How to raise a $11m Series A and disrupt a $1.7tn market with Jonny Plein

How to raise a $11m Series A and disrupt a $1.7tn market with Jonny Plein Speaker 2: Hello and welcome to another episode of The New Frontier. If you haven't already, make sure you're following us. Make sure you like this or however you're consuming it. Make sure you engage. Unknown Speaker: Click all the buttons. Speaker 3: Click all the buttons. Speaker 2: Click all the buttons because it really helps us to continue to attract Such amazing guests and this episode is no different. We have with us today Johnny Pline. So Johnny is a repeat founder, investor and an advisor. An advisor to me personally, he's been fantastic. He sold his first business pouch for seven figures and he just announced last week an $11m Series A for his current business Yaso. Damn, exactly. Yaso is a next generation solution for ambitious brands looking to enter the 1.7 trillion Chinese e-commerce market and sell directly to Gen Z consumers using the power of social commerce. I think this is going to be a great conversation, which is going to benefit a large segment of our audience, ranging from SaaS founders to senior leaders at e-commerce brands, everyone interested in AI and all of that good stuff. So Johnny, welcome. Speaker 1: Thank you for having me and Jo and Max. Great to see you both again. Speaker 2: Yeah, this is definitely one that I've, as Jo knows, I have a list of people on my OneNote that I want to get on the podcast and I'm kind of We're not waiting for things to happen, but when big news happens, I'm like, this is the time. Let's get them on. And Johnny, you've been one of my hit lists for a while. Speaker 3: Last week, Max was so excited. He texted me. He was like, oh my gosh, we've got Johnny. So yeah, it was very nice. Speaker 1: It's great to be speaking. Massive respect for what you're building and you as a founder. So yeah, nice to be having this conversation finally. Speaker 2: Yeah, and likewise, when I saw that news, I was so happy for you, but I definitely want to spend a lot of time talking about Series A, your latest Series A, but maybe just like winding all the way back to start with. Speaker 1: Yeah. Speaker 2: Talk about Pouch. Very briefly, what was the business there and what was the story behind that, your first venture? Sure. Speaker 1: So Pouch was a browser extension that automatically sourced voucher codes, presented it to consumers at the checkout page. The idea being that the voucher code shopping discount journey was broken. And if you downloaded our browser extension, you would never need to search for a voucher code again. You've probably heard of Honey. They were acquired by PayPal for $4 billion. We were the UK version of Honey, but just on a much, much smaller scale. But the idea was the same. And now each market has a pouch copycat. We ran the business for two years full time. And then exited to an amazing company at the time they're called Global Savings Group. Now they're called Atolls, just a European leader in voucher code, website production, and other affiliate marketing tools. Crazy journey, completely different from what I studied at uni and where I started my career. So I did economics and Chinese at uni. Then I worked in finance for three and a half years. And then was just like, screw it. Let's like, just try and build a business. And a good friend of mine from school was like, Hey, I've got this idea. I never thought it would go anywhere. I thought, we'll give it a go. It will last for six months. We'll fail because why would a first-time founder succeed? But it didn't fail. And yeah, we exited the business two years after me being full-time, but three years after the founding, which was just an incredible experience to go through. Speaker 3: That is quite a rollercoaster journey. We talked with a lot of e-commerce founders and in e-commerce in general, it's very difficult to exit a business, but you have managed to exit a business for a seven figure, like seven figure? Yeah. For a lot of money. So my question is any advice for aspiring exiteers? Like how do you achieve that? Speaker 1: So I'll say in terms of the money, seven figures is true. It was very much on the low side of that. I still need to work and I still need Yaso to be a massive success. And I think part of the... Speaker 3: Well, it's so modest. It's an achievement. Speaker 1: It is an achievement, absolutely. But part of the reason I think the investors backed us for Yaso is they saw a little bit of a chip on our shoulder of, okay, you've got a taste of success. It could have been a lot bigger if you had the right team and funding and everything around you. We had a $4 billion idea, just wasn't our exit. So that motivation definitely helped with the round. But in terms of an exit, companies are bought, they're not sold, meaning that If you are trying to set up your business and trying to engineer the exit, it's harder for it to come that way. You need to build a great product that people love using. And then because you have value there, someone will come along and buy you eventually. But you've got to be thinking about building the product and making sure that's great. We almost shut down Pouch. About three months before we sold it, it just shows how crazy that this journey can be. We were in this accelerator program with this massive media company. They were meant to invest like a million pounds into the company. And they actually, I can say it's News UK, and they pulled the deal the day we were meant to sign, like absolutely tragic, one of the most painful things that can ever happen. And we were like, my two other founders and I, we got in the room and said, actually, we just can't. Give up, you never know. There's that phrase like three feet from gold, the old adage of the guy digging for gold, and he gives up and he's only three feet from the gold. And so you never know when you're three feet from gold. And actually through that News UK experience, the Daily Mail saw what we were doing. The Daily Mail had a voucher code site ran by this company called Global Savings Group. And as soon as we were out of our NDA or like exclusivity period, News UK, they came in and bought us. So you never know which way things are going to go. Speaker 2: I guess you touched on it there, Johnny. And this was one of my key questions I really wanted to ask you, which is, You had a previous business. What have you taken from the first one to the second one? You talked about that shift on your shoulder on the hunger, but there must be like tons of lessons that you learned in the first one that now you're implementing to make Yaso hopefully a billion-dollar success. Speaker 1: My role is like finance and ops, so I can just speak to more of that. But being extremely organized from day one, I know this sounds a bit lame, but like being extremely organized day one with all your filing, How you're going to organize your business, because as that scales, if you've got just a haphazard way of dealing with all your internal company information, it's going to be really hard for you to scale. And when you move into a funding round, you know, you're going to find that process extremely painful to pull everything together. So we've been like extremely organized from day one. So as soon as anyone's asked us for any type of information, whether it's brands, whether it's clients, whether it's platforms, whether it's investors, like we can get on it really quickly. The second thing is knowing what is value with your time. I know this is like a classic thing to say, but I used to do everything myself, legal contracts, accounting, supply management, all these things. If there is a tool or a hire that can for a few thousand pounds a month, strip away, strip that away from you. And you can have more time to free up to promote the business like I'm doing now, or to generate more sales, which is ultimately like what is most crucial, right? You're going to live and die by the sales you make. That is worth it. And it's sometimes okay to spend a bit of money to unlock yourself. And finally, in the early stages, most senior hires suck because they're not going to know the business as well as you. I remember at Pouch, we brought on quite a senior product manager. He'd been like head of product at an affiliate network for a long time. And he was rubbish and he only got to the position that he was in because he was good at chatting and he's been around for a long time. So he wasn't in a high position through skill. He was just there through actually probably lack of skill by not going anywhere else and just staying long enough in a business. And we made two senior hires at Yaso quite early on. One of them turned out to be a complete disaster. One of them ended up being okay for what we needed him to do for a time period, but just couldn't grow with the business. But we knew he was going to be a bit of a mercenary and we accepted that. So those three things, right? Learn how to free up your time. Learn, be super organized from day one, because it will pay dividends in the future. And avoid making senior hires too early, because no one's going to know the business or be able to sell it as well as a founder, no matter what metrics this salesperson says they made at whatever flashy text that's up. You're going to be the number one salesperson in the early days. Speaker 2: Yeah, that was super useful and I'm sure many of the listeners will find this very useful because it's one of those things where we're shortcutting years of pain and frustration to just to get to the answer essentially of what you learn. In the organization, you talk about data rooms, like what does that actually mean in practice? You just have. Speaker 1: So a data room for me is what you put out when you're going out to fundraise. So anyone that's watching or listening to this, if you are starting a fundraise, you organize all of your information into what's called a data room. If you want my structure that we use for our Series A, just DM me. I'll be happy to share it. This is where you organize all the information in your business. For the raise, so market sizing, client contracts, margin analysis, and anything and everything about the business. So the idea is that someone can look through your data room in a structured way and understand the story of your company. The biggest difference for me as a founder between Pouch and Yaso is how much better I became as a storyteller for the business. So Pouch had a massive potential market size. I was not able to articulate that. Speaker 2: Right. Speaker 1: It was sold. We knew it could be massive. A business, one of the biggest e-commerce acquisitions ever, Honey got sold for $4 billion. Same business model. Right. Exactly the same. I was not able to articulate that. With Yaso, Obviously, objectively, the market we are operating in is gargantuan. There is no bigger ecommerce market in the world. So no one would ever question market size, but it was like, okay, why are you the right team to be able to sell in this market? When I'm speaking to investors or speaking to brands, explaining, because not everyone's going to have the same knowledge of China ecommerce as we do, we can't expect them to. Explaining the equivalent situation if they were dealing with Western systems, Western tooling, mapping that onto the Chinese systems, explaining what's wrong with that, explaining how we fix it. To be able to do that in 90 seconds so you don't lose interest of the investor or the brand you're speaking to is really important. So as a founder, leader, whatever your position, your storytelling, your 60, 90 second picture on your business needs to be shit hot if you're going to want to grow to the level you want to or get to the level of investment that you think you'll need for your company. Speaker 3: This is really interesting because I guess my question is when you go into this, let's say funding rounds, like how much do you think investors are buying the business and how much they're buying founders? Speaker 1: It depends on the type of business. I think if you are building a bulk standard SaaS tool, maybe a Shopify app that there are thousands of them and you've got the credentials of a decent founder, people are going to be buying the metrics because You're a bit unstandardized. That's all they can judge you on. When it's a bit more of a new market to understand, you're buying the founders. So that's why you're seeing all these AI founders raise millions and millions just on their pedigree, because that's all that they can be judged on right now. And for us, it was a bit of both, because Investors like to invest in what they know, and they don't know about China. So one, it was how they're investing as us as founders of the founding team, we have a PhD in Chinese internet governance, we've got self taught techies, we've got chartered accountants, like, we're an extremely strong founding team for this domain. But we needed to have numbers as well. It's usually not one or the other, it's both. But depending on where you are on the spectrum of vibes, when you're raising your round, the founder background may be more important than the numbers, especially in the AI hype cycle that we are in now. Speaker 3: I just have one follow up question, which is when you were doing like your pitch for that round, what do you reckon, what is your gut feeling? What was the kind of the special sauce or the deciding factor that like you think just wowed them and skewed the decision? Speaker 1: The founding team for sure. The metrics were good, but they're not like a lovable scaling mega fast. Like in relative terms, it went quickly. So we went from zero to a 2 million pound run rate in 12 months, which is pretty fast. But if the team wasn't the right fit for this market, we wouldn't have really got through the door. And I think Puma, who led the round, their CEO did a podcast Talking about Yaso, I didn't know they were going to talk about it. And he said, ultimately, if you are going to write down the qualities of a team to build this product for this market, And then you met us, we would exceed those qualities. So the founding team was definitely the stronger factor in this round, but we couldn't have just been the founding team. We were at pre-seed. It was literally three guys in a pitch deck and we raised 2 million quid. So pre-seed, it was just our background. But at A, of course, you need the metrics. It's very hard to raise without having the metrics. And those metrics, by the way, have The goalposts have changed. Before a million was like standard, now it's two. Speaker 2: Now, it's interesting, something that we're going to be trying to do shortly. But I want to just take it back a little bit to your learnings that you were talking about, because I think this is valuable. We talked about the organization. The second one was freeing up your time. I guess it sounds very obvious. We don't want to be doing low-quality tasks when you're the founder of a business or a senior leader in the business. But in practice, have you been able to identify those things? Do you have a structure or something you're using to think about? Speaker 1: Not really. I think it depends on your own like area of the business and What your personal OKRs are to do. So at Yaso, we have three co-founders. We have a revenue co-founder, Adam, that deals with selling to brands. We have James, a tech co-founder. We have me like finance operations. I was spending a huge amount of time dealing with probably more like business intelligence, dealing with the internal reporting. We've got all of this data coming from these Chinese platforms. We have a revenue share structure with brands. We have different cancellations and edge cases of like how that revenue is going to be reported. I was doing all of this reporting. It was taking me hours. In that specific instance, it was like, okay, I've built the framework. Now I need someone smart and capable to fill it in. And our amazing founder, Associate Lucy, now leads up all that brand reporting. But there are other things because there's a big enough task, but there are other things that actually it's not enough. To hand off to someone else, I'll still do it. I still do our payroll. I literally sit there and I pay people at the end of the month. I haven't off-boarded that yet because actually, it takes me two minutes to do. And the minimum it's going to cost for a payroll company to come in and do 20 people will be like £1,000 or £2,000. I'm like, actually, This five minutes is fine. And I like to be in control of every penny coming in and out of the business, just my nature. Like I like to know exactly what's going on. So it really depends on one, your personality to like what tasks you hate doing that you would rather off-board that you're doing because you need to. And three, like what's the cost benefit for you. And that's going to be different in a sales role. It's going to be different in a tech role. It's going to be different in a more operational role as well. Speaker 3: I'm sorry, Max, go on. Speaker 2: I was going to say the last one was hiring, so I just wanted to just double click on that one before we move on to Yaso and whatever else you're going to talk about. I think I spend probably about 35% of my time interviewing, hiring, that kind of stuff. It sounds like we've made a couple of mistakes. It sounds like you've made a couple of mistakes you mentioned already. Any material learnings people can take away on this? Because it's really hard, especially in early stage companies. Speaker 1: You need to be like pretty brutal, to be honest, like at the end of the day, you're building relationships with people. But if they're not cutting the mustard, like they're not doing the job, you need to just be really comfortable with firing fast. Hiring fast is great, like you can build a process, but you're never going to know until they're embedded in your business because some people are amazing at selling themselves. You can't feel bad about letting someone go. It's your fault if you have to fire someone because you've made the hiring process. You've made that hire and you're the leader and you've made the wrong choices. But you also can't feel bad about it. You need to accept that we've made an error. It's going to be painful. You can help that person find another job, whatever it may be, but you can't get romantic about hiring people. And headcount is not a metric for success. In fact, nowadays, probably the inverse. So, you know, people like, oh, we grew from 20 to 50 people. Wow, well done. You spent a lot of money. No, You just need to be comfortable with getting rid of people if they don't fit. However, you need to make sure that you'll know what that person's like first hundred day plan is and what they need to achieve in the first six months. So it's not vague in terms of what they're trying to achieve. So you can make that decision. Sometimes, and we've had this, where we've thought actually the person isn't right for this role. And rather than go through the pain of firing and rehiring, we have moved them into another role and given them a chance there and they've succeeded. So there are, it's not always a case that they're in or they're out. But I actually think those are rarer. And typically, when there's a doubt, there's no doubt. And you've got to trust your gut as a founder as well when it comes to those things. Speaker 3: And just one follow-up question on that. Do you believe more in nature or nurture when it comes to hiring? Speaker 1: Depends on the role completely. I've always been more of a fan of... When you say nature or nurture, do you mean like you bring in the skills or do you train them yourself type of thing? Speaker 2: Yeah, I've always been a fan. Speaker 3: Do you bring the attitude or do you bring the skill? Speaker 1: I prefer the attitude. I think that's, I've always preferred hiring more junior people and training them up because they're a blank slate and it takes a bit more time to get them going. But once they're there, they're great. And as long as they have some aptitude for skills that maybe you're missing that may not be relevant right now, but can be in the future, that's great as well. So what I mean by that is they don't need to, if you've got a job prescription, Let's say you've got like a CRM manager role, right? Typically, they're going to have to have experience with some of these tools. But if they don't, people can learn how to use HubSpot. People can learn how to use MailChimp. They're not mega complicated. So if you've got someone that says, actually, I really want to join your business. I'm really hungry. I'm really, I love ecommerce. I love what you're doing. And you're like, we've got the CRM role. You can get them to do a training course or get them to set something up as part of the interview, where you're like, okay, if they can get this bit, then they can learn other things going forward. Some other things require skills. They may need to have a finance background to do it, but then they don't need to have 10 years of experience. They can have a bit of experience and you can train them the rest. So I'm very much a fan of hiring for attitude and letting them develop. And that's been proven over both my businesses. Senior hires with the wrong attitude just kill time and just waste money. Speaker 3: I 100% agree. Speaker 2: Let's talk a little bit about Yaso now. You've got all these lessons. You're hungry. You've got a chip on your shoulder. You're raring to go. You've got these three co-founders, which sound like a really strong team, obviously, from your own investor. But how did you come up with the idea? What was the origin story behind it all? Speaker 1: As I mentioned, I studied economics and Chinese at uni, lived out in China for a while. My Mandarin used to be pretty good. And when I worked in finance in London, I still connected to that China network. And I put on a UK-China trade event and I met my now co-founders, Adam and James. They studied Chinese at Oxford and from their university bedrooms, they founded a marketing agency, a digital marketing agency for Western brands to target Chinese consumers. So over the last 10 years, they've worked with Uniqlo, Unilever, all the way through to companies like Alexander McQueen and Fortnum & Mason. Driving either their sales at their China stores or driving Chinese traffic and consumers to their UK. Physical stores or websites, so deep experience in the demand generation of how to make money in China. And they got in touch with me after I sold pouch because their business was under offer. They didn't know if it was a good deal. They'd never met anyone that sold a company before. So I just went to give them some advice. And agency businesses have a max capacity or revenue in multiple. But when I and they didn't do the deal in the end, it was a bad deal. But they showed me a product that they built internally called WeCommerce, which was an integration between WeChat, which is the Chinese super app, think WhatsApp on steroids and payment gateways, which meant that consumers could buy through WeChat for the first time. And they sold this to six brands without even trying. It was like a profitable internal tool bootstrapped via an agency. And we all knew that this was the scale idea. And that was like Yaso v1. But we didn't know how to launch it, or they didn't know how to launch it. They needed external capital. We needed a new structure. So it was not a pub, hey, we think we can do this idea. It was we've got these learnings of 10 years. We've got this MVP effectively. We know the errors we've made with it. Actually, this is how we could take this product to the next level. And it took probably two and a half years of conversations before we were ready We're here to quit our jobs and go all in on Yaso. Two and a half years because COVID knocked 18 months, so you can probably call it a year of conversations to say, okay, we're ready to go. And the theory behind Yaso was there were hundreds of brands in China that need to benefit from the social commerce boom. Most of them, if they want to sell on social commerce channels in China, they need Effectively unique setups for each channel. We can build one single source of entry to allow these brands already in market to scale really quickly. And additionally, there are hundreds of brands, thousands of brands that aren't in China that would like to enter the market, but the traditional routes are too difficult. With Yaso, we can serve both of those ICPs, brands completely new to market or brands already in market that want to swap over to Yaso to benefit from this effectively single point of entry to the entire Chinese ecommerce system. So the origin story is deep market knowledge, a lot of experience, knowing the right skill set. And for anyone here that's thinking of starting an econ business or in chats with their co-founders, Maybe this is the wrong advice, but you really need to make sure that there isn't a rush. Starting a business with co-founders is getting married. You're going to be together for seven to 10 years, probably longer than most marriages last, and you want it to be successful. You need to make sure you're with the right people. You're on the right idea. You have very clear roles and definitions and the commercial setup is right. Is there one person that's going to have more equity or not? And if so, why are they putting in more money? How does that, what does that work? For me, it's always been three co-founders, 33% each. So don't rush this decision. It's an important, it's like the most important place to take time over if you're going to start a business or not. Speaker 3: Actually, let's talk about that more because I think a lot of people are feeling maybe anti the idea of getting a co-founder. I've heard advice on both sides. So what would you say are the skills or the qualities or the characteristics or the personality that you should really look for when looking for a co-founder? Speaker 1: The stats show that two or three person founding teams are more successful than single co-founder teams over the long term. They raise more money. They have better outcomes. It's true. It's not possible. It's of course possible to be a single co-founder. I know plenty of businesses that are, but those are just the stats. And me personally, I like working with other people. In terms of skills and personalities to look out for, it's so dependent on the individuals. I'm not going to really give advice on that because I don't know the personalities of the people listening to this. The one thing I would say is you just need to make sure that you have a high degree of trust with these people and that You know, you're not going to micromanage them or they're not going to micromanage you. And you can just work in your own domains very comfortably, because that's when you're going to get the most leverage, right? When I was doing the raise for Yaso, I knew that Adam and James had everything else taken care of. So I could 100% focus on the raise. And I think the reason we got such a good result is because I was able to spend three months out the business just focusing on fundraising. So yeah, I don't want to give generic advice here. I love having a co-founder and trust is the most important thing in that co-founder relationship. Speaker 2: Yeah, so you guys, it's a super interesting story, overnight success, but really the overnight was two years of discussions and 10 years of prior experience. But then you turn up, you've raised this 2 million pre-seed, you've got a team. How did you take the idea to market, especially if you're going in China? Speaker 1: So the first 18 months of the business was just build a solution. What we built was quite complicated. It combines logistics integrations, payment integration, analytics integration, storefront integrations. The most basic way I could think about it is a Shopify for China in terms of what we offer, but it's not self-serve yet. We have built all of these integrations, but we run them as a Yaso team internally. You as a brand can't use Yaso's tooling yourself Yeah, like we're working on that. That's the next stage of the business. So the OKR for the first 18 months of the company was deliver one package. We can deliver one package through our system. We can deliver millions, right? That's the level of architecture that we had. So it took 18 months to build it. And that's why we needed 2 million. It wasn't like a bootstrap business. You've got to integrate with China Customs. You've got to do your, you know, logistics integrations and payment integrations. There's no, hey, this kind of works, but there's loads of errors. It had to work very well from day one, which it did. And in the midst of building the solution, say we started Jan 2023, we did our testing. That was hiring the team, starting to build. We launched the test brand in Jan 24. We figured out all the bugs. And by July 24, we were ready to launch our first proper brands. And we started selling the solution effectively from January to July 2024. We knew that there's a huge amount of demand to get into China. All the sales we've done to date has actually been cold outreach and direct relationships. We've not spent any money on digital ads because we just haven't had to yet. Now, that doesn't scale. Those channels are obviously the most effective, but we're trying to reach a much larger audience now. But the results of the brands that have come onto Yaso have been phenomenal, growing 337% the first quarter they onboarded with us. Very happy clients, very happy testimonials. All of that, of course, helped in the raise. We've only really been operational selling for about a year. I'm just trying to remember the question now, Max. Speaker 2: I can't even remember it at all. Let me give you another one because it's really interesting that you just had conviction and spent 18 months learning a product. And that is almost the entire opposite of our journey, which has always been driven by basically paying customers, feature by feature, paying customer, paying customer. We rarely build stuff that customers haven't committed to pay for. And therefore, we have high conviction that it's a useful product because big companies have spent lots of money investing in it, basically. Did you not feel there's any risk in just sitting in a dark room and building something for 18 months and then taking it to market and be like, we... Speaker 1: So we had taken it to market already before we'd raised the round because we had brands that said, hey, as soon as this is live, we're going to build it. It was just a case of that's when we first onboarded our clients. Unknown Speaker: Did you have LOIs and stuff? Speaker 1: No, we didn't have LOIs because an LOI to me is just like the tool to convince someone else that they're going to buy it. Until the contract signed, it doesn't really matter. But because we've been in the space for 10 years, we knew that there would be people biting our arm off to use it once it was live. So we built that conviction over a decade. But don't get me wrong, there were times where We thought, oh my God, if we've just done the classic startup thing of building something that we think people want without actually knowing, like we did ask ourselves a couple of questions before we had those first contracts signed. Because we've been in the space long enough, we knew that the demand was going to be there. Now, going forward in the next stage of the business, how do we productize Yaso, make it self-serve, all of those things. There are a lot more of those questions. We're going to spend and invest money building in self-serve analytics or self-serve store management. We need to make sure that we are doing lots of customer interviews and doing that research for all Yaso products. Onboarding brands onto our internet solution and allowing them to sell. We had done 10 years of research to get to that point. Speaker 3: And actually to follow up on that, because it's really interesting when you launch product, when you have your hypothesis, but what are the things that went wrong or were basically came up as a surprise or something you didn't forecast in the beginning? Like what was not part of this hypothesis? Speaker 1: Let me talk a little bit about Yaso's business model right now and I will answer that question. So the traditional way that brands have sold into China is selling directly on one channel called Tmall Global, owned by Alibaba. Think about it as the Amazon of China. That's the way that brands have sold it to China for the last 10 years. Basically, since COVID, you've had massive growth in social commerce channels, Douyin, which is TikTok, RedNote, which is Chinese Instagram, WeChat, which is like WhatsApp, and a lot of other like long tail channels. To set up on each of those channels would require effectively A new logistics setup, a new payment setup, a new technical integration setup, almost a whole new team. So as a brand, if you're looking to enter this market, you've gone from having one marketplace to manage, to one marketplace and four or five other storefronts. And typically you'd have a local partner running those different stores, and they would almost be competing with each other. So your TikTok store would be trying to undercut on price your Alibaba store. It's a really messy model. What Yaso does is we run all of those storefronts and marketplaces from one single point of entry. We control all of them. We control pricing across all of them. And we earn a revenue share of what is sold via those channels. So the incentive alignment between us and the brands is huge because ultimately, if we do not sell, We don't make money and they don't make money. Whereas the other Chinese local partners don't take a revenue share. They just charge a massive fixed fee, which obviously doesn't work because they're getting paid no matter what and they mess around with the brand and it just doesn't really work. So we've come in with this new revenue share commercial model, which is fantastic. We do not buy stock from the brands. Whenever we work with a brand, we work on consignment basis, meaning brands give us that stock. It sits in our logistics facilities physically in China. We are responsible for it. We have all the insurance for it. But we do not pay for that stock until it is sold. The one thing we didn't realize is how difficult it would be initially to get brands to agree to that consignment model. Because most of brands when they do international expansion, the playbook is find a distributor in that country who will buy my stock from me. I don't need to worry about it and they grow the business. This is effectively taking a DTC model that they would have in the UK or US or France or wherever and managing that in China. That was new and that took a lot of convincing of brands to go with that model because it's inherently riskier because you're not getting the money up front. However, the margin the brand's getting from it, probably three to four times better than they would in the traditional distributor relationship. And there's a lot more control. You can build a price and you're actually building equity in your China business. Because like with any international market, if you're working with a distributor, The distributor owns your business, not you. That's it. You have contracts and you have controls. But ultimately, if the distributor thinks this isn't really working anymore, I'm just going to discount the shit out of the product to try and recoup my money. That is massively damaging for the brand in the long term. Getting people to agree to that consignment model initially was difficult, but now we've got some fantastic case studies. It's a lot easier because people are like, okay, I get it. It's a bit more risky from a cash perspective, but the benefits are so great and we've had bad distributor relationships. So let's move over. Sorry for the listeners, it's getting quite technical, but for any ecommerce leaders, for any ecommerce leaders on the call, be careful of distributor relationships and do consignment if you can, because you're going to make a lot more money at the end. Speaker 3: Sorry Max, can I jump in with one more question? How did you get your first clients? How did you essentially pitch them to get them to sign up? Speaker 1: Sure. So the first, I would say like large client that we signed was a business called Matrix Brands. They own a stable of brands. They used to do self-manufacturing and then they built their own brand. So they own like Cow Shed. So it has a skincare brand. They own Archive, a few other brands. And maybe this question doesn't come up, but when people think about international expansion, if you're based in Europe, typically it's the US number one. But China is always, like, number two. It just seems so difficult. When we said to them, hey, here's a really easy way to launch in China. You need your champion to be on side at the brand. But ultimately, like, they're like, we've been looking like this for something like this for ages. We're so glad that you're now around. We get you're an early stage startup, but actually we're willing to take the chance on you. So it wasn't that hard once we We've worked out how to really sell the product and how to talk around the business in the correct way. Some leads, some contracts take a lot longer to sign. Our longest and biggest brand probably took a year from first conversation to signing. The shortest was two weeks. Yeah, we've been looking for this for ages. Great. Let's go. I agreed the commercials and got it done. So it really depends on who we're speaking to and what that person's personal opinion is. Like I said, all the sales we've made to date have come through direct outreach or direct connections rather than long lead gen campaigns where we've taken them down. Lead magnets and copy and email marketing and events, it's been a lot more direct and quick. Speaker 2: I'd say you're talking to the queen of LinkedIn. Jo has, what, like 50,000 followers? Maybe you can tell him afterwards. She taught me a little secret about this and it's been really helping us as well on that social media side, just to get it as a channel. If you explain the business, it sounds to me like the Stripe of China, like Stripe for ecommerce for China. I always knew you were an incredible founder from all of the conversations we've had in the past, but as you talk me through it, I can see how you raised the $11m Series A. It's obviously a super defensible business, tough business to do, team, great experience. So I can see how it all comes together. Speaker 1: Ultimately, though, Max, our business is not one of productivity gains and ethereal benefits to a company. We make money for companies that couldn't make money in this market without us. It's very simple. If we're making the money, we're going to succeed. If we're not, we're going to fail. Right now, everyone's making money. So happy days. Yeah. Speaker 2: I was going to ask you a question on defensibility because on my notes here, like my experience of in the WhatsApps I have with the port codes of the two, the three VCs, four now, they've invested in us. Like everyone, And I'm Spencer. We have drinks and stuff with our kind of poor co-founders who would like to see a Series A type stage. And everyone has 20 competitors because it's very easy to spin up an unlovable something in an afternoon. And the barriers of entry have become so low that if you can't do this today, you'll be able to do it in six months. Literally put in a YouTube video of someone's product and have that coded up. For yourself, and that will be the case soon. But I guess like you guys have, as you described it, you've got all these kind of connections with like physical on the ground space that's very challenging to do. But like, there's definitely more defensibility than just being a software. But like, have you thought about that and answer those questions that VCs have given to you on it? Speaker 1: Everything is possible with enough time and enough money. Everything. Do people have the desire to build this business? Do people have the skills to build this business? We are a bit of a hybrid in that we are a software company in terms of the level of integrations that we've built, but there is like a physical element to what we do. We don't own any warehouse space. It's all rented and integrated and it's fantastic. We run a live stream and we go from selling a thousand units a day to 80,000 units a day and nothing changes. Like that is still blows my mind because that's really what we wanted to achieve. But yeah, it took 18 months to build. Now we're so far ahead. We've got a bit of a brand. We've got great clients. It would be very hard to come after us and try to replicate what we've done. But it's not impossible. So we have to stay on our toes. And we do have competitors. The competitors to us are effectively where brands want to grow in other markets. So when we meet a company, we say our biggest competitor is Meta, because someone could spend a quarter of a million a year trying to launch in China, or they could spend it on low ROI Meta ads. So it just depends how you view it in terms of direct competition. Our direct competition are distributors. They are groups in China that will buy stock from brands. And if you look at the P&L we offer compared to a distributor in terms of cash flow. It's about, it's probably three months better to work with a distributor than us, but DTC brands and consumer brands in general live on cash. So we have lost deals because a brand says, I don't want to do consignment. I don't want to spend anything on marketing. I'll happily take this, earn a 10% of my RRP from this distributor and just wipe my hands off it. Yeah, it's an interesting conversation. However, from a VC standpoint, We are so off thesis of what is a normal business, right? It's a market most people don't know about. It's not a pure SaaS business. You shape the world around you and we've convinced enough people and there's been enough people that have exposure to this. So this is a good idea. We'll use this to say, actually, this could be a massive company. And that's the storytelling of the founding team. And, you know, me during the fundraise to say, here's a massive opportunity and here's why. And we are lucky that we don't have, you know, 20 direct competitors coming after us. It's not really something we talk about as a threat to this company. The threat is, can we grow into our valuation? Can we grow quick enough? Can we transform the company and grow SAS revenues as we want? And that's double-edged sword because we're not able to attract lots of money from people that want to invest in the fifth or sixth lovable because they think there'll be an acquisition. But it's harder to get those investors on board. So it really is a bit of a double edged sword when you're in such an off consensus model and market. Speaker 3: So how would you define yourselves then? Are you a tech company? Are you an e-commerce company? Are you an operator? Where do you guys live? Speaker 1: And this is why the fundraiser was quite interesting because everyone tries to put you in a box so they can compare you to other companies in that box and we consider it a blend. The best definition I can give is we are a We're a revenue-based SaaS business. It doesn't cost companies anything to use us on a day-to-day basis, but the more they use us and the more success we have, the more revenue that we generate. So we onboard a brand. Our costs for onboarding that brand are quite low. They're using the same system as being used by all brands, same solutions that we've invested in that tech. And the bigger these brands get with us, the more money we make. So in the same way that if you're a revenue-based SaaS, you're not selling seats, you're selling volume. If we, from like a people and tech cost, It costs the same for us to serve a business doing a million a month that it does to a hundred grand a month. In fact, the margin profile improves. So our job is to sell to bigger and bigger brands because that's like better for our model and better for them as well. So revenue-based SaaS is if you have to compare our margin profile and like our retention metrics, that's where I would put us in a box. Speaker 2: Amazing. Johnny, it has been so interesting talking to you, so many learnings. We have a lot of brands who listen to this, people, brands who listen to this. And founders, who do you want to reach out to you and how? Speaker 1: Fantastic. So we're looking to speak to all consumer brands, beauty, skincare, fashion, sports goods, fragrance, kind of high growth. Supplements is massive for us now. So if you are, if you're thinking about international expansion, if you're scared from US tariffs and the cost of entering America, Speak to us if you want to hear some of our case studies. We work with brands like Pixi, like Faith in Nature, like Cow Shed, a great stable of companies. And then if you are a founder and you're looking for some advice, please contact me on LinkedIn, Johnny Plain. My DMs are always open. Speaker 2: Cool. It's been a pleasure. Thank you. Unknown Speaker: Thank you.