Secrets Of Venture Capital Scott Kupor And Product Innovator Tracy Hazzard From The School For Startups Radio With Jim Beach
Getting into retail can be very challenging, especially when you have to compete with the bigger brands. You have to prove yourself before you ever get on the shelf. That’s where Amazon comes in. Amazon provides an opportunity for small brands to make that play to prove themselves, and to show up on the shelf later and in relatively quick order. Joining Jim Beach on The School For Startups Radio is product innovator and Amazon launch specialist Tracy Hazzard. Tracy shares the secret to using Amazon as a test bed for your product. She also touches on podcasting and how you can use it as a marketing, networking, and content creation tool. If you have a product to launch, this show will prove valuable to you.
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We have a great show for you. First up, we have Scott Kupor. He is the author of a book called Secrets Of Sand Hill Road: Venture Capital and How To Get It. For those of you who don’t know, Sand Hill Road goes right through the heart of what we would call the money of Silicon Valley. It’s over there by Stanford. It is where all of the VCs and money people are located. I’m excited to hear from Scott. He is also the Managing Partner at one of the most prestigious, if not the most prestigious venture capital firms in the world, Andreessen Horowitz. You do not get any cooler or more prestigious than that. Scott is in the position to give us some amazing insights. I’m excited to learn from him.
We also have Tracy Hazzard. She is an Inc. columnist and brand specialist. She has taken 200 products to market with 85% to 87% success rate which is a huge success. That would be like winning nine Super Bowls in a row. That’s an amazing accomplishment. We’re excited to learn from Tracy. She does something interesting and I want you to focus in on this part of the interview. She is using Amazon as a testbed for other products as a proving ground to see if the product is going to work, if it’s a good idea or if it’s going to be successful. She’s an amazing resource. I am excited for you to meet Tracy Hazzard as well.
As always, we sure do appreciate you being with us. We have three principles and two goals. The principles are bagged creativity, forget about risk, avoid it at all costs, and keep passion for the church, synagogue, mosque and the bedroom. Those are our three guiding principles. We also have two things that we hope happen with regularity. Number one, we want to give you the skillsets to be successful. We’re going to try to give you through these incredible introductions to these guests the skillsets to be creative, be more passionate and be fiscally suited. We’re trying to give you all the tips, tricks and techniques to be a successful entrepreneur. Goal number two is to motivate you to get off the sofa, go out there and do more.
You may already have a business. Our goal is to help you take it to the next level, to go out there and do more with it, to be more successful with it and to push it harder. If you don’t have a business, our goal is simple. That is to get you off the sofa, take that remote control and crush it underneath a bunch of rocks. Quit watching ESPN and the Real Housewives of Steubenville. Go out there and use that time to grow a product, grow a business, and take control of your own financial destiny. That is simply what we are trying to do. We hope we can do that for you every day. We’re not all going to get rich but we hope to give you the offensive skills to go out there and do that. We’re not playing defense here. We’re not going to show you how to get a cheap airline ticket.
Occasionally, we’ll talk about that but very rarely, once a year. Our goal is not to play defense and teach you how to save money. Our goal is to play offense and go out there and make more money. We’ll show you how to make more money in your spare time as you transition out of your full-time job into full-time entrepreneurship. If you need a bunch of venture capital, our first guest, Scott Kupor is going to show you how to go and get it. We’re giving you the entire basket and skillset. Hopefully, you can bootstrap the business. Do it lean, get started and own it 100%. Sometimes, you need to get some professional money. We’re going to talk about all of it.
I am very honored to introduce you to my first guest. He is at the absolute top of the VC profession. His name is Scott Kupor. He’s the Managing Partner of Andreessen Horowitz which used to be a venture capital firm but they changed their format. We will ask him about that. He has grown the business with the rest of the team to 150 employees and about $7 billion in assets under management.
He is also the Cofounder and Codirector of the Stanford Venture Capital Director’s College and teaches VC and governance at Stanford and at several business schools. He’s the Vice Chairman of the Investment Committee for St. Jude Children’s Research Hospital, and has also been the Chairman of the Board of the National Venture Capital Association. The reason we’re excited to welcome him is because he has released the book called The Secrets Of Sand Hill Road: Venture Capital and How To Get It. Scott Kupor, welcome to the show. How are you doing?
I’m doing great. Thanks for having me.
It is our honor. For those who do not know, Sand Hill Road is the road where all the VCs are located right there by Stanford University.
If you follow country music and you know about a national road or a country road, this is a similar idea but as a lot of these roads, it’s not that exciting. Stanford is by far the most attractive part of Sand Hill Road but it is where all the VCs tend to congregate.
The big secret is that you want to take over my firm, move to Birmingham or Tulsa or wherever, run my business and kick me out.
That’s not it at all. As VCs, we want the same thing that you want as an entrepreneur, which is we’re trying to help facilitate the growth and development of hopefully, a very big, long-standing and profitable business. We’re both on the same page here.
The last thing you want to do is run my business.
That is exactly right. VCs are not there to run the business. The only thing that VCs do is work with a CEO. Provide guidance and expertise about how to grow the business. There are VCs like ourselves who have made a big investment in what we call the post-investment team. We’ve got more than 100 people here at the firm who think about how can we help you in terms of sales and marketing, how can we help you identify new executives to hire or new engineers. Those are the mechanisms by which we try to help. To your point, the entrepreneur is the magic here. The last thing we want to do is mess with that magic.
You understand the myth that I’m pointing to that somehow the VC is going to screw me.
It’s exactly why we wrote the book. There’s a huge amount of disinformation and misinformation in this business. What I hope people will take away from reading the book is that we all share the same goals, we all want to build companies. The way that we can do that is providing capital. Hopefully, in more cases also being a useful partner with you, as the CEO and the founder of the company, and helping grow and develop the business.
Specifically to my introduction and question, you were a VC firm and now you’re not. Did I hear something about this a couple of months ago? Can you explain what this is about?
You did hear about it and I’m sorry to say that sometimes all the reporting wasn’t quite as it seems.
Do you mean there was fake news about the VC industry?
Fake news is probably too strong of a term, but we just changed the way we are registered and regulated by the SEC, which is a long story. That’s not going to be interesting to your audience. At the end of the day, we are in the venture business, we were in the venture business, we will be in the venture business for the next years. We change a regulatory structure that caused that news to seem like more than it was. Our job is the same as it was before which is we look for great entrepreneurs looking to build great companies, and hope that we have a chance to partner with them.
I’m already confused. I can’t even get someone at the company to answer my phone. I’ve sent five emails to associates there and I don’t know how to get in. I have this great business here in Des Moines. I know you all are interested in Des Moines, but it’s cool and you should hear about it. The second part of the subtitle, How To Get It, let’s start transitioning into that, Scott. What are the first steps for someone not hyper-connected already living on Sand Hill Road?
The word connection is exactly the way to think about it. One of the best tests of your mentalism as an entrepreneur is, can you find through 1 or 2 degrees of separation away to get somebody to introduce you to various venture capitalists? You will find venture capitalists do their own proactive deal identification where we try to go out and find all the best entrepreneurs, but inevitably we’re not going to be able to do that perfectly. One of the best things you can do if you are particularly in a market that is not local to your venture capitalists is use your set of relationships and network and say, “Do I know somebody who can at least help me get in front of the right person for a conversation?” What you’ll find is the market is incredibly efficient in that respect which is if you’ve got a good idea and you have a way to at least find your way in the door there, that the market tends to be efficient.
In other words, what I heard is even if you are from Des Moines, if you’re worth anything at all, you’ll figure out how to find the way in.
I wouldn’t say it quite as strongly as that, but it is important. If you think about what you have to do as an entrepreneur, you’ve got to be able to knock down walls and find customer opportunities when people tell you no. Part of starting a company is a little bit of willful suspension of disbelief. A great way to demonstrate your stick to witness and your creativity is to also show that you’ve leveraged your network to find a way to get into an organization that might not have been so obvious for you.If you’re not mining bad reviews, then you’re not doing the industry a service. #TheSchoolForStartupsRadio #JimBeach #podcastinterview Click To Tweet
That’s not that hard, is it? It’s not like you people are hiding and you have a list of your associates. Is an associate a good place to start? If I can get an associate to take my call, I send him or her a one-pager and they agree to a fifteen-minute call. Is this a good way for me from Des Moines to start?
It’s a fine way to do it. As with any selling, the higher you can get in the organization, the earlier the better. Associates play an important role. In our firm, we don’t use that title, but there are lots of people here who are meeting entrepreneurs for the first time. We have a very structured process for how they then sit down with the rest of the general partner group and help us get visibility into stuff. If there’s no harm at all in going that route, you’ll find in most firms that it’s quite an effective way to get to the broader general partner base.
You want a one-pager and a 700-page business plan.
Not quite. Whether it’s one page or ten pages of PowerPoint, we need your articulation of why this opportunity is so interesting, how this can be a very big company. Then in particular, the part that people forget about, why you are the right person for us to back going after that particular opportunity versus any number of other teams that might back us? We don’t need business plans. We don’t care about what the spreadsheet says or what your year twenty revenue is going to be. We’re more interested in your thinking around the product and the market and the fitness of your team for this particular opportunity.
What is your sweet spot for investment? How early and what is the average amount?
We are a multi-stage firm which means we will invest at the seed stage. It’s the earliest. That tends to mean $1 million, $2 million. It’s typically where those kinds of investment opportunities will come and then we will invest all the way up to as much as potentially $100 million in a company. We think about it as an early stage where you’re trying to say what if this business could work? We recognize there’s no product yet, but what could it be to later stage stuff where the business is working albeit at a smaller scale. Now the question is, can our money be used to help you go from a $5 million to $10 million business to hopefully $100 million-plus business?
That’s so useful. What could it be is I don’t have any revenue yet, correct?
To set the expectation for our audience, it’s a run of the mill average thing that you decide to invest in. You’re going to put $1 million into it, it has no revenue yet. What percent equity should I expect to give up on an average day, all things being equal?
I’ll go back to an example. We invested in Instagram when it was still that stage company. It was a very early company. It wasn’t even called Instagram at that time. At the time, they were raising capital. At that stage, for $1 million, you’re talking somewhere between 10% on the low-end and maybe as high as 20% on the high-end in terms of what you might sell to an investor. That’s the range to think about.
That’s valuing the business high.
Particularly out here, oftentimes when somebody does a seed, there’s something these days called a pre-seed, which means these companies have raised money even before they get to the seed level. They might have raised hundreds of thousands of dollars from friends and family or others. For something to get that valuation, you’re talking about a $5 million or $10 million valuation at the seed level. In most cases, they will have raised some money before so the product itself may not be working but at least there’s something there that we can diligence as opposed to purely a PowerPoint deck.
You and I are roughly the same age. We remember back of napkin deals in 1998 and things like that. I have a napkin in my pocket, Scott. Let’s do a deal right now. Is that still going to happen in nowadays world?
Every now and then that might happen. We had deals that go down over a weekend sometimes, which is not the preferred way to do it. If you’re an entrepreneur and you’re planning for this, you should assume that it takes you three months from start to finishing a process. Month one, you’re meeting people, getting to know them, and talking to a number of firms. Month two, you’re deeper engaged in what we call diligence, helping the VCs understand the business in a lot more depth. That leaves you 30 days on the end once you have a term sheet to get all the legal documents in order where you can close the deal and then fund the business. That’s the minimum timeframe that at least you should plan for as an entrepreneur. Hopefully, you get one of those napkin deals that take you out of the market a lot faster.
What verticals do you prefer? Does it matter if I came to you with an incredible vertical that you weren’t already invested in, but it was obviously a great deal? Would you go there?
We’ll do anything where software is a core component of the business. An example would be Instagram, Facebook, Twitter or a company like Slack which is in the enterprise application space. Anything where software is the foundation, we’ll do it. We do sciences and software stuff. We do crypto and software stuff. The real answer to your question is we’re in the outlier business. Our job is less so to be dogmatic about what we’ll invest in, and more to be open-minded as to what entrepreneurs are doing out there, and allow them to take us into areas that we might not have realized were good investment opportunities.
Is the investment strategy there the same that we hear about in the media that you’re going to invest in ten companies and 1 or 2 are going to be Instagram and make you billions, 3 or 4 are going to make you $100 million in some sort of merger or acquisition. You’re going to have 3 or 4 that you can’t figure out what to do with, and they make you $1,000, and then 3 or 4 that crash and burn and were an epic, stupid mistake? Is that a fair distribution?
That’s about right. The simple way we think about it is 40% to 50% of what we do are in that category of it’s a great idea and it turned out to be not a good business, and hopefully, you get a few pennies back.” You’ve got middle of the road outcomes. You got to have an Instagram, Facebook, Airbnb, Pinterest or something like that where you can make significant multiples of your money. That’s the way these business works. It’s very high risk, very low probability of success, but when they succeed, they succeed. That’s the only way to make the financials work at the end of the day.
Succeed is an interesting word that has different connotations and denotations. For example, I would say that a company that has cool software allows cars to drive around and move people from point-to-point so people don’t have to own their own car, but loses money every time it does that transaction has not succeeded. The market would say otherwise. What are your thoughts?
You raise a good point which is, there are a lot of companies that we invest in that are not profitable and some that even when they get to be public companies, are not profitable. The real question in those businesses is, do you fundamentally believe at the individual unit level that those things work? Does an individual ride in a mature market that produces real sustainable profits? From the data we’ve seen in those types of things you’re referring to, delivery services or others, the good businesses do make profits at the unit level. These companies tend to be investing in very significant growth which drives the overall results for the business negative. That to me is the fundamental question. If you believe that then you say great. If it can make profits in this market over time, I believe other markets will look like that. You either get comfortable with that or not in order to decide if you’re going to make the investment.
Scott, we’ve gotten to know each other a little bit. Tell me a secret now.
Let me give you a couple of secrets. One I alluded to, but the biggest secret and a misunderstanding that a lot of people have is the way VCs evaluate deals. As I mentioned, so much of the evaluation is about the team. You’ve got somebody like Brian Chesky who’s starting Airbnb. The real question is not, do you think Airbnb can be a big market? The question is, why back Brian versus any of the other folks who you might see? A lot of what we’re trying to do and where a lot of entrepreneurs don’t spend enough time in their pitches is go to that point.
Tell us about how are you going to brutally take on this business? How are you going to recruit people when you need to convince them to quit their jobs and come work for you before you have anything to do? How are you going to help customers understand how to get there? All of those things that people tend to underestimate and gloss over, which tends to be the biggest piece of evaluation for venture capitalists particularly at the early stage.
Scott, I don’t understand that standard. By that standard, I could always find someone better than the entrepreneur in the room. If you and I are going to start a chicken gizzard company, the chances are 100% that we could find someone who knows more about chicken gizzards than the guy who came in the room. If we were to sit down for six months and do it, don’t you think we could find someone better? Maybe someone that doesn’t yell at his employees as much or someone that already had an IPO, but it was in a different industry? Don’t you think we could find someone better?
You might but the question is, what is it that makes this particular founder or founding team uniquely suited to go after this market opportunity? In other words, if we’re starting the chicken gizzards company, the answer is somebody who comes from that industry might be the least obvious person to start a new company because quite frankly, they’re too wedded in the ways of how the business works and they can’t think creatively.
There’s a great example that I use in the book. Herb Kelleher is the Founder of Southwest Airlines, his biggest reason why he said he was the right person to start Southwest Airlines is because he had never been in the airplane business before. Therefore, he had no preconceived notions and nothing to hold back the creativity of his thinking. In some ways, depth of expertise in a market might be the exact wrong thing for somebody who’s trying to take on the market in a different way.Over 85% of retail is bought or influenced by women, so women decide what plays in retail. #TheSchoolForStartupsRadio #JimBeach #podcastinterview Click To Tweet
Give me another secret. We have time for one more.
The other secret and it’s a mistake that we see a lot is people tend to not think critically about how much money they want to raise and why. A lot of times, people come in here and they say, “I’m going to raise $8 million.” When you ask them that, they don’t have a good answer. It’s because the last three guys they ran into before they came into the meeting also told them they were raising $8 million. The thing that is so important in this business is when you’re raising for the current round of funding, think about what the story is, and what the milestones are that you want to tell at your next round of funding, and then back into the amount of money you need to raise in order to derisk that opportunity.
The biggest mistake in this business as an entrepreneur is to get ahead of your skis and either raise too much money and therefore not be able to clear that hurdle for the next round of financing, or to raise too little money where you then find yourself stranded in between financing rounds. This is a big area where people give fairly short shrift to thinking critically about that number. It got a massive impact on the success of the business.
Is the market frothy for IPOs? What do you think of the market as a macro looks like?
The market is reasonable right now. There is some stuff that always gets traded at a premium valuation but the number of those companies is relatively small and the market is rational. You see this in some of the IPOs we’ve had, which is companies that are profitable or they’re near profitability and are getting traded at a premium relative to companies who are still consuming a lot of cash. That’s a reasonably healthy place for the market to be, quite frankly.
Scott, congratulations on the book. I am on that Amazon thing. Who would ever have thought that would have worked? Your book is selling very well. It is highly rated and has got some amazing reviews from people like Eric Schmidt, the CEO of Google. Thank you so much for coming and sharing this information with us. Let me ask you one final question. I call up an associate and say, “I bought Scott Kupor’s book and I read every word of it. I’m ready to present now. May I have ten minutes, please?” Does that get me ten more minutes? Yes or no?
That’s a surefire way to get in the door. I would highly endorse that.
What about I bought 100 copies of the book and gave them to all of my friends. Can I have lunch with you now?
Now you’re talking. I hope everybody reads it and takes away something good from that book. By all means, if somebody calls me with that answer, I’ll certainly meet you.
How do we find out more or get a copy of the book, follow you online, visit some URLs and all that?
You can follow me on Twitter at @SKupor. You can also go to SecretsOfSandHillRoad.com to find the book. You can also go to our corporate site, A16z.com/book and find it there as well.
Scott, thank you so very much. Take care. Thanks a lot.
I am excited to talk to my next guest. This is something right up our alley. You know how much I love selling on Amazon, and how I think it’s a perfect model for all of us low-risk entrepreneurs. You know how I hate that Emagazine. The one that entre something magazine and therefore we love Inc. Magazine. We’re going to roll all of this up into our next guest, Tracy Hazzard. She’s an Inc. columnist and an Amazon launch specialist. She does all sorts of other things too about helping brands launch, scale, build, supply, source, all of those things. She and her team have done $1 billion in sales. Tracy, is that true?
$2 billion from my clients.
You made 700% of that, right?
That’s an impressive model. She runs a company called Hazz Design after her name Hazzard. In that company, she is a product launch expert, 3D printing expert. We’re going to talk about that and her innovation work as well. She and her husband also have a podcast business which we’re going to talk about. It’s got some unique things going on there too. Tracy, welcome to the show. How are you doing?
Thanks so much for having me, Jim. I’m so glad to be here. I’m a big fan of the show, as I told you before.
You were very polite. You had me on your show. The podcast switch-off is one of the best free marketing tools out there. What do you think?
I do. There’s no reason for us to believe that podcast listeners don’t want to consume more content. They’re eager to have more shows, more information and learn more, so why not?
I don’t think that there’s anything at all like competition. There are only 600,000 podcasts to choose from. I don’t call that competition. Do you?
Not at all.
Let’s talk about the practicality of it. How do you make a podcast switcheroo happen, assuming you have one? Who would not have a podcast at this point? Everyone should. My mother needs one.
Everyone should. It’s a quick and easy way to market and it’s very thorough. You can do your networking, relationship building, and get your content out there. I’ve never been turned down when I’ve invited a guest. They always say yes. It’s free publicity. Why not? It always works.
That’s because you’re famous. You write for Inc., have your picture on money and stuff.
You went through three things fast. Number one, that the podcast is a great marketing tool. Number two, it’s a great networking tool. It’s an awesome way to meet somebody. You and I are now friends because we’ve spent two hours talking, chit-chatting and finding out what we think about philosophies of entrepreneurship and stuff like that. Number three, it’s a great content creation tool. You get to publish the podcast. You then get it transcribed and publish it. That way, you didn’t take a bunch of transcripts and put them into a thing called a book. It seems to me that podcast is the most perfect marketing tool ever created on the face of earth.
We go one step further. We do a lot of videos to start. We go from video, podcast, to blog and book. Usually, we foray that into speaking engagements. We’re covering everything we need to do all in one task.
I want to talk about Amazon and the whole launch experience. Let me tell you where me, my wife and the audience are. We’ve talked a lot on the show about finding a product, putting it on Amazon, and hoping that it sells. That’s our model. That works. That makes a ton of money for people.
I don’t believe in hope. Hope is not a plan. We like to be more calculated about it. We’ve done 250 products not just on Amazon, in mass market as well over the last decade. We have an 86% success commercialization rate. That’s almost 9 out of 10 product successes instead of 7 out of 10 product failures, which is very common. The way you flip that is you do a lot of market testing sooner. Market proof that people will buy what you have to sell. I do like the Amazon model because it is an inexpensive and easy access test run, but I don’t like to dive deep into inventory or make anything innovative, inventive, creative, required tooling until I’m positively sure the market wants it.
How do you go out there and test? I have developed a new chicken gizzard which is 18% better than prior chicken gizzards, and 12% more cost-effective so that’s good, 18% and 12% add up to 30% which is my favorite number between 31% and 32%. What do I do? How am I going to test that? The gizzard is done. I can’t change my gizzard.
The real issue with that is a price play. When you’re talking about food products or some product that has taste or style like color choices, you have to test it at parity. In other words, you need to test it at exactly the same price as the closest equivalent product on the marketplace. If you test it for cheaper, the assumption is that it tastes bad or its quality is not good. At minimum, you have to test them side-by-side. What I usually recommend is sell both. Sell the current product, sell your new ones, sell them side-by-side and see what’s going on.
Won’t the current product outsell simply because it is the current product and therefore has some industry awareness and customer appreciation?
Yes, initially, but as you start to get people who buy that current product, you can start to serve them up suggestions for the new like, “Why didn’t you choose this one? Did you know that it tastes better? Did you know it functions better? Did you know it does this?” You can serve that up. Now that you have them in your database of clients, you have the ability to have a conversation with them about what would make your new product, your better products sell. What would compete more heavily against that entrenched product? We like to have both going at the same time because then it captures the people who didn’t choose us, and we can learn more about how to make them choose us next time.
I can’t change the chicken gizzards that I have. I can change the packaging or the promotion, is that enough?
Most of it is positioning, how you market it, how you talk about it, and how you’re presenting it to the market. Most of it is that. What you may find out is that you do need to raise the price. That is a strategy in the initial days of a product launching. It’s to raise the price and make it a premium because then they want to know what they’re missing out on. They think go in with a low cost.
I love high price strategies. It’s by far one of the best ways to differentiate yourself. The low-price strategy is a downward spiral toward oblivion. Do you know the Walmart joke, Tracy?
I haven’t heard it.
I haven’t told the joke so let me pester you with it. The most prestigious thing you can win is the Walmart Partnership Award which is for whoever reduced their price the most during the year. If you win it two years in a row, they give you a super thing called the Sam Walton Award for reducing your price two years in a row. If you reduce your price three years in a row, they have another special award. Do you know what it’s called? The Gone Bankrupt Award.
That’s so true. This is the thing that we’d love to talk about in our industry. I’ve done a lot of retail. I’ve done products in Walmart, Target and Costco. I love Costco better because you can always do a premium play much easier than you can anywhere else. It is the case where the bigger brands play heavier and it is harder to compete there. You have to prove yourself before you ever get on the shelf. That’s where Amazon has come in and made this opportunity for small brands to make that play, to prove themselves, and to show up on the shelves later in relatively quick order. We’ve had a lot of success going from Amazon’s success into store success, or dot-com success into store success.
When you’re on Amazon, do you pound the ads to drive the sales or something like that?
We don’t handle the marketing side of the advertisements. We support it but we don’t handle that ourselves. Our job is solely in the product design and development side. We get involved early on. When you were talking about your chicken gizzards and stuff like that, this is an example of what we would do. Someone comes and they want to make an amazing portable juicer blender because they’re in the juicing industry, they’re healthy eaters, that’s what their brand is all about. They probably have a podcast. They’ve got recipes, but now they want to have their own branded juicer blender, and it doesn’t exist on the market.
We would have to come in and design it, create a whole new mechanism and housing. It’s an expensive undertaking, easily $100,000 in inventory and tooling. We look at that and we say, “That doesn’t make a lot of sense early on. Why don’t we make sure that we’ve got exactly the right product before you dump $100,000 into it? Let’s buy an existing juicer and an existing blender. Let’s get you started with our partners to get an Amazon listing going on those two items. You’re going to get customers.” As we develop it, we’re going to send it out to them with images. We’re going to have discussions with them. We’re going to give them marketing information. We keep going back and forth. We even choose colors this way.
When we dial down into the juicer blender where we already have fans ready for it, ready to buy it at pre-sells and ready to go. We’re sure that when we spend that $100,000, maybe we’ve already earned half of it back, and the profit from the sales of the current juicer blender, we’re already sure you’ve got a market for it. That’s how we shift and move people into it. From that point, you’re sure you can sell it. You know how you’re marketing. You’ve got those ads dialed in. You’ve got them optimized. You’re ready to go and hit the ground running with a brand-new product that’s innovative and yours.
One thing I didn’t understand about that is getting the feedback after you’ve sold something through Amazon. Do you contact your Amazon customer afterwards and say, “I need your help?” Do you even know the email address of the Amazon customer? I’m lost here.
You’re technically not allowed to contact them except to send them a thank you note and ask them to leave a review through the Amazon system. You don’t have their email. You technically have access to it, but you are not allowed to email them directly. What we do is put pamphlets, postcards, things like that in the box of the item we’re selling like the juicer blender. We invite them to get free recipes or get something free off of our website. We invite them to come back in and join a community. The people in the lifestyle, they do that. Now you’ve got your early adopter fans. The ones who are active and are always looking for something new. You’ve got the right audience to start having that conversation with.
There’s a big juicer community here in Atlanta, I tried to get in it and they ostracized me. They kicked me right out, Tracy. They wouldn’t want to have anything to do with my juice. I was upset by that. That hurt. Anyway, I just wanted to let you know that as an industry insider.
I’m not much of a juicer myself so I wouldn’t know.
This is interesting. How do you work then with that juicer company?
We’re the ghost designer. We’re going to be their designer and developer. We’re going to help them figure out what to make, how to make it, what it should look like. We’re going to handle getting customer feedback through that client groups if that’s what they’ve got to make sure that it’s the right thing. We’re going to go and source it for them and help them make sure that it goes all the way through the first run of manufacturing. We start at ideation, coming up with an idea if they don’t have one, all the way to that first run, getting out there, and the production run of the items.
We handled that stage of it, and then marketers and other people, we work in concert with them to make sure that it gets out. We work in concert with facilitations of distribution, warehousing, freight forwarding, whatever you need on that side. We have partners that we always work with to make that happen. We handle everything all the way through that first run. We find that critically important because if something goes wrong in the early run of manufacture, that’s where it will go wrong and quality problems will show.
We are speaking with Tracy Hazzard about her innovation business. What’s the best way for you to find the creativity? I hate to say this, Tracy. You might get mad at me and hang up. It sounds to me like you’re relying on the marketplace to outsource your creativity, almost. Is that an unfair mean thing to say?
It’s not mean at all, but we don’t rely on it to come up with our ideas. We come up with our ideas from needs and resources. The reality is if you’re not mining bad reviews and you’re not understanding use cases, why it’s not working, why people are choosing not to buy something, or what’s missing in the marketplace, then you’re not doing the industry a service. We like to use our market to understand and verify if we’re right. When we verify if we’re right, if there’s market proof, there’s a market product fit, then we know we’re more likely to be successful in launching this product. We can advise our clients to spend money because the reality is product launching is expensive. We don’t want to make a mistake. Fourteen out of fifteen Home Shopping Network, QVC style products typically fail. It has a high failure rate in many parts of the industry.
Even if you’ve made it to QVC, your chances are still to fail?
It’s not a failure of like it didn’t totally sell. It just didn’t move based on their metrics or your profitability is way off because of being on QVC or HSN. Similar to the joke about Walmart, it’s very similar. HSN can kill a new product brand instantly. I’ve never brought products in there first. It doesn’t happen. It’s a nail in the coffin already. We don’t like to do that. We’re also not fans of Kickstarter for most products.
I was going to ask you about that. You don’t like Kickstarter but you’re about to kick start yourself.
It’s a good example. We’ve developed a new product that came out of a need. As you know, I’m a podcaster. I do a lot of live events. I was doing a live event where I was dark backstage interviewing Gary Vee. I only had three minutes to interview him. I had to drop my Zoom device and had my microphone. I had to drop it down to the floor. I hand him a microphone. We get started. We go. When it was all over and I picked up the Zoom device, the batteries died. I had got zero recording of this great three-minute conversation I had, and I was so furious.
I called up my partner, who’s my husband, Tom and said, “This is ridiculous. There’s got to be a better way.” About 30 days later, we designed a whole new microphone. That’s what we’re about to bring out. I’m against Kickstarter and Indiegogo, that style of crowdfunding, not because it’s not viable. It’s viable but it’s viable for a very select group of products. Over 85% of retail is bought or influenced by women. Women decide what plays at retail but Kickstarter and Indiegogo is 70% to 80% male. It’s not an indicator of whether or not you’ll sell at retail later.
That being said, a microphone, a tech device like that is a lot more male-oriented product. We’ve already done an algorithmic test to prove that that’s the case. It’s already showing high probability for success with marketing to the male audience that matched the demographic of Kickstarter and Indiegogo. That’s the only reason we’re going to go through it. We’re doing it for marketing play, not because we need to because we can pay for the launch of this product. I’m already very certain based on pre-sales that I’ve already conducted on my own that it’s going to work.
Tell me about the microphone. Convince me as a podcaster that I need to buy one.
As I’ve mentioned about my interview, I lost the recording. What we designed is a self-recording microphone. It’s called the Brandcaster Self-recording Microphone. It has a branded mic flag so it will have your show name on it. In that mic flag, we have an SD card that lasts all day. We have a light that goes on so if your SD card is running out of power, the light will start flashing at you. It has a battery. It’s not run by wires or cables. There’s nothing in it. It got a simple battery that you can replace. If the battery runs low, within ten minutes of running out, another light will flash so you can end up or pause your conversation, replace your battery and keep going.
Additionally, you can string two together so you can capture two track recording, and then you can hook it all straight to your phone and drop it in the Dropbox for your production team to take care of. There’s a little cable that will attach it and you can download straight from the SD card into your phone or onto your computer. It’s all self-contained. The only thing you have to carry around is the microphone and an extra battery. There’s even an extra SD card in the bottom of the mic flag.
What’s the price point. What does it cost?
We’ll do a $199 feature, a $199 and $249 retail. It will include a book on how to podcast and a free month on our Podetize platform. It will include some extras in the box.
I like the idea. I would buy one of those. It makes a lot of sense.
We’ve been getting a lot of good feedback from live streamers and people like that because it’s a lot to carry around. There’s a lot of equipment and all of us are solos. We’re solo hosts, we don’t have a team, we don’t have a big staff following us around with Boom mics, video cameras, and the whole thing.
What do you mean you don’t have a staff? It takes twelve people to make one of these things.
I have a staff of 50 worldwide. It does.
Twelve of them are full-time on the podcast like here.
No, I have 50 people full-time on my podcast network. We have over 200 shows to manage so we have full-time on that.
Tracy, it’s a cool story. I love what you’re doing. I love the way you are helping entrepreneurs and innovators. How do we find out more, follow you online and all that stuff, please?
The best place to follow me on social is LinkedIn. I participate heavily there but you can find me anywhere. You can find me @HazzDesign. You can also reach out to me. I’m emailable. You can find my column at HazzDesign.com. You can contact me directly through that. You can find our information on our company for podcasting at Podetize.com.
Tracy, thanks so much. Great stuff. We’ll have to have you back soon and get some follow-ups.
That sounds good, Jim. Thanks for having me.
I want to thank my great guests. I enjoyed both conversations. I wanted to also let you know who is coming up here next. We’re going to be talking a lot about money. We’re going to talk with Kedma Ough about target funding. It’s a whole new way of looking at funding, throwing in that target word there. You’re going to learn from this. We’re going to have a crowdfunding update from one of the country’s very top crowdfunding lawyers and gurus. We’re going to meet a real estate empire that’s going to blow you away. A huge company built very quickly with Tim Bratz. We have the lead Blue Angel, the flying group for the Air Force that does all of the stunt flying and all that cool stuff. He will be with us, and the founder of The Improv comedy club. Huge guests and I’m very excited for them. We appreciate your time. Thank you so much for being with us. We will be back with more.
Watch the episode here: