Founders & Friends with Scott Orn

A Startup Podcast by Kruze Consulting

Startup Podcast by Scott Orn

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Posted on: 09/10/2019

Dave Schappell talks about raising seed and VC funding as a repeat entrepreneur

Dave Schappell

Dave Schappell

Investor, Board Advisor and Director Of Marketing Operations - MyPerfectColor.com


Dave Schappell of MyPerfectColor.com - Podcast Summary

Dave Schappell of My Perfect Color talks about raising seed and VC funding as a repeat entrepreneur, and what metrics he uses to help get investors excited about his startup.

Dave Schappell of MyPerfectColor.com - Podcast Transcript

Scott: Welcome to Founders and Friends Podcast. This is Scott Orn at Kruze Consulting. And before an excellent podcast, a quick shout out to our sponsor, Brex. Brex is a credit card for startups, the first one ever. It’s fantastic. They don’t require a personal guarantee by the founder. That is a huge, huge deal. Also, it has great integration with QuickBooks, which makes life easy for your accountant. And finally, they have really good rewards. They do startup-centric rewards, so, like bonuses on ride sharing and travel, and eating out and things like that. All things that’ll appeal to the whole team at the startup. So, check out Brex. And if you go through their signup and type in Kruze you get a discount. Hopefully you enjoy Brex, and thanks so much guys for sponsoring the podcast. Thanks. Welcome to Founders and Friends Podcast with Scott Orn at Kruze Consulting, and my very special guest Dave Schappell from My Perfect Color. Dave welcome.
Dave: Hey. How are you doing Scott?
Scott: I’m doing great. We’ve been friends about what, ten years? I don’t even know.
Dave: A long time.
Scott: 15 years?
Dave: We met-
Scott: Yeah.
Dave: We met via Gregg Spiridellis at JibJab.
Scott: Yes.
Dave: And I guess he had raised some venture debt from you, your old fund. And you helped me with an intro that almost turned into an acquisition.
Scott: Yes.
Dave: But it was we’ve known each other for a long time.
Scott: Well Gregg is newly acquired by Netflix, so he’s doing pretty well.
Dave: Yeah.
Scott: Hi Gregg, if he’s listening. And then that acquisition that didn’t work actually ended up working out for you the other way, right? Because you got acquired by what, Amazon
Dave: Yeah, so you introduced us to Angie’s List.
Scott: That’s right.
Dave: And then that fell through. And then LivingSocial. That fell through. And it ended up as the smallest of the three acquisitions on paper, which was the Amazon one at the end, turned into by far the best. Because Angie’s List and LivingSocial both essentially flamed out, I don’t really know, and Amazon is up 10X from the acquisition, so we got very lucky.
Scott: Sometimes it’s better to be lucky than good, or good and lucky I would say.
Dave: I just call it lucky. I’m one of the luckiest humans alive.
Scott: So now your new venture is called My Perfect Color, which is awesome. And I’ve known about it for a couple years because you introduced me to the founder of the company. But maybe just retrace your career a little bit, and then talk about how you got involved with My Perfect Color.
Dave: Yeah. So I was, a long time ago, I was an accountant out of undergrad. I hated it. And so when the internet started coming up, like when I was out in high school I ran a bulletin board on my computer in my bedroom. And so when AOL and things started to come up, I said this is a lot like what I used to love doing. And so I went, I basically said I hate accounting, I like what’s going on with the internet. And I applied to Wharton to get my MBA, and I only applied to one school. So, if that hadn’t worked out I probably would have jumped off a bridge if I had to keep going with-
Scott: Was that confidence, or just not understanding the way the process works?
Dave: Yes. I wouldn’t call it confidence. I lived in Philadelphia in Pitt school, and but yeah, if it hadn’t worked out it would have been a rough year probably applying to a whole bunch of other schools. So, I went to Wharton and new I wanted to get into tech. That’s where I met Gregg Spiridellis from JibJab. And that’s where I met Jason, who’s the founder of My Perfect Color, was there. And short story is I ended up getting a summer internship at Amazon in the summer of ‘98, and then I didn’t go back. So, I stayed. I got really lucky with timing. The luck thing is going to come up a few times. I got lucky with timing and worked at Amazon from ‘98 to ‘04. I worked on a lot of different launches, including AWS-
Scott: That was a tough time to be working at the … Probably fun, but also tough, like the company’s going through tons of growth waves and-
Dave: Yeah it was-
Scott: Capital market pain-
Dave: It was-
Scott: And probably the experience of a lifetime.
Dave: It was awesome.
Scott: Yeah.
Dave: So, I get to work with Jeff all the time, and a lot of the key people that are there. Jeff Blackburn and Andy Jassy. Andy Jassy, who runs AWS and founded it, was my hiring manager during the summer of ‘98, so-
Scott: I remember we talked like two years ago, like a party, or maybe it was like three or four years ago. And you’re like you are not going to believe how big AWS gets. Because Andy, and I’m going to mispronounce his name, Jasp-
Dave: Jassy. Jassy.
Scott: Jassy. But you’re like he doesn’t lose, that guy doesn’t lose. And I was like mental note.
Dave: Yeah. I feel that way about a lot of them. I feel like there are lots of great companies, but Amazon is stacked with talent everywhere at senior levels, and they all sort of channel Jeff’s way of thinking, I think. And Jeff’s just getting started. He’s never going to stop. He’s like the Terminator so, in a good way, that’s a good Terminator. But he looks at the opportunity, and learning, and exploration. And I think everybody focuses way too much on the money. From his mindset he just sees it as I’m interested in that, let’s go do that.
Scott: Let’s do it.
Dave: Yeah, let’s do it. And so, it’s a pretty neat space to work. It’s stressful and challenging, but it’s a neat place to work just because you work for somebody who’s willing to invest big in ideas. Versus a lot of CEOs are just working for their own exit ten years down the line.
Scott: Yeah.
Dave: So yeah, so I worked at Amazon from ‘98 to ‘04. I left and did some things, and started a company called TeachStreet we raised some venture for. Basically, we failed. We got lucky at the end with an acquisition. That brought me back to Amazon, and basically worked with startups and VCs in the AWS startup business development team for a few years. And along the way did a bunch of angel investing, like I know you guys do, and got lucky with a few of those, and stopped working a couple years ago. And then recently invested in My Perfect Color, which is what we’re talking about a little bit today.
Scott: Yep.
Dave: And again, My Perfect Color was founded by a friend of mine from Wharton who worked at Amazon with me.
Scott: And you’ve had a long relationship with him because … His name is Jason. I don’t know his last name. But I had talked to him a couple years ago, because it was kind of like an internet company tied to a retail company. They were kinda experts in paint.
Dave: Right.
Scott: And they saw the opportunity to do this on the internet too, and now it’s like it’s My Perfect Color is an internet company.
Dave: Yeah. So, we still own Breslo, this part of his store that was founded by Jason and his brother Dana, by their grandfather in 1924.
Scott: Oh my gosh.
Dave: Anyway, that business is big. It’s doing more than $2 million in revenue. It’s profitable and all that stuff. But along the way Jason saw the idea, or the vision, of selling paint online. And it’s hard to believe, but nobody does it still. So, you can buy cans of Krylon, or Rust-Oleum or whatever, but it’s like the old internet days with channel conflict and Sherwin Williams, Behr, Ben Moore, not allowing these places to sell online. And buying paint in a store is okay for most residential experiences. It’s sort of like you just cover your walls with something, and you cover with [crosstalk]
Scott: Yeah. You bring a few samples home.
Dave: Right.
Scott: And check it out. Yeah. Yeah.
Dave: So, Jason’s first idea was let’s sell paint online with My Perfect Color, and probably ten years of that it’s muzzling along, it was doing fine. But it was in the last 18 months that he realized that the big opportunity is the B2B. So, we sort of pivoted the company into doing a lot of the really hard-to-match bright colors, Pantones, RALs. And so, My Perfect Color now is focused almost exclusively on that. We do exact match paint solutions. Just two days ago Hulu called. They needed Hulu green in a spray can. Not only could you not get Hulu green made at a hardware store, but a hardware store can’t even put it into spray cans, because you have to be in industrial areas.
Scott: Yeah.
Dave: So that’s almost like an example of the niche that we’re in. We can create all the hard-to-match bright colors. Tiffany is a customer, YETI coolers.
Scott: Oh wow.
Dave: IEO. These are companies that all they care about is the match. The color has to be perfect, and they need it-
Scott: And because it’s their brand, right? It’s their brand identity, like the Tiffany box.
Dave: That’s right.
Scott: Or Hulu Green.
Dave: Yeah.
Scott: And so, they’re smart.
Dave: That’s right.
Scott: They think about that kind of stuff.
Dave: Yeah. Jason asked the girl from Hulu. He’s like well what would you have done if you didn’t find us? She joked. She’s like I would cried. But she’s like we would have gone to the hardware store, or Home Depot, and we would’ve got whatever’s closest. And that’s a terrible experience.
Scott: Yeah.
Dave: That color wouldn’t, it would just be a green. And so Jason describes it as we think we’re building a new category. Everybody says we don’t have competitors. We truly don’t have competitors. Because there is, and I don’t want to dare a Y Combinator company, but there is no way a Y Combinator Company’s going to come out that says hey let’s get in the business of making paint.
Scott: It’s hard.
Dave: Yeah, but you have to be in an industrial area. Jason’s done this stuff for 30, 40 years. And so, there’s lots of things that make it attractive, but it’s also what makes it difficult. We’re creating a new category, and we have to go find the people at these marketing companies, and manufacturers, and 3D printing. And once we find them though it’s exciting. Our repeat order rate, expansion rate, all that stuff is really exciting.
Scott: That’s amazing. And I’m not asking you to bare your secret IP or techniques, but what goes into creating the right kind of match? Because conceptually I understand that.
Dave: Yeah.
Scott: Because my dad did a lot of painting.
Dave: Yep.
Scott: And my mom owned a retail store for 25 years.
Dave: Yeah.
Scott: So, I’d be in there painting different vignettes different colors, right?
Dave: Well the big thing is-
Scott: How does this work?
Dave: There is some technology that anybody can buy. So you buy it’s an expensive piece of equipment called the spectrophotometer, so you can then scan. So we get parts in all the time. So, it’s not just we have a massive database of colors that you can order immediately, but bike companies they send us all of their bike forks so that we can scan them.
Scott: No?
Dave: But then you have to actually mix the paint, and you have to do X number of shades lower and darker. And we require eye tests for all of our employees because … And you have to let it dry. You have to learn how to match the sheens, the finishes, the qualities. And then once you get it dialed in then you can recreate that with a pretty high precision level. And so, it can be done. But then you think about the other barriers, like well PPG is not going to take the time to do that for somebody for 25 cans of spray paint.
Scott: Yep. Yeah.
Dave: So, we sorta do things that the hardware stores can’t do because they don’t have the equipment, or because we have ten times the number of pigments. And this is the boring stuff, but so it’s things that they can’t make because of they’re too bright colors, or we can put it in formats, a lot of spray paints, touch-up bottles. And then for the really big companies that could do it, they don’t want to deal with orders less than 10,000 cans.
Scott: Yep.
Dave: So, we can do as little as one can up to thousands. And thousands is we don’t have the automated equipment, so that’s a clunky order. But we do them all the time because it’s a high-gross-margin business. But so that’s the niche. It’s the niche is really hard-to-match colors, things that people can’t do. But also, we’re willing to do sizes that the people that could do that won’t touch, because it’s too small to do less than 10,000 cans.
Scott: I love it. We really geek out on process at Kruze Consulting, because we have kinda the same niche. Like Deloitte’s not going to do what we do.
Dave: Right.
Scott: But also, the local bookkeeper, who’s a cloven to the hardware store-
Dave: Yeah.
Scott: Can’t do what we do either.
Dave: Yeah, they can’t do it, because they don’t really know financings.
Scott: Yeah. Yeah.
Dave: And they don’t know what investors are looking for. Yeah.
Scott: Yeah.
Dave: It’s very hard. It’s a nice place to compete, because you know that the pain point for your customers is I just want somebody that really has their shit together. And knows what I want my financials to look like, and what my investors want it to look like, and what my 409A is going to be done, and have that all integrated and great customer service. And we have the same thing. We know exactly what our customer’s pain point is. It’s just like how do we find ‘em, you know?
Scott: Totally.
Dave: And we don’t get the word of mouth. At least you get word of mouth.
Scott: Yeah. We-
Dave: Because you get a happy startup and they’ll tell ten other startups. The guy in the manufacturing line at Hussmann, or whatever, isn’t going to go tell his other ten colleagues at other companies, so we sorta have to call on every one of them.
Scott: Oh, I didn’t think about that. They might be kind of competitive. Have you guys done content marketing or like, because we’ve kinda found this is so simple, but it works. We just answer our clients’ questions in a public forum, like on our blog, or Vanessa’s posts, or whatever.
Dave: Yeah.
Scott: And actually, that is like a magnet for people, because they do the classic if they can answer this question, they must know what they’re doing right?
Dave: Yeah. And-
Scott: And then-
Dave: I love that idea. The reason we’re terrible at content marketing is because I’m in charge of it.
Scott: You know the guy. That’d be like me in charge of content marketing here. You need the person who, Jason-
Dave: Right.
Scott: And Vanessa for us, who really knows their stuff, to be [crosstalk]
Dave: No, that’s a really good idea. And I’m not going to geek out on this. We literally just put a blog up the other day. It’s like wrestling with well do we put it on blog.myperfectcolor, or myperfectcolor.blog? And we know the right answer, but there are technical issues.
Scott: Oh yeah, I went through that.
Dave: And so, in any case we, yeah, so we get … That’s a really good idea though, because we’re constantly like what should we write about? But we also get questions every day that we could just publicly say we got these three questions last week, these are the answers, and Google would like that type of content.
Scott: It totally works.
Dave: Yeah.
Scott: Do you guys have the other, just geeking out on process here. Do you guys, because one of the biggest challenges we have is training new people to get them kind of indoctrinated in our flows and, like you say, good customer service, knowing how to do things. Do you have training programs, or how do you document all this stuff?
Dave: I would say yes, but I … So, I live in New Hampshire now. So, we moved back from Seattle, Los Angeles, London, and so we live in tax-free New Hampshire. It’s awesome.
Scott: God bless you.
Dave: But Jason and the company are in New Jersey, so they’re right outside New York City. And so, what I was going to say is that Jason, he trains all of those people. I’ve seen the documents, and the forms, and the processes. But I’d say I’m sort of outside of that, because I’m doing SEO, site development.
Scott: Content marketing.
Dave: Yeah exactly, well some of it. And so, I’m just saying the answer is yes, but it’s still a relatively small company.
Scott: Yeah.
Dave: There’s like ten people in our … We have a 5,000-square-foot warehouse where we make, mix, do all the customer service and that sorta stuff.
Scott: Yeah.
Dave: But I think Jason would say he’d like to improve it as we grow the company.
Scott: It’s like that. We still want to improve ours, and we’re almost 50 people now.
Dave: Right.
Scott: And it’s like you just you stair … You’ve been through it.
Dave: Yep.
Scott: Multiple startups. You stairstep it.
Dave: Yeah.
Scott: And then every year you look at it, and you’re like this is a little outdated. I need to fix this, you know?
Dave: Yeah. We’re drowning in Google Docs, let’s put it that way.
Scott: Yeah. Yeah. That’s a problem too.
Dave: We’ll create a Google Doc to attract other Google Docs, so I know it’s definitely my mind’s going to blow up at some point.
Scott: We talked about the history of the company a little bit, but where was kinda your entry point? And in hindsight now, you’ve been doing this for a while with Jason, what do you think your value add? Because I think the reason I ask that question is Jason seems like a subject matter expert. Just kind of generally speaking, in startup world, oftentimes you look for a really strong subject matter expert. And then someone who’s either an experienced startup person, or a good operator, or how did … Tell me your story on how that interacted.
Dave: So, I wasn’t working. I was doing advisory work, and all that stuff that we all try to do. And so, I wrote down a … This is the advice I always give to people when they’re going to make a change. Write down what you want, and be honest, be brutally honest. How hard do you want to work? What do you want to do? Because I get people calling me all the time saying well I don’t know if I want to go to Amazon, start another company, become a VC. And I’m like you haven’t really thought about this very much, because those are all really-
Scott: Just clear differences in those-
Dave: Yeah. So, I wrote down, and I said I wanted … I had worked on the startups, and invested in startups, and a lot of times they’re sorta like fake products. We’ll watch this thing. We’ll see if we can get customers. Then we’ll see if we can figure out how to make … And I just said I want to work on a real thing, with real margins, with profitability, known customers, known customer problems, not like going after the Instagram crowd. And I wanted to work with friends. And I wrote all this stuff down, and I said I wanted to get my hands really dirty and own things. And so, I had been talking with Jason for years, but Jason reached out again and said hey we need to raise some money, need to pay off some bad debt like blah blah blah blah blah. And so, it sorts of checked most of the boxes, or all of the boxes really, and so yeah, so I got involved. We raised a small round last October, so it was probably about a year since I started actively talking with Jason, and we raised a small round. And since then we’ve accelerated the sales. There are areas of the site that are still hideous, but the important pages on the site … And I mean hideous from the perspective of people who live online all the time.
Scott: Yeah. Yeah. Yeah.
Dave: The pages that matter, where we get all of our organic traffic, and where customers actually spend their time, are beautiful. They’ve been really modernized, and so I’m really sorta proud of what we’ve done in the last 12 months. But so, what I brought to the, to answer your question, I think Jason is the subject matter expert. If Jason gets hit by a bus we are in trouble. So, but I brought the perspective of what are the important pages? What are the important experiences? How do we fix SEO and get that moving in the right direction? And the investor mindset. Jason had never really … It sounds like everybody else starts with getting great at the investor mindset, and then figures out all the other stuff. And so bringing that to Jason, and introducing him to what professional investors want to see, and what the metrics need to look like and all that sorta stuff, I think I brought that. Plus, just helping him with site development. Having somebody who’s filing bugs, and reviewing bugs, and up until that point it was largely him doing everything.
Scott: Oh God yeah. Well when you make a point that the people who are subject matter experts, it takes time and energy in just to be the subject matter expert, so you sometimes have to pick your battles. You’re either going to be the person who just knows the category really well and how to do everything, or you’re going to be a person who’s good at talking to investors. Because they’re kinda different skill sets, and they both take practice.
Dave: Yeah.
Scott: And raising money is a skill.
Dave: Yeah.
Scott: And cleaning up cap structure is a skill, and running your financials is a skill. And that’s not always where the person who really knows their stuff in the category can spend their time.
Dave: Yeah, I think Jason, I mean I know he would say, because probably the biggest mistake he made was bootstrapping for too long. Jason’s, he’s really good in front of investors. His enthusiasm sort of oozes out, and people see this isn’t a short-term thing, but he struggled along. There are investors within 25 miles of his house. He’s right outside New York City. And so not nurturing that network of professionals.
Scott: Yeah.
Dave: Versus trying to figure it out in sort of the local community really probably subjected him to a lot of pain that he didn’t need to go through so.
Scott: Sometimes I can relate to that, Dave.
Dave: Yeah.
Scott: Because [crosstalk] too. And I’m like oh man, it’d be nice to have $5 million in the bank to invest in all these things we want to do. It’s great.
Dave: Yeah, and that’s what’s crazy about this. Like I said, we’re doing, when I talked about it offline, we have really strong revenue, strong margins, crazy customer base, like you could see our … Like I said earlier, YETI Coolers, Tiffany, Panera, the U.S. Postal Service. It’s crazy, all these, they come in every day. But it is primarily we just have an awareness and a sales problem, so right now we’re saying okay the site’s good. These things are good. Let’s just go all in, literally, on building out the SMB sales funnel. And so, it’s like anything with a startup. You move from problem to problem to problem.
Scott: Yeah.
Dave: And we have 100% agreement that our laser focus right now is on the fundraising, but also fundraising via driving the sales funnels and getting better metrics around that.
Scott: I’d say the awareness is a good problem to have, in the sense that you guys have a product and a process that works.
Dave: Right.
Scott: And you’ve already demonstrated there’s demand there.
Dave: Yeah.
Scott: So, it’s repeatable demand.
Dave: Right.
Scott: That’s what’s so exciting about paint. It’s like every Tiffany store across the country needs to buy paint from you guys probably once a year or something like that you know?
Dave: Yeah. Yeah, we have this customer that sort of showed up in June. Now Jason had been talking to them for a year, but since June they’ve placed six orders for about $13,000 of paint, so it’s just boom boom boom. And now they want us to become their OEM paint supplier. It’s crazy.
Scott: Oh my gosh.
Dave: They’ll do a quarter million dollars of paint a year, and that’s a conservative estimate. And so, we have these repeat customers all over the place. It’s to your point. Pella Windows and Doors called us, and people actually pay us to do these matches. They send us their parts, and then they pay us.
Scott: That’s awesome. That’s like wow.
Dave: Yeah. So, Pella paid us to match their 24 colors, and it could have been 16, who knows. But then Jason and I were like oh wait a second, let’s just call every Pella distributor in the country. And so that was where the light bulb went off. It wasn’t like the sales close rate was one in a hundred. It’s like one in three.
Scott: Yeah. Yeah.
Dave: And it’s about catching somebody in the right mood on the right day, and then those orders just, the Nor Cal, the Southern Texas, the whatever, the orders just come in every couple of weeks, like they need 16 cans of spray paint. So, it’s just that we see the opportunity all over the business. But it’s very similar to any purely tech startup. I mean, we have an engineering team. We’re constantly working on the website. But it’s very similar to any tech startup, where you sorta go this quarter our problem’s this. Next quarter our problem’s that. And so, it’s a lot of whack-a-mole, moving from problem to problem. But like I said, there’s a lot of fundamentals of the business that are really good relative to most startups, which they don’t know what their revenue or their customer … They don’t know what their customers are willing to pay for. That’s not our problem. Our problem is just finding customers.
Scott: We also, I think, maybe talked a little about this, the importance of an attractive gross margin, and just making sure the business fundamentals are there. Did you do that analysis? Or is that something that as you reworked some stuff you now have gotten to that point where it’s a really nice gross margin?
Dave: Yeah. We have a north of 60% gross margin business. And even the competitors here, they do too, because we know where we’re priced. But we never ever hear issues about price, so my hunch is that we’re underpriced.
Scott: Yeah.
Dave: That most people there, I mean it’s hilarious. We read these emails from customers all the time saying the paint match was indistinguishable. Or like that woman from Hulu. She’s like I would cried, and the matches are crazy good. We do a bunch on Instagram where you can see the matches, and you’re like it’s indistinguishable. But Jason always-
Scott: That’s actually a smart marketing channel for you. I never thought about that.
Dave: Yeah it is, but I’m not sure how smart any of that social media stuff is. It’s good for our brand. It shows a good like what we do, but I’m not sure how many people are actually transacting, other than E-commerce or social media experts. They might be the only ones making money on social media.
Scott: Yeah. Yeah. Yeah. They’re the only ones, yeah.
Dave: Yeah.
Scott: But it’s still attractive there. So-
Dave: But back to the margin thing. Jason just always, he just always built in … He knows what the costs are on everything, and he just always built the models at a margin that we need to sustain the business. And that’s awesome, because it’s one of the first things VC … VCs don’t care if you’re losing money. I mean, they’d prefer if you didn’t, but what they want to know is what are your gross margins? And our gross margins-
Scott: Unit economics.
Dave: Have actually increased over the last few years, but that’s been as we’ve pivoted away from consumer and towards B2B. But, like I said, it’s nice, because the only time you’ll get a margin request is when it’s a really big order. But we can usually conserve the margin, because we can go to our suppliers on those really big orders and get the same, so it just sorts of ripples through. But the free cash flow on those big orders, it doesn’t matter that you give up a little bit of margin.
Scott: Yeah. It’s worth it. Yeah.
Dave: Yeah.
Scott: Is that something where, when you guys talk to VCs, they are validating that? Because I think the reason why I’m so curious about this is the flip side is you have companies get started that have no idea what their margin structure’s going to be. And they’re kinda trying to discover it while they’re building their service or product, and they can kinda get lost with the perpetual money-losing companies.
Dave: I mean, we literally just did our investor deck in the last six weeks. So it’s me doing it for the 412th time, and that was the easiest slide. I’m like oh thank God we have a margin.
Scott: Yeah. Yeah. Yeah.
Dave: We have a margin slide, and we have a graph that shows it’s gone from 50% to 63%. And so, I think VCs like that, and they really like our repeat-order rates. So we were just talking about that this morning. I’m like Jason, we really should print … Because we always use the ten common examples. Obviously, we always mention Tiffany, because that’s an example of one where the color is really important.
Scott: Yeah. Company identity.
Dave: But I don’t know how many customers we have that order 6 to 20 times a year. We have a lot. And so, I said to Jason we should actually pull that data, because that is the second … VC investors love the once you-
Scott: Repeatable.
Dave: Get a customer repeatable. They go what’s the LTV? And we’re like we don’t know. What’s your CAC? I don’t know. What costs do you want to include? Do you want to include the content cost? Do you want to include just Google? Because a lot of what we’ve done is our advantage is we have nearly 250,000 colors on the site. So, we get massive amounts of long tail organic traffic.
Scott: Oh traffic, because yeah.
Dave: Because most paint companies think about color as the thousand colors that Sherwin-Williams has.
Scott: Yeah.
Dave: We can create all of those colors.
Scott: Wow.
Dave: So, we have all their color books, and so it’s just a different way of thinking about it. So, we’re trying to cast the wide net.
Scott: But that’s what the people who are searching on the internet are looking for, is that one match.
Dave: That’s right.
Scott: That one color.
Dave: That’s right.
Scott: That they, you know, that’s amazing.
Dave: Yes. So we do really well with, again, people looking for those Pantones in paint, or the RALs, because they have these weird, long color codes that a normal human would never search for. But we also have Sherwin-Williams Agreeable Gray.
Scott: Yeah.
Dave: And there’s, again, hundreds of thousands of these things. So yeah, I mean, it’s just like the TED conference order the other day, which was just the Pantone color, but we immediately created TED Red. So, if you go to My Perfect Color now and you search TED Red, or you go on the internet and you say TED Red paint, well we’re going to show up.
Scott: That’s amazing.
Dave: And we just continue to just add. So, the way we think about it is there’s a color for everything. And so, a competitive advantage is let’s get them all in our database and satisfy customers, and then rinse, lather, repeat.
Scott: It sounds like such a perfect match for an internet business.
Dave: Yeah.
Scott: Because of that long tail.
Dave: That’s right.
Scott: And the specificity, and especially with your Amazon experience. You know people are searching for that stuff.
Dave: That’s right.
Scott: It’s like so-
Dave: Yeah-
Scott: That makes so much sense.
Dave: And we’re not really, because there are some companies that have been funded in the consumer space, like there’s a startup called Clare. Not to give shout outs to competitors. It’s Clare.com. Well, there you go. They just have a different approach. They’re more like Warby Parker, like we have 55 colors. And their site’s beautiful and everything, but we’re not convinced that the residential market is that broken. It’s not that bad to go into a hardware store for a blue that’s good enough, if you don’t care that much about the precision of the color.
Scott: Yeah. Yeah.
Dave: But for the customers that do care about precision, price is not their issue.
Scott: Yeah.
Dave: It sorta flips the model. And so we, again, Jason spent a long time doing the consumer side. We believe strongly the bigger play is the long tail massive selection, price-insensitive customers that really need customer service, and follow through, and all that sorta thing.
Scott: Yeah. Vanessa and I always talk about this. Having a complex business is actually it stinks sometimes, but it’s actually incredibly defensible.
Dave: Yeah.
Scott: Because the odds of someone figuring out everything that you figured out, everything that we figured out, is just so that like, yeah.
Dave: We love our competitive slide. We got feedback from a New York VC about our competitive slide. And he’s like I don’t believe it. And I’m like dude we’ll send you to the warehouse, and you tell me which of the startups you’ve met in the last five years would want to touch any of this stuff. And our competitor is the local body shop, or the ACE hardware, and so we don’t know how big it is. Like we say it’s probably not a billion dollar, but it’s a tens of millions of dollar revenue business. And since nobody sells paint online still, it kinda reminds me of the early days, where they’re all protecting their channels, and then, ultimately, they’re all going to want to have an online E-commerce business, and we think we have a chance to build that. And then, by the way, eight years from now we can be the leading consumer seller of paint.
Scott: If you want to, yeah.
Dave: Well just by virtue of having it all, and lowering prices constantly, and getting more efficient, increasing shipping speed. It just reminds me very much of 1998, you know?
Scott: Yeah.
Dave: With you sort of start with a minimum viable product, and you have happy customers, and then you sort of improve it over time.
Scott: I love it. I love it. This is an incredible story, and kudos to you, Jason. And kudos to you for lending all that … Well I know you’re an investor, so you’re not lending it.
Dave: Yeah.
Scott: But you’re contributing a lot of your expertise being built over the years.
Dave: It’s all Jason. I mean, honestly, I’m not being fake humble. This thing wouldn’t exist. I just wish that he could have saved himself a lot of pain. Well if he never left Amazon he’d probably say that was the worst economic decision ever. But he could have saved himself a lot of pain if he had plugged into the right group of people with a different mindset about how to build the business.
Scott: Yeah.
Dave: But you can only play the hand you have now. So-
Scott: Totally.
Dave: Yeah.
Scott: And in the end he might not be … Life tends to work out, I think, for people who work hard and who mean well.
Dave: Yeah.
Scott: Well maybe you can tell everyone this has been awesome. Can you tell everyone where to find My Perfect Color and just give the pitch one more time?
Dave: Yes. Real simple. It’s myperfectcolor.com. And I guess, like I said, our core customer is companies, brands, manufacturers, a lot of marketers, who need exact matches for their colors. And we were just covered in the HubSpot blog post the other week, and so we created HubSpot orange, so they can now order their … So, it’s that sorta thing.
Scott: That’s awesome.
Dave: TED conference, whatever. So, if you have a brand color, or 3D printing, whatever. We do a lot of custom work, and can ship it out pretty much same day for most stuff if needed.
Scott: That’s incredible. Thank you so much for coming on podcast, and awesome talking and catching up with you.
Dave: Thanks. Say hi to Vanessa. I think you guys are awesome. Thank you.
Scott: All right buddy, thank you.
Dave: Bye.
Scott: Hope you enjoyed that episode of Founders and Friends podcast. Quick shout out to Brex, the first startup credit card. Brex is our sponsor, and we really appreciate their support. Brex has no personal guarantee for founders. That’s a really big deal. It integrates really nicely with QuickBooks. Great rewards that are startup centric. It’s a really nice little tool, and we are seeing it all across the Kruze portfolio of clients, so check it out. And again, if you go through the signup flow and type in Kruze you get a discount. So hopefully you’ll check out Brex. Thanks again for the support on the podcast guys. Take care

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