#306 – Being Bigger Is Not Necessarily Better – Matt Howitt Breaks It Down

#306 - Being Bigger Is Not Necessarily Better - Matt Howitt Breaks It Down Speaker 1: Hey there, welcome to episode 306 of the AM PM podcast. My guest this week is Matt Howitt. Matt heard about selling on Amazon four or five years ago from a buddy of his. It intrigued him. He ended up buying an Amazon business, then bought a few more, and now he's got 17 of them. In fact, he would be classified as one of the aggregators that's in the space. We're going to be talking about his journey and what he's doing to give his company a better chance of survival in a space that's had a lot of ups and downs over the last few years. Enjoy this episode. Unknown Speaker: Welcome to the AM-PM Podcast. Welcome to the AM-PM Podcast, where we explore opportunities in e-commerce. We dream big and we discover what's working right now. Plus, this is the podcast where money never sleeps. Working around the clock in the AM and the PM. Are you ready for today's episode? I said, are you ready? Let's do this. Here's your host, Kevin King. Speaker 1: Matt Howitt, how are you doing, man? So happy to have you on the AM-PM Podcast. Welcome, my friend. Speaker 2: I'm doing well, Kevin. Thanks for inviting me on. This is a lot of fun. Speaker 1: Now, this is like we're doing this remotely, but we just live a few miles from each other. You're just down the street here in Austin from me, right? Speaker 2: That's right. Yeah, I live in Westlake. You live downtown. You're cool. I live out in the burbs, but yeah. Speaker 1: You live in the rich zip code. You live in the rich zip code. I look at the zip codes, you know, in Austin, they come on the Austin Business Journal. Here's the zip codes with the highest household income. And I think that's the zip code you're in. I might be downtown, but you're in the rich area. Speaker 2: That might be true, my friend. But yeah, I'm a long time Austinite like you are, right? I know you did your world tour there for a number of years, but your base has been Austin for a long time. I moved here in 1997, but I think you've been around almost as long, right? Or longer maybe? Speaker 1: Yeah, I came to Austin after I graduated from Texas A&M in 1990. So I came to Austin in 1990. My dad was very disappointed with me. I came with a marketing degree and I slept on my buddy's couch for a year. Actually, there's a house up by over close to UT and we actually, I slept on his couch for about a year. So right in front of the TV. So I had to wait for everybody else in the house to go to sleep. There's like seven guys living in this house and we sold t-shirts actually on the UT campus. And so I used to get a lot of flack From people at A&M, like what are you doing? You graduate from A&M and you're going over there and selling t-shirts on the UT campus. Speaker 2: I feel like this is the greatest marketing degree you could have possibly gotten. First you got a marketing degree at Texas A&M, which might in fact be borderline useless at this point. Then you spend a year marketing t-shirts to UT students. That's probably the most valuable marketing experience you could possibly have at that age. Speaker 1: Well wasn't it just UT students? That year UT did really well in football and you look like this. One of my friends was still in college at the time in the engineering school and so we got a special permission to set up little tables on the corners around UT, high traffic walking areas. And right then the song from MC Hammer, You Can't Touch This, was like a hot song. So we took the U and the T and put those in like orange and the can't touch this. Cool little thing and set these tables up everywhere to actually sell and We got permission because we were giving quote-unquote a percentage back to the engineering Department or you know some fundraiser kind of thing, which I don't think we ever paid anything But we got permission and then we would do game days, you know, you'd have back in the stadium I think was smallers 80 90 thousand people back then coming on a game day We would sell set up and sell these shirts, but nobody could see us nobody that You know, you have masses of people walking into a stadium and the only people that can see your little table are the ones that pass right in front of you. And so my buddies that I was doing this with, they're like, we got to fix this. So they built this catapult system. So they built this like, takes these two by fours, it painted them black and like, Put all the hinges on them and so they would fold down flat so you could put them in the back of a station wagon and we would take them out and we would unfold them. It's kind of like a picture of unfolding a beach chair or something. We'd unfold this beach chair and they would pop way up into the air and we'd hang these shirts off of a clothesline way up like 10 feet in the air so you could see them from above the crowd and everything. And we would sell $40,000 to $50,000 worth on a game day. When you're 22 years old and getting $40,000 to $50,000 in cash and splitting that among three partners every game day, you're riding pretty high. Speaker 2: This is such a Kevin King story for so many reasons, but my favorite part of it being a Kevin King story is not that you're making $40,000 or $50,000 a day, but that you're making $40,000 or $50,000 a day, but still sleeping on a couch. That's my favorite. Speaker 1: I was. I was sleeping on a couch. Speaker 2: Dude, you can afford a much better bed than a couch when you're making, you know, I guess it's what, only four or five, maybe six, six home days. Speaker 1: Yeah, six home games I think and we did like make it about $10,000 but I was buying nice stereo stuff and but I did I moved out a year later into my own little apartment. And you know, I had the nicest TV and I had, you know, all that kind of stuff. But so yeah, it was good. But we actually took that and then we actually went on the road. We're like, this is kind of cool. Let's go hit all the spring break spots. And that's where we lost the money. We actually went to took a station wagon full of shirts, not UT shirts, but other stuff we did and tried to hit all the beach towns from Padre Island to Florida. and try to sell shirts to the beach shops. And that was a cool trip, you know, nice, a lot of good beer drinking and having fun, but we didn't make too much money off of that. Speaker 2: I was going to say, I think it was enriching in other ways would be my guess. Speaker 1: Exactly. But yeah, it was a good time. So that's awesome. Yeah, I've been in Austin a while. I've been an entrepreneur my whole life. And that's where a lot of people, they always ask you, when you get into this business, you know, what did you do before? I like slept on a couch. I've never worked for anybody. I've worked for something, I've had two jobs where I had to fill out a, what do you call the thing? A W-2? Where I had to fill out a W-2. That was McDonald's and a pizza delivery in high school and college. Speaker 2: You fill out the W-4, but the W-2 is how much they paid you. Speaker 1: Oh, okay. That's what it is. See, I don't even know the name. Speaker 2: There you go. Yeah, you're right. W-2 is what you got when you actually got paid. That's your annual income. Speaker 1: I've actually never made a resume. I've actually, I think I had to do, I had to do one in college, you know, for a class or something, but that's, I've never actually made a resume. But speaking of resumes, your resume is impressive. Your resume, it's Harvard grad. What's your background? The old story background? Speaker 2: That is, that's correct. I graduated from Harvard in 1997 and then as I was saying, moved to Austin. Right, right there after and work for, you know, a string of high tech companies here in Austin for many, many years before becoming an Amazon entrepreneur. But yeah, yeah, so sure. We don't have to talk about my resume. But definitely, you know, cut my entrepreneurial teeth, working for so different than so many other entrepreneurs in the Amazon space in the sense that Almost all of them are bootstrapped, as was your t-shirt business, for sure, was bootstrapped. But the companies that I worked for always had some sort of institutional backing, some sort of venture capital type investment from really the time I got out of college. I wasn't the founder of any of those businesses and a couple of them I was like the first employee that the founders had hired, but I didn't found any of them. But I worked for a string of companies Here in Austin, I guess, five total before starting Profound Commerce, all of which, you know, through some, a big combination of luck and good, but I think more luck than good had, you know, successful outcomes for their investors. So I got to, you know, sort of over the course of the first 20 years or so of my career, Just see how that was done. How is institutional capital raised? How is a story told about what the company is going to be and how it's going to evolve? You know, how to multiple rounds of financing work, hiring, etc. You know, and so I've worked for I have had quite a few jobs. I've written my resume quite a few times and in total before founding profound commerce and becoming. Speaker 1: When you got into this Amazon space, what actually lured you there? I mean, you said you had a side hustle and you were doing stuff. But I remember when I first met you, I think it was at the Billion Dollar Seller Summit, you came to one of those a couple years ago. And, and then we had, I think, lunch afterwards, because we were both here in Austin. And you're, you're telling me a little bit, but you were still working at that time for one of these companies. And you were doing the side hustle on the side with the Amazon. How did this Amazon thing lure you in? Speaker 2: Well, you know, Austin is a very vibrant community of entrepreneurs and all sorts of people doing things. And it's one of the reasons it's so fun. To be here, it's such an interesting city with such interesting character and culture and people. And I had a friend of mine who had gotten involved in the Amazon space. And he and another guy and I would meet regularly and we would talk about what we were all up to. We were friends and work colleagues as well, you know, at various companies over the years, we'd just hang out. And, you know, he would come in and he would tell us about what he was doing. In the Amazon space and I just, I couldn't get enough of it. I kept hearing what he was up to and sort of the results he was getting and I was just like, this is like, this is really, really fascinating. And he's like, yeah, it's pretty cool, isn't it? I'm like, no, man, it's like, really cool. And he was like, yeah, yeah, I guess so. Like, whatever, I feel like I was more into it than he was. And so that's sort of what, you know, kind of got me started. And I was like, well, I'm pretty interested in this. I should look into it. And I thought to myself, well, I could start one of these businesses on Amazon. And I didn't know anything about the tool sets back then. I didn't know how to use Helium 10 to find the right keywords and find a product that is low competition, high search volume, all these kinds of things. So I didn't know what to do there. But what I did have some experience in previously was buying other businesses. I had done that as a side hustle. I bought an internet site. From a broker, and I thought, well, interesting, you know, let me see what I can find. And then I started to look a little bit and I noticed that there were like, and this was in 20, you know, spring of 2018, maybe. It turned out there were like, a lot of Amazon businesses for sale. Of course, there became a lot, a lot more over time into 2019, 2020, 2021, and now in 2022. But, you know, even back then, there were at least a handful of businesses for sale. I looked at a couple and I thought they were pretty interesting and I, you know, just sort of like on a whim decided to buy one because I was interested. Speaker 1: That was with your own money or did you raise money to buy that business? Speaker 2: It was a combination of my own money and some friends' money. Those two guys I was talking about, they kicked in some money. We found some other folks that I knew. It wasn't institutional funding by any stretch of imagination. You might call it angel investing, but it's probably really just like friends and family. There was no actual family involved, but just friends. Each of them cut me a check for, you know, We made five figures, a couple of them six figures, and we went off and bought this Amazon business for about $800,000. I didn't know what I was doing at all. I just thought, this is cool. I'm going to figure it out. This guy's figuring it out. All these other people are figuring it out. Some of them are getting really successful. It can all be completely time shifted. I can talk to the suppliers in China at night. I can do almost all the work, not outside the normal office hours. You know, loves that aspect, I think, of being an Amazon entrepreneur is it does give you a lot of time, flexibility. You certainly have to work hard, but you can kind of work at all sorts of hours and from all sorts of places and, you know, be successful. And so I was like, oh, well, I'll just work my day job and then I'll work on this and that'll be cool. And that's what happened. And when I got into it, I didn't really think that it would ever become anything as big as it has now. Become for me. But I really got more and more hooked over time. I thought it was interesting when my friend was describing it to me. And then it just got more and more and more fascinating once I actually was like, in the business of operating and growing one of these businesses myself. And, you know, I think I bought the first Amazon business, the first Amazon business I ever bought, I bought it in like September Of 2018, I guess, and then, you know, we went through the whole holiday peak season. The business was growing very rapidly. When I had bought it, it was like growing at almost 100% year over year, just sort of Organically and honestly, you know, it was easier back then as we all know on Amazon, less competition, lower cost per click, all sorts of things that made it easier, cheaper supply chain costs, you name it. So, you know, took the business through December and into January and I was just looking at the results like, How much did I pay in September? How much revenue had we accumulated over those four months? How much profit had we made? How much time had I spent working on it? And I remember just thinking in January of that year, so January of 2019, just like, this is so cool. I want to do more of this. I want to do a lot more. And, you know, I'm excited about the one I own and I want to own more. And I, you know, maybe this is like a thing I could do, you know, as a real job, like I could, I could build a company around this. And at the time, So, you know, so I was like at that point I was an aggregator with one business. And so, you know, I thought to myself, you know, and I kind of knew about aggregators that were out there, like we had the ER aggregators, the proto aggregators were on the scene by that point, like Thrasio, as it turns out on its first business in June of 2018, I think is the right, right around that time. And so we, you know, profound commerce bought its first business. And by the way, it wasn't even called profound commerce, which is, of course, the name of the aggregator that I now run and are founded in that run. It wasn't even called that back then, didn't even have a name, basically. We bought our first business in September, so we didn't quite go as fast as Thrasio, I always like to joke about, but that model was coming on the scene. There was a lot of people talking in the buying and selling community at that point about Hey, there are some people who are now becoming like repeat and multiple buyers like brokers like quiet light or website closers like they were seeing the same guys pop up over and over again looking to buy these businesses. Even though, you know, sort of the aggregator model hadn't launched yet. So there was Thrasio, then of course, there's Richard Jalachindra's company, who you also know, because he's an Austin guy, which is 101 Commerce, which of course, eventually sort of merged with another aggregator. And I'm not even sure what fully is going on there anymore. But, you know, there's a couple guys, couple companies doing something like what I was thinking about doing. And I just thought that this was a really good entrepreneurial opportunity, which is just, you know, the Amazon don't need to tell anybody on this, on this, you know, Podcast, but like the Amazon market is massive. E-commerce is massive. You know, Amazon is the single greatest aggregator of consumer demand for physical products that the world has ever seen. And we all know that by like the incredible search volume that Amazon has for every keyword you could possibly think of on the planet and many, many more that you could never possibly think of. And so, you know, it's just, it became, all of a sudden, it just looked to me like an amazing opportunity. Like, can I buy more of these businesses? Can I pay the right amount of money? They're growing really rapidly. Can I put together, you know, a team of people who know how to do this well, who know how to, you know, find good businesses. But more importantly than that, and this is, you know, I've always, Have the mindset of, you know, operator first. And so it was always for me, like, I want to buy these businesses because I think the brands are cool. I think the products they sell Our need, I see opportunity to sell more products to this customer base, improve roadmap, expand them in all sorts of different ways, do brand building, marketing, all the things that we do to make our businesses more successful over time. I wanted to do all that. It wasn't just about buying the next one for me. It was about finding ones that I really wanted to run. And so, you know, back to the origin story, I looked around for a couple of things. First, I wanted to look at more businesses. But I also needed more money. Like I had essentially, you know, tapped out the network of friends at that point. Speaker 1: Because you went from one to four fairly quickly, right? Speaker 2: I went from one to three in about... Speaker 1: To three. Speaker 2: One to three in about three months. And then I, the fourth one took us another like nine months. And so, but by basically a year and a couple months later, I was running a small aggregator with four different businesses. Speaker 1: How many people did you have working for you at that point? Because you were still doing a lot of the daily stuff. Speaker 2: Yeah, absolutely. I mean, even to this day, I'm still super hands-on, even though, you know, Profound Commerce now owns 17. But, you know, back then we had, so, you know, putting the team together, I eventually convinced a really good friend of mine who became co-founder of Profound, Nirav Bhagat, to come on board. So it was Nirav and me, and then we had like one or two U.S. employees. And we started building in the Philippines really early. So by the time we even had three brands, we had a team of four people that we've never called VAs. We've always just called them our Philippines team. Speaker 1: Some of those came from one of the guys you bought, right? Speaker 2: That's right. So as many of you know, Mike Jackness is Podcast, Ecom crew is very well known and he talks about his business Color It that he sold, which was in spring of 2019. He sold it to me or to me and my company, Profound Commerce. And Mike is a great guy and actually is now an investor in Profound Commerce. And he had also been building in the Philippines for a long time, even before I got to know him or got to know So he was helpful in helping me sort of seed our Philippines team over there. Some of the folks who worked on Color It for him in the Philippines came over to work for us as part of that acquisition. And that really got us started. But we've scaled significantly since then. That was like four people and now we're at 45 in the Philippines. So, you know, it's just, it's definitely was extremely helpful for Mike to sort of bootstrap us over there. And we have always had sort of like, that's just an extension of our company kind of mentality. And so now, we do an incredible number of things in the Philippines and we're hyper-efficient from the US perspective. I think that's one of the things about Profound that's different than some of the other aggregators who just seem to hire So many, but you know, we today, we still only have 25 US employees and you know, we're managing 17 brands with those 25 people and another 40. Is that working in an office or are they all remote? So it's hybrid. We have about 12 people here in Austin and we do have an Austin based office. And then we have another 10 of those people who are US employees who are spread around the country. You know, we sort of have, You know, look, we did it, you know, the pandemic obviously completely changed the game in terms of how office versus remote work really was done and how it was accepted. And I think, you know, from my perspective, as you know, CEO and founder of a company, we need to get the best talent that we can to make the company successful. And the best talent isn't necessarily in Austin and doesn't necessarily want to come into an office every day. And so we have a very flexible policy. It's interesting. We have people who really do want to come into an office every day and they do. I work out of our office only two days a week, Tuesday and Thursdays. And then Monday, Wednesday, Friday, I'm at home. We're doing this chat on a Friday. I'm working from home today. We have a very flexible policy and it works really well for us. I think it's great at attracting talented people because we give them the flexibility that they want and treat them like adults. Assume that they're going to get work done. By the way, have a great culture, have meaningful work to do. That makes people want to work and it also makes them want to work hard and work smart. So that's sort of like my mantra. I don't need to be making sure that they're in their seat at 9 a.m. at my office in South Austin. I don't care. I just want them to be kicking ass and making the company more successful. That works best for them. It is what's going to work best for us overall as a company. Speaker 1: So how hard is it to actually find these people though? I mean, a lot of aggregators have had trouble finding quality people that know this stuff. I mean, you might be able to get someone that graduated even from Harvard with a degree in business or marketing or whatever, and they come into this space and they're like totally lost. So how do you find those people? Speaker 2: It's a different animal, you know, I sometimes relate Amazon to almost being like a trading desk. You've got to be on your listings, on your competitors' listings. You've got to deal with negative reviews and hijacks and all sorts of crazy stuff. In a way that is, I think, very different than conventional businesses. The Amazon marketplace is a whole animal unto itself. And it's different than selling on your website and B2C business. It's different than selling at retail. It's just a very, very different animal. And so, when we first started, Kevin, there were Nobody knew it very much reminds me actually have a different place in my career you know when i had just graduated from college and the internet was substantially disrupting the world you know it's the first version of it was beginning to disrupt everything. And one of the things that it was disrupting was also like employment. In the sense of you had all these internet companies that were trying to hire people who knew how to do stuff, you know, on the internet, how to build things. And, you know, there was a huge industry of that now, obviously. But back then, nobody knew anything about how to build anything on the internet. And I think it was, and we were all like fumbling around trying to figure it out. And I felt like Amazon, you know, when we were first getting started, you know, in 2018 and 2019 is the same way. Like, you couldn't hire anyone who knew anything. Like, you know, the people who knew stuff were working for themselves and maybe they were working at agencies. But it wasn't like, you know, Amazon, you know, Seller Central Experience was a resume item, if you will, that people, you know, put on their resume. If anything, they were like me doing side hustles where their day job was at the top of their resume and, you know, their Amazon, you know, business was not mentioned at all. You couldn't find those people. And so, yeah, you know, at first it was really hard and you know, you don't necessarily hire based on the people's experience. Or their specific skills, right? You hire more on their ability to learn quickly and to, you know, be a culture fit and to assimilate into your company, etc. I mean, I'm sure many, many people have had the experience where you hire someone who's supposed to be an incredible expert. And then, you know, but they don't are not compatible culturally in any way, or, you know, they think that their previous context is the same as this context. Every problem that they solve at your company is, well, we did it this way at my last company, so that's the way we should do it here. Really? Maybe not. Maybe things are different here in some set of ways that make that solution invalid. Maybe it's good. Maybe it's bad. I don't know. You sort of get into this mode of like, You know, experienced people might not always help you. And then the flip side of that is like, sometimes you hire someone who's inexperienced, who's, you know, super motivated, great learner, and you're like, I can't believe how impactful this person is. I can't believe how quickly they're picking all this stuff up. I can't believe, you know, the value they're creating for me and my business. And so, you know, the people that we hired, you know, at the beginning, they were just smart, motivated, eager to learn. And, you know, they cared. And I think that that, you know, goes a really long way. It's a developing space and what that means is the companies are developing, they're all immature in their process, in their leadership, etc. The people who are working there are immature, not in a personal sense, but they're not experienced, they haven't been doing this for 20 years because this hasn't been something that you can do for 20 years. I think when all these companies launched, when we launched, Yeah, there was no one to hire and the difference in terms of whether you did a good job or not was not whether you found people with the appropriate skills. Previous experiences, et cetera, but more if you found the right people who were able to learn, fit the culture that you were trying to build, et cetera. I think if you have a lot of experience doing that, building companies from small to bigger like I did in my previous roles working for these different startup-like companies for about 20 years, you're at a real advantage. You've been hiring forever. You know, I was hiring in the, you know, in the early days of the internet when no one knew about the internet. And then I was hiring in the early days of being an Amazon aggregator when nobody knew anything about Amazon. And so it was fine. But, but, you know, now it's sort of an interesting different ballgame. Like over time we've accumulated, you know, now this has been around for a few years, right? Like most of the bigger aggregators launched in the summer of 2020. So, you know, we're, Most of them are now at least two years old. And what that means is that you have people who've worked there for two years who now have two years of experience. It's definitely an evolution in terms of what skills are available and how you think about constructing a team that can go about and accomplish the objective and be successful. But yeah, it was hard in the early days. I felt like I had some experience, not specifically hiring for Amazon, but experience hiring in this sort of context where no one knows anything and it's an emerging market. Speaker 1: So you went from these three, four companies and then you decide, Hey, we're going to really blow this thing up. And you went out there and you use your, your knowledge from your last several companies on raising money and you raised north of $50 million. Is that, is that correct? Yeah. Speaker 2: So that's correct. So yeah, the total amount of money that we've raised is 53 million. Um, and that's spread across equity. And debt. But yes, we were fortunate. We spent a long time looking for the right partner. I mean, I can't describe to you how weird it was for me and my co-founder Nirav. In the summer of 2020, when all of these companies started to launch, when Perch and Heyday and Elevate and Tap Hill and a number of them, all of whom I now know the CEOs and some of the We had the same experience that I think all of these other Amazon sellers had. At that time, we still had more businesses. You're hearing about these companies that you've never heard of before, who suddenly are putting out press releases that are saying, we raised $100 million to buy Amazon businesses. You go to their website, and you look at the people on their website, on their about page, I've been in the Amazon space for two years. I've never heard of any of these people. Who are they? I think that was the reaction that the entire Amazon seller community had when aggregators launched. Who are these guys? It wasn't anybody you'd ever met at a conference before, but it was so interesting. They had a skill set that was pretty much fundamentally different than Amazon sellers. They could go out and tell a story and get institutional capital. What Amazon sellers could do is find an amazing keyword with search volume, find the supplier, by hook or by crook, get a good product or a decent product built. It depends on what area you're in either, you know, grab the product on Alibaba and just throw it up on Amazon or maybe, you know, later on, like, actually do some innovation, etc. It's a little harder, right? But, you know, they had a very specific skill set. There was almost no overlap between those two types of people. It was just very strange. When that started happening to us, it wasn't like we had never had the idea either to try to go raise more money from outside investors to invest in more of our businesses. It's just when we would go talk to them, most of them weren't that interested. And so, but then all of a sudden, all these guys who, you know, when we see ourselves as operators, not finance guys, but then all these finance guys are out there raising hundreds, literally hundreds of millions, and then eventually billions of dollars to prosecute this thing that we've already been doing for two years. And so when that started to happen, we were like, well, like, Damn, we should get our own. How do we get that check? We think we know what we're doing. We've been doing this for two years at least already. We bought four businesses. They've been successful. We've put together a team. It's not a big team, etc., but it's a team that knows what it's doing. Hired a few people in the US, hired more in the Philippines. And we went and knocked on the doors that all of these different guys had knocked on. They were like, yeah, that's cool that you have four Amazon businesses. These guys are going to have 50 in a week or something. They're going to buy 50 in the next month. That's a much more interesting model to us than you're a four. I'm like, well, we could probably buy some more, but we need more money. And they're like, yeah, well, you've only bought four and it's been two years. You guys kind of suck. Oh, man. So, but we eventually did find a great partner, which is Adelaide Capital Management is who our investor that invested $53 million. And it took us a long time. It took us almost, well, from start to finish, it took us a year. But like, we just started talking about maybe like in the first six months, and then it took another four to six months to put the whole deal together. Adelia has been, I tell everyone this, they've been really, really good to us. They've been incredibly supportive from the moment we met them. I think there was some really good alignment in terms of how we view the world and how they view the world. We spent some time, it took a long time to hammer out the deal as I was saying, but by the fall of 2021 is when they gave us, we finished all of the documentation and the legal work around actually raising that financing. We started thinking about that in the summer of 2020. When all the other aggregators started launching, but then it took us another year to actually find the right partner who we wanted to work with and who wanted to work with us. And finding that mutual fit was difficult. It was a great move for us and it's been a great relationship. Speaker 1: Do you think you have an advantage because you were more of an operator versus a finance guy? While all these others were more finance guys and just seizing the gold rush versus you were a true operator before you really expanded out? Speaker 2: I hope that is the case Kevin and I can tell you that now as we think about you know raising more money for the company and continuing to try to expand. That is a big piece of what we talk about when we talk to investors. We have some great proof points in terms of the growth that we've been able to achieve with our businesses, the discipline we've had financially in terms of how we've scaled our own corporate expenses, the number of people we have. How we've, you know, sort of used the Philippines in a very leveraged way where, you know, for essentially for every, you know, one U.S. or Western country employee, we have two Philippines people that, you know, it's not like they directly support each one of those people, but, you know, we have a very different ratio than most folks have in terms of like U.S. to low cost geography headcount. So, yeah, we talk about those things and, you know, I think it does give us a real advantage. I think the other thing about us that is an advantage is those guys scale way too fast. It's not necessarily clear that more is better in this space. Are you better off with 250 Amazon accounts than you are with 100 or 50? Sure, you might have more revenue, but does that mean you're going to be more successful as a business? And I think that that is, you know, at first, this space was all about just buy as many of these things as I possibly can, as quickly as I can continue to escalate the amount of money that I'm raising, and put out more and more press releases about how much money I have, and how many businesses I own. But at the end of the day, I think you kind of have to ask yourself, so what? It's like, once you buy a hundred businesses, a hundred Amazon accounts, is it really better to buy 200 Amazon accounts? And if you're going to buy another hundred and have 200, and if you're going to market, you know, either to attract capital or to go public or to sell, you know, to some other entity, are you really better off with 200 versus 100? I guess you're a more attractive company the bigger you are, but that doesn't mean that operationally you're able to manage that many. I think, from my perspective, the aggregators that scaled the fastest and were the best at attracting capital and then putting it to work are actually the ones that, at least from a rumor mill perspective, are doing the worst, who are in the most trouble. Last year, and I'm stealing this from Ryan Neeson at Elevate, so I need to properly credit him before I do it, but we were all running this race and everyone thought, buy faster, Buy more, raise more money, and because there is a perception that the longer you wait, the more expensive various businesses got, the more likely the good businesses were going to get snapped up by a competitor, all these sort of things. And in 2022, that has completely changed because the world has changed significantly from an interest rate outlook, from inflation, which is why interest rates are rising, because You know, government is trying to combat inflation, you know, we have war between Russia and Ukraine, you know, that 2021 was, you know, we had we had millions or billions, trillions of dollars, I should say, injected into the economy because of COVID. It was a very, very frothy environment in 2021. And now things have really Turn around and change and you can just check your stock portfolio to know how difficult that's been and what the outlook is now compared to what it was in 2021. Speaker 1: Even some of the people at some of these big ones, like, you know, I just saw on Equity Zen, someone from Thrasio is selling their shares at an 80% discount over the last valuation. The last valuation was $7.3 billion, and they're selling at an 80% discount to the last valuation, just dumping. So there's a lot of lost faith in a lot of the aggregators, and you're seeing a lot of them are consolidating or they're buying, the bigger ones are buying the lower ones, and some of them are going to probably go out of business. So where do you think this is headed in this space? Speaker 2: I think, you know, look, my perspective is that this is still, at least to some extent, a grand experiment to figure out if these models work. And actually, let me put it a different way. I think this model does work, but that doesn't mean that all the companies that have given all of this capital figure out the right model, right? And I think There are going to be some set of winners in this space. I firmly believe that. There are going to be companies that figure out how to operate successfully, that grow and have meaningful returns to their investors, create meaningful value for their employees. Make their customers happy, all the stakeholders, right? But I think, you know, like in any sort of frothy market or mania or whatever you want to call it, there are going to be a lot of losers. And in fact, there'll probably be a disproportionate number of losers relative to the winners. And so I think we will see some amount of consolidation. In the sense of aggregator X will buy aggregator Y and but I think that what the issue with that is that bigger may not be better. And that a measured pace to grow sometimes the tortoise really does win the race. And it's just not entirely clear, you know, as the next few years develop here, that the biggest guys who grew the fastest are going to be the actual winners. And I think, you know, it's possible that they, you know, find way, they're, they're the ones in the most trouble from what we can tell, in terms of just like how difficult it is to manage their businesses now. But, you know, it's possible they'll, they'll figure it out. But I think it's also, you know, Maybe smaller companies that scale faster like us wind up being the ones that are actually the true long-term winners in the space. That's the bet that we've always made. It's funny. I didn't really choose that bet. I just am it. I'm not a finance guy. I couldn't raise a couple hundred million dollars in the summer of 2020. I didn't know how to do it. And so I didn't choose to be the tortoise. I just that's my skill set, if you will. And so but it might just be, you know, a lucky tortoise, if you will, and that it couldn't work out for us. You know, relative to some of these other guys who, you know, not like we didn't have similar ambitions, they just have the ability to execute it. Much faster, but perhaps not better. But the story is still to be written in this regard. As I said, I do think there eventually will be winners in this space. But it's not just like a manic buying spree. You really do have to build, you really do have to operate. And I think that a lot of folks got into this thinking that it was an easy money, like make a fast buck. They always go up and to the right and they're just going to grow forever. You don't have to worry about competition. Your garlic press is always going to be superior to the next guy's garlic press. The fact that you got 10,000 reviews on it, it's going to continue to grow forever. Anyone who's been playing the Amazon game for any period of time knows that is not how it works. One thing I always like to say is all real estate on Amazon is fleeting. You don't own your keyword. You don't own your search rank. You have to earn it every day. And there are people out there who are trying to knock you off your pedestal, right? Take away your bestseller badge, take away your top three rank, etc, etc. Let alone all the things like how Amazon's making it more and more expensive to operate. You can set all that aside, right? The competition is brutal. It's brutal. It's one of the purest markets out there. And the idea that you can buy some business, it doesn't even matter what you pay for it, and that it's just going to have those returns or better forever with sort of minimal investment, so you can just kind of ignore it and move on to buying the next one. That's not how it works. That's not how any business works. And I don't think the laws of physics have been changed by the Amazon seller, third-party marketplace. They have not. You still have to operate. And if you don't do those things well, you will not win. You will die. Speaker 1: I agree, I agree. So if any of the 17 that you've bought so far just turned into be a mess, it wasn't what it was cracked up to be or what it looked like once you got truly inside of it? Speaker 2: I mean, I think we make mistakes all the time, like we are not perfect like everybody else. There are a couple of those 17 that we've bought that, you know, I wouldn't say there was fraud or that we were misled or anything like that but we made a set of assumptions that have proven to be bad. In certain cases, we didn't really understand The impact that COVID had had on the business, and we thought it was smaller than it was, and it was actually much larger. We didn't really understand how COVID had impacted it. And then another year goes by and you're like, wait, the business is very different. There are a couple of businesses like that. There are a couple where we have one business right now, that's linked to housing and you know the environment that the business was purchasing when we bought it was like the housing market was extremely frothy basically, Interest rates were low. I mean, everyone can look at their real estate values over the last few years and see this enormous increase, right? And so I think we underestimated how much this business was benefiting from that very competitive home buying market. There are things like that. We have many more wins than we have losses. That's the value of portfolio management. You have a series of businesses. You're not just dependent on one company that sells aprons like our original purchase, Hudson Durable Goods. You have many businesses across different sectors. Some are going up and some are going down. Hopefully, many more are going up than going down. The idea that you could make 17 purchases like we have and not make any mistakes and not have results that you didn't expect and not overlook things, it's insane. Of course that's going to happen. Speaker 1: What's one of the ones that you've bought that has just skyrocketed, taken off? Like you've just like 5x'd it or 10x'd it or do you have something like that as well? Or are they just kind of a steady growth? Speaker 2: We don't have any that we've 10x'd. We do have some that have doubled or tripled and you know in a short period of time, in a year or two. And yeah, and so you know, we have one business in the medical space You can see on our website called Patient Aid that it's been an incredible purchase and we've doubled its revenue easily and grown its actual profitability even more than that. And so that was a really big win. And there were some interesting things there. They were doing a lot of FBM shipping when we first got involved with it. We changed everything over to FBA. Most of the listings doubled their conversion overnight when we did that. A bunch of the listings were really crappy. We improved them a lot. We got better photography, etc. All the things that aggregators do. We ran PPC smarter, right? All of those things added up to a Almost a triple now. I think I have lost track a little bit, but yeah. So look, we have our shares of wins. We have our shares of losses. That's going to be true for any portfolio that you're managing. I think the key bit, right, is to be a good picker, like pick businesses that, that, you know, have great potential, which I think, you know, when you're trying to buy 250 in three years, inevitably you're going to, you know, you're not, you're going to make more bad choices. It's, you're going to feel Rush to pick if you will. So, be a good picker, but then after that, be a good operator, right? And so, you put those two things together and we think we're pretty good at picking. We work really hard to be good at operating and go from there. But back to the question about what happens, look, Amazon is going to continue to be an incredible opportunity for entrepreneurs. And some set of people will figure out how to build scaled companies. that are good at being Amazon sellers, and some people will not. And I think, you know, I'm hopeful that we're one of the winners in the space, but we don't know yet. We're pretty optimistic about it. But I don't think that anything is inherently impossible or broken about the model. But I do think it is a heck of a lot harder than people thought. And I think you have to show up every day and have real expertise and really care. Just like making any company successful. This entrepreneurship is no different than any other entrepreneurship. It takes grit, it takes hustle, it takes brainpower, it takes capital, and it takes some luck. And you put all those things together and sometimes you win. Speaker 1: So if I'm looking to sell my business to someone like you, what is a few points that I need to keep in mind when I say, hey, I'm ready to exit my business now? Hey, Matt, would you take a look or you may be interested? What are some things that you'd like to see? Speaker 2: Yeah, I think one of the things that's interesting is what's happened in the market. As you get bigger, whether you're Profound Commerce, whether you're Thrasio, whether you're anybody else, the bigger you get, naturally, the more you want to look at bigger deals because you have accumulated a bunch of revenue. Say you've got $100 million in revenue, A $1 million deal just isn't that interesting anymore in terms of moving the business forward. All of a sudden, you're thinking, I need to buy at least $10 million more in revenue. That would add 10%. One $1,000,000 business, that's like only moving 1% increase. And I think that that's something that entrepreneurs need to better understand, you know, not better, but understand is that, you know, as aggregators get bigger, they're going to increasingly want to do bigger deals. And so, you know, if your business is a few million in revenue, a couple hundred thousand dollars in profit, There isn't the same market for that that there was at the beginning. And now if you've got a $10 million business that's throwing off $2 million a year in profit and is still growing rapidly, that is a very, very interesting business to people like me and many others in the space. And so I think that's one thing to keep in mind. I think another thing to keep in mind is that You know, I was talking about how last year it was like a race and everyone was trying to move as fast as possible. You know, people are saying like 30 or 45 day closes. We can get your money in five minutes and we'll give you a Tesla too in the process, right? I think those days are over and it doesn't mean that your very good business can't command an attractive valuation. But what it does mean, I think, is that the process is going to go slower It's probably going to take longer. There's going to be greater scrutiny on the front end than there was previously a year ago. I think that process is very difficult for an entrepreneur. Selling your business is time-consuming. It's expensive. It's obviously emotionally difficult. The process is now, you know, it's more of a buyer's market now than it was a seller's market a year ago. And buyers can be more selective, they can take their time, they can stretch the process out even more. And so I think entrepreneurs sort of need to understand that new reality that, you know, where they had a lot of leverage a year ago or two years ago, that is a bit different now. Now, that doesn't mean that we're, you know, going to be jerks about buying your business. And I hope that's true of all the other aggregators, honestly. But it does, but the market is different and sort of your expectations of how these transactions, you as a seller, your expectations of how these transactions are going to go, it's going to be different than it would have been last year. It's two things that come to mind. Speaker 1: So if I'm new or just getting started in this business and you know, I just went through the freedom ticket or I just found out about this and I'm listening and trying to gather as much information. You said it earlier, the days of just going into Alibaba and sticking your name on something and selling the next garlic press are pretty much over. What do I have to do to make myself, if my goal is to exit in a couple years from now, what do I have to do to make my, now to make myself attractive? Do I have to be truly innovative and come up with some brand new design and brand new thing? Is it about my marketing? Is it about being off of Amazon and having diversification? What, or having a, just building a true brand? What, what do I have to, having an audience or what, what did I have to do? Speaker 2: Yeah, I think it all works together, um, honestly, but if I had to pick any of those from the list, I would say branded audience, what you've ended on, I think is actually the most important piece. And it kind of gets back to something I was talking about before. How every piece of real estate on Amazon, from my perspective, is fleeting. You never own your keywords. It doesn't matter how many reviews you have. You can always be displaced. But from my perspective, you know, as a buyer, long term value is in brand and an audience. And so, you know, brand is your story, you know, how you talk to your customers, certainly your, your, your visual look and feel, but it's really, you know, what you stand for, right? When someone buys your product, what does it mean to them? And you know, if it, you know, and, and then also on the audience side, Your audience is your tribe, right? The people who are your raving fans, who love you, who love your product, and they love your brand, and they even love you as an individual entrepreneur. And so those things, Brand an audience i see those as being much more permanent than your search position on amazon and so if you got you know an attractive brand where you can innovate and create new products and introduce those and then you got an audience that you can sell them into. That is something that is sustainable and durable and is worthy of someone buying your business and continuing it forward. If you just have a product that you plucked off Alibaba and is essentially a commodity and might even just be a little bit better than the previous garlic press, and say it accumulates a bunch of reviews and a bunch of revenue and then cash flow, At the end of the day, you've got revenue and cash flow, you have something, but what do you have of sustainable, durable value that is going to be worth something to someone, not just in the next five minutes, but in the next five years? And I think that it is not the same environment as it was, where like, oh, that product has a lot of revenue and cash flow, I want it. As a buyer, it's more about you building something that is interesting and differentiated, has a brand that some set of people care about, and has an audience that you can continue to mine and harvest value out of over time. Speaker 1: Awesome. I can't agree more. Well, Matt, I really appreciate you taking some time today and sharing with us your journey and your thoughts about everything. It's been awesome. I'm sure we could sit here and talk for another two or three hours. If people want to reach out to you and get a hold of you, what's the best way to learn more or to reach out? Speaker 2: It's mhowitt at profoundcommerce.com, email address, feel free to reach out. We also have info at profoundcommerce.com, more general lists, we'll get to more people, but my personal email is mhowitt at profoundcommerce.com. Happy to engage with anyone and everyone about this space and share our knowledge and importantly also learn from you. So happy to chat. Speaker 1: Well, I appreciate it, Matt. Thanks again for your time today. Speaker 2: Great, Kevin. Thank you for having me. This was a lot of fun. Speaker 1: As you can see, Matt is passionate about this business and he's super smart. If anybody can make this work, it's going to be Matt. Don't forget also, if you're trying to make your business work, You need to sign up for the Helium Tent Elite. Every single month I bring on three guests and I also speak myself with my seven ninja hacks. It's something you don't want to miss. Plus we have roundtables where once a month we all get on a Zoom call and we just help each other out. We talk about whatever is happening in the world of Amazon e-commerce. If someone's got a problem, the group tries to help them, give them direction. It's a great opportunity for you to really advance your business. Plus, as a Helium 10 Elite member, you get access to some special tools that nobody else has access to. You get to come to the quarterly in-person meetings that happen in Irvine or sometimes in other places. There's actually one coming up in Las Vegas just before Sale & Scale Summit that a lot of Helium 10 Elite members will be at. And you get to go to those things for free. So check it out and hopefully you will join us there. Before we go this week, I just want to leave you with little words of wisdom. This is something I really believe and part of this is, you know, I've traveled quite a bit and this kind of goes with travel, it kind of goes with almost anything really, but it's better to see something once than to hear about it a thousand times. I really believe that it's better to see something once with your own eyes than to hear about it a thousand times. I'll see you next week on the next episode of the AM PM podcast. Take care.