helps explain things to me like I’m a 5-year old which helps as long as it’s not lowing up. I spend as little amount as I can on IT issues.
Scott Orn: Is there something or some of those function that you didn’t think would be very fun that turned out to be interesting. For me, some of the insurance stuff is actually fun for me. I like it.
Matt Ziser: There was nothing that I came in where I was dreading. Maybe IT a little bit but just because it was an area that I didn’t understand and know more about it. No. Not really. There is nothing that has really surprised me. Every now and then, I get involved in the brand discussion and things like that, around the product that I never thought I would be talking about like who the Tobi girl is. I actually enjoy that, even though it’s a foreign language to me.
Scott Orn: [inaudible 00:12:14] your catalog marketing experience.
Matt Ziser: A lot of it is your understanding of pop culture, It’s not really this structured approach to marketing. We’re at a point where we don’t have a real identified structure, brand, plan or guideline or anything like that. We’re still very much at the early stages; who do we want our girl to be; who do we want to represent. That stuff, I actually have found to be fun. I don’t get involved too much in it and that’s fine, but I do like thinking about it. At least being a part of the conversation and giving my two cents even though it may not be listened to that much, but that’s okay.
Scott Orn: We have a lot of people that listen to a Chief Of Staff of a startup - early stage 10 or 15 person startup. And they help the CEO with everything. What kind of advice would you give them? I don’t know how many people you have.
Matt Ziser: We’re at about 150.
Scott Orn: What’s the advice to someone who is Chief of Staff, effectively VP of operations at a 10 or 15 person start up who wants to get to a 150 company, whether it’s scaling their own company or leaving their job and finding a Tobi sized company?
Matt Ziser: When you’re thinking about scale, there’s somewhat of a knee jerk reaction to do whatever you need to do to get whatever that needs done. An example would be if you’re negotiating with somebody around a salary, you just say, ‘Okay, we’ll just give them whatever they want,’ I think you need to walk a fine line between doing whatever you need to do to get it done, but also creating some kind of structure - even if it’s a flexible structure - that you can grow into. So the next time somebody comes in and tries to negotiate more, you have some limits and some bounds to that.
Scott Orn: Yeah, we do this. We end up making decisions on the fly all the time. When we sensed ourselves doing that, we started adding more rules.
Matt Ziser: It’s incredibly hard to do, if you’re growing like crazy. It’s a lot easier if you’re slow growth, you can manage it and think about it if you have time. It’s easier said than done. I would say that trying to create some structure early on will help. Ultimately what that structure does is it takes decision making away from you and from other people. So that you can leverage those people. If they have guidelines to say- to go back to the hiring example - ‘Okay for this role we have a salary band, which is very corporate.’ If they have those guidelines they don’t have to come back and keep asking you for questions, and getting permission. It helps ease some of the decision making.
Scott Orn: You know it’s funny. I have a good example from today. There’s a company that’s already committed verbally but who wants to sign our engagement letter. The guys lawyer and called us and he wanted to take out our indemnification provision. We had decided a year ago in our engagement letter that we would never touch our indemnification provision. It’s probably one of the most important things for us personally, because a wealthy start up could just make our life miserable by suing us and run us out of business. So we don’t budge on that. And our lawyer’s the one who’s adjusted that and we never touch it. When she suggested it, I was like, ‘I don’t know if it’s a good idea. We might lose a deal.’ [oo16:00] Now I’m like, ‘Thank God. She made me promise that.’ So I told the CEO, who wanted us to change, I said, ‘We don’t do this. Every other company is signing this. I don’t know what to say to you. You’re main sway.’
Matt Ziser: That’s a great example. The chances of that one client ending up in a legal situation are probably small, but when you break that rule, it gives permission to break it again later on. Later on at some point it might come back to bite you. It’s a good example. As an operations person, you have to get very comfortable with saying ‘no.’ That’s part of the bigger values that I bring to Tobi. People bring things that they want to do, and a lot of time I say, ‘No.’ I’m okay with that. I explain it to them. It’s not like I just say, ‘No’ in an unreasonable manner. I try to explain, ‘Here’s why I’m not going to do it that way.’ Or, Let’s do it a different way.’ Or, ‘Let’s think about it this way.’
Scott Orn: There’s always a reason why we’re doing something. We learn the hard way that the previous way wasn’t good.
Matt Ziser: Yeah, when you’re growing so quickly, that growth masks a lot of things. It’s very easy to just say, ‘Yes’ to everything. You will inevitable and your company will inevitably experience some tough times probably, or a growth that’s not at the same trajectory that you’re at now. Having some of those principles in place will help you navigate through those times, because you’ve got rules. You’ve got a playbook for how you do things. You don’t have undo everything that you said ‘yes’ to while you’re on the upswing.
Scott Orn: That’s an awesome example, by the way. Is there something else you encountered like that? Maybe it’s specific rules or just another way of thinking about these things?
Matt Ziser: Probably, yes. They come into play all the time.
Scott Orn: For us, we don’t do LLC or S Corps. My first startup we did was so chaotic. It had different tax deadlines, and Vanessa told me this - long before I admitted it - that we shouldn’t do those kind of companies. So maybe for you it’s something like, ‘Hey, let’s get into men’s clothing.’
Matt Ziser: That’s a good example. There’s always a tendency or desire to expand into all these other areas. We’re constantly saying, ‘No we’ve got plenty of opportunity in our current market that we are nowhere near fully penetrating. Let’s focus on that.’ The stuff that’s near and dear to my heart, I oversee the marketing budget so setting in clear guidelines on what multiples are there. Or are there any multiples and how we’re going to think about it. If the multiples aren’t there we cut budget. We don’t just keep spending, or even leave spending where it is. Stuff like that. Marketing in particular can get a lot of start ups in trouble, because a lot of them have all this money that they’ve taken on from funding and most of that goes to hiring and to marketing in a lot of cases.
Scott Orn: So you bring up an interesting point that Tobi didn’t raise venture capital money. You guys are self funded.
Matt Ziser: Yeah. The initial investment was made by the current CEO and founder. It’s been funded via operations ever since. I really appreciate that because business models that are profitable and have to be profitable. I’ve always been a skeptic of the venture model. I know it works in certain cases. I just think it breeds bad discipline in a lot of companies, not all, but in a lot of them it does. So that was one of the things that I really liked about Tobi when I was interviewing that this is the company that is profitable and manages itself that way, and there’s good discipline around it operations and how it approaches things. It puts us at somewhat of a disadvantage in some cases, at least in the short term, when we’re competing with some of the other venture funded companies, because they can do things and spend on things that we can’t.
Scott Orn: *that employee based, like the team. One of the things that people don’t realize is that allows Tobi to control its own destiny on an exit. You don’t have to get bought for a billion dollars or nothing. You can get bought for more or less. You don’t have to sell in 5 years, you can wait 10 or 15 years. There’s a lot of positives.
Matt Ziser: Yes. I think the founder definitely preaches a long term approach. He has a decade’s view, approach. One of his favorite companies is Zara and Uniqlo. Both very good examples of retailers that have grown to be these huge successful businesses.
Scott Orn: I always say it ‘Unique Look.’ I don’t know how to say it.
Matt Ziser: I’m not sure. We’re both butchering it. It’s a Japanese company. Those companies took decades. Decades. For a longtime they were local regional players. There are certain advantages to scaling that the online internet brings, but at the end of the day it’s still retail. It takes a long time to build a brand. To build a sustainable, repeatable customer experience and product experience. It takes a long time to build. Not having the funding allows us to take that approach. The founder definitely instills that.
Scott Orn: I totally agree. My mom owned a retail business. For any business she used to always say, ‘Building a big business takes patience.’ We practice that at Kruze Consulting. We’re in this for the long haul. That’s the advantage of having a team that loves what they are doing, is good at it and loves coming to work every day, because then you’re not looking to sell. It’s not about the dollars. Just doing the cool stuff every day.
Matt Ziser: Yes, definitely there’s no clear exit that we’re marching to, I think. Most likely we’ll keep growing the business forever and ever. That’s the plan, because we’re already profitable. We don’t necessarily feel like we need to more money. We might. I’m not ruling it out. We might to want to do that to accelerate growth in certain situations, but we’re not under this mandate from either us or outside investors to get to a point; whether it’s an IPO or get purchased or whatever. It does take that kind of pressure off. There’s still pressure to be profitable, and to succeed and to grow, but you don’t feel like there’s this timeline that you’re marching against.
Scott Orn: The thing a lot of people don’t understand is if you have venture funding, the pressure to grow really fast and spend a lot of money. And then it’s just one day when things change at the late stage and it’s like, ‘Okay. You need to be profitable.’ So it’s hard to get out of those spending habits.
Matt Ziser: Yeah, most of that money goes to people and to marketing. If you’re hiring like crazy and really quickly, you may not be hiring the right people, or may not be thinking about the org the right way so you hire a bunch of people that you don’t really need. And that’s expensive, and that doesn’t help you grow the company. On the paid marketing side, once you stop spending that money, it doesn’t necessarily stay.
Scott Orn: It must be a weird feeling, looking and just shutting off this thing and then being like, ‘Wow! This is what we’re only left with; organic.’
Matt Ziser: If you didn’t spend enough time you’re host in a lot of ways. Quite frankly organic is only organic so much. You can fuel that growth with all this paid for a while, but when you pull those dollars away, it drops.
Scott Orn: It’s like sugar.
Matt Ziser: Yeah.
Scott Orn: Before I turned on the mic, we were talking about other e-commerce businesses that deal with that. What’s your favorite things about e-commerce and what are some of the challenges?
Matt Ziser: My favorite thing is that it’s a real physical product that people get passionate about. It’s easy to explain to people. There’s a lot of common sense to it. You either have a good product customer experience or you don’t. There’s not this ‘gaming’ or trying to [inaudible 00:25:24]with marketing, just the marketing business can be so removed and disconnected. I know they have product managers and things like that at marketing companies that aren’t real products. I know I’d probably get skewered by Silicon Valley for saying stuff like that, but a widget on a website to me is not a product. It’s an experience. There’s value to it. I don’t know, I guess I’m old school, I like having that physical tangible. E-commerce typically covers a wide variety of products, but you’re selling clothes. That’s never going to go away. It’s not very cyclical. Especially women’s clothing. Women are going to be shopping and buying clothes forever. There’s that value. One think that you start to learn once you actually work in an e-commerce environment is how complex it actually is. Everybody thinks they go on a website, you order. It’s so easy. But there are so many different pieces especially if you’re vertically integrated like we are. We don’t own the manufacturing but everything else we run. A lot of e-commerce might source their fulfillment or certain aspects of it - we don’t. We keep all that in house. Everybody down from the $12 or $13 an hour fulfillment center worker, to our software engineer, to our CEO, to someone like me who got his degrees and stuff. There is a wide variety of people involved in that chain. I really like that about it.
Scott Orn: Everyone is necessary to make it work.
Matt Ziser: Yeah, very critical. The challenges are that everybody loves e-commerce, and so it’s super competitive. Everybody wants to start their own fashion company. If you pull 10 people; men or women, about a company they’d want to start, probably half of them at least would say, ‘I want to start a clothing company, or something like that.’ So it’s super competitive. It’s tough. You have to have a very compelling product - one. Not only that, you have to execute every well. It’s tough. It’s not all great. It might be early on when there’s a lot of hype but you’ll run into something sticky.
Scott Orn: I was talking to an entrepreneur today who was talking about doing a fintech company. I was talking about the complexity in regulation for a fintech, that actually worked in their favor down the road. It’s probably the same for e-commerce, once you actually figure this stuff out, and you look at a new entre and you’re like, ‘Oh, that person’s got a lot to learn.’
Matt Ziser: It’s true. absolutely. It’s very complex to create this integrated business, but once you actually do it, you have that built-in competitive advantage. But it’s surviving to that point, that’s tough. There’s plenty of companies out there that can’t, that don’t.
Scott Orn: Anything works that way. Vanessa bootstrapped our company for 3 years by herself. We didn’t have enough money to be able to hire people.
Matt Ziser: It breeds discipline. It breeds a sustainable company. Even companies that made it look easy like Facebook, I’m sure they had a lot of issues early on. It wasn’t easy for them to take off. The harder it is, the more rewarding it is, the more challenging it is. But it is a drawback. It’s not all easy.
Scott Orn: It sounds like you see yourself at Tobi for 10 or 20 more years. I can feel your enthusiasm, that you love working here.
Matt Ziser: I do. I love the team. I love the company. I love my role within that company, within Tobi. I like all the different problem solving that goes on. I like the dynamic that I have with the Co-founder and the President. We all play to each other’s strengths and weaknesses. Things that I don’t do really well, he does well and vice-versa. It’s a good environment, a good set up for me. I think we’re poised for strong growth. It hasn’t been crazy for us the last couple of years. We’ve gone through some challenges, but in a lot of ways I think that was good to start out with that, to really understand what the challenges were going to be to growing the company’s first and to help fix a lot of those things, and then get us back on the path to growth.
Scott Orn: That’s awesome, man. May we can wrap it up here, and you could tell people here where to find Tobi. We have 10 or 15 days till Christmas.
Matt Ziser: I don’t what our cut-off date is on the website, but it’s coming up. We’re not Amazon, we’ll not drone drop it to you tomorrow morning. You can find us as tobi.com. It’s the only place where we sell our products through our site. Happy shopping. If you know any 16 to 25-year old females, who are looking for a good New Years Eve dress.
Scott Orn: In fact, if my niece isn’t listening to this, maybe I’ll get her something to wear.
Matt Ziser: There you go.
Scott Orn: Awesome Matt. Thanks for coming on the podcast. Thanks for explaining what a VP does - just talking about Tobi, the positives and negatives of e-commerce. Also, the fact you guys have done this without raising capital is really amazing.
Scott Orn: A lot of that credit goes to the management team, I mean I help, but a lot of that happened before I got there, but I enjoy.
Scott Orn: Well you guys are a success story. I love your site and I look forward to buying some stuff for my niece on your site. Thanks man.
Matt Ziser: Sounds good, take care. I appreciate it.

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