Nick Sharma (0:01)

Welcome to season 11 of limited supply, a place for hot takes on what it's really like building and scaling consumer brands. I'm your host Nick Sharma. Let's get into today's episode. As a brand you know that you're spending hard earned dollars driving traffic to your site. The problem is 98% of that traffic is anonymous. You don't know who they are and once they leave, it's hard to find them again. There's a new tool called Instant that helps you identify these visitors and get in front of them. Instant gives you another chance to convert these shoppers into buyers using their RET marketing platform. You can use their platform to send about two to three times more site abandonment emails which you already know generates meaningful revenue and build audiences to retarget on meta. Double your abandoned flow revenue and increase your roas with Instant. Want to see it in action? Sign up by March 26th to get 50% off your first month. Just go to Instant One Limited to claim that 50% off. That's Instant One Limited foreign. Welcome back to another episode of Limited Supply. My name is Nick and I'm your host today. Today we're going to be diving into a couple things. It's a quick episode but should hopefully be valuable. First thing we're going to be talking about is influencers. How do you work with them? Do you work with them for content? Do you work with them for whitelisting? How do you find them? How do you brief them? Then we're going to go into investing into brands and software companies in our space. The Commerce Enablement SaaS area. What does it take for a brand to be investable? What does it require? And also same thing goes for software. What does a software need to be able to do for it to be an investable software versus one that is just running on a cash flow basis? Enjoy the episode and as always, hit me up on Twitter if you've got any questions or comments or feedback and I'll see you at the end. So the first thing I want to talk about is actually influencers. There are a number of brands who you know want to work with influencers. There's a lot of advantages to working with influencers. You have a different source of content, you have a new source of reaching new audiences or new customers. You get the cosign from content creators or influencers. You get the offline effect. You know, if they walk into the NBA tunnel holding your bottle of whatever beverage you have, you have the the whitelisting ability. So if they create content and you start running ads with it, you can run ads using their handle. There's so many reasons to work with influencers. The main kind of four ones that I look for are content, reach, alignment or cosign and whitelisting. So those are kind of the four main reasons I would recommend. Brands would be working with influencers and each of them kind of have their own realm. So content, you know, these are people who just create really good content. They probably don't have a big following, but you've seen through their content on whether it's TikTok or Instagram or YouTube or Pinterest, wherever it is, that they're really good at creating content. On the reach side, you're really looking for somebody with a following, ideally with high engagement too. So you're not necessarily just looking for their cosign, but you're more so looking for mass reach. It doesn't matter if this is a wellness specific person who's talking about this probiotic supplement. It more so matters that this person has a ton of followers and can easily reach a bunch of people. Think of this as the Kylie Jenner's of the world. Or really influencers with a few million followers. The third one is alignment or cosign. And this, this is where you would find a wellness influencer or somebody like, you know, if Andrew Huberman, for example, co signs matina as a yerba mate, right? That's, you're obviously getting reach because it's Huberman, but you're really getting the cosine and the alignment. You want the fact that Huberman said this is a good drink to have or that, you know, Peter Attia said that this is the right supplement to go to sleep. Those things are more so for the cosine. And we actually ab tested this on a brand's website lately, which I talked about in a prior episode where we took a quote from somebody like one of those massive kind of industry influencers, you could say, who are kind of known as the cosign people or you know, everybody follows their recommendation and we put a quote from them on a product page and it instantly increased conversion significantly over any other form of social proof. So that's called the cosign. And then the fourth one is whitelisting. So whether or not you create content with them taking that content and then writing it, or, sorry, running it as an ad through their handle is the fourth way to do it. And sometimes it's not necessarily an influencer person. It might be a meme page or a publisher page or Just a, you know, any sort of page that's really not the brand, but that is essentially whitelisting. So the way I like to go about finding these people is I like to go on TikTok and YouTube. Those are really the two places that I find that there are the best content creators for the reason that YouTube only works if you speak to the camera well and if you're a very good storyteller, ideally a longer form storyteller. So as a result you cannot build a following on YouTube unless you're very good at connecting with the audience, kind of in a one on one situation or feeling directly through the camera. A lot of the early creators that I worked with, and this was, you know, eight to 10 years ago, were successful YouTubers because they knew how to speak directly to the camera, especially vloggers. Vloggers are very good at speaking directly to the camera and just making it feel like we're having a conversation right now. They speak to you, you feel like you're the only one being spoken to. And that's just a special trick that vloggers have from YouTube. There's a good amount of creators or even storytelling type of creators on TikTok who are also very good at this, but you're going to find majority of those on YouTube. TikTok is a really good place to find content creators that are in your niche or have an education within your niche, but may not have a ton of followers. So for example, if you were to search, you know, beverage commercial setup, or you know, I'm just making this up as I'm speaking this, but the idea is that you go and you would see a bunch of creators who've made beverage commercials at home. They may only have 463 followers, but they might be really good at creating content that you can then leverage on your own channels, either as an ad or organically, or on your website or in emails or, you know, wherever it may be. But it's very easy to find good content creators on TikTok who are basically underrated and you know, they don't charge a lot because they also don't have a huge following. Those are the type of creators you want to try to put into a retainer, which we'll talk about in a second. The third thing to mention here is that anytime you do work with creators, you want to try to work with them as much as you can within platforms that allow for social shopping. So Instagram, YouTube, TikTok are all platforms that allow to transact and make social shopping Possible. What does that mean for or why is that beneficial to have influencers also tag your products on the social shopping side? Well, it just adds to more validity of the product itself. The product listing, more sales, more reviews, you know, more ratings, more engagement. All these things overall contribute to your product doing better in its own environment of social shopping catalogs and in the shop pages of these apps. Now, most brands, I would say, tend to work with influencers around seating or around reach, so they think, okay, I'm just launching a brand, I need to figure out how to get my product in front of other people. You know, I want Ella Rose McFadden to post about my product or I want, you know, Alyssa lynch to tag the mouth tape from the Skinny Confidential, whatever it may be. Those are kind of like the standard ways everybody works with them. I actually am a bigger fan of figuring out how you can find content creators and put them on retainers for ongoing content. So, for example, can you find a content creator who you can pay $2,500 a month or, you know, $3,500 a month and you know, maybe they don't have a following. Maybe they do, but you don't have to, you know, ask them to post it. And you get, you know, four to six videos out of that, or you know, two to three videos and 10 to 15 images that you can use across email and Instagram and things of that nature. I'm a huge fan of the ongoing retainers because I think one, it helps you diversify your content so nothing looks the same or looks too stale or, you know, feels like it's all of the same flavor. The second is that these creators and influencers are sort of on the front lines in the sense that they're always hearing from their followers, their fans, their, you know, basically people who follow them, what they like and what they don't like. So if they post something of your product and they immediately hear back, you know, they can actually alter and modify their content based on what they hear. This is something that Sephora does really well, is they do these quarterly check ins with influencers to actually see what are they hearing from their followers in terms of what kind of products do they want to see, what kind of ingredients, what are the things that they see as rising trends versus, you know, falling trends, et cetera, et cetera. So that's one way to do it. The other way is obviously the one time posts or, you know, whether it's on Stories or whether it's in feed, and then the other one is Whitelisting with either a flat fee, percentage of spend, or as a part of a retainer. Me personally, I'm a fan of the, you know, trying to bundle everything together, content and whitelisting into a retainer. Ideally, that's, I think, the most efficient way to do it. But I do know brands that will either go to influencers and say, hey, your piece of content did really well. Can we whitelist it for a flat fee? And, you know, it kind of depends on who they are, how big they are, et cetera. You might find influencers where they're actually comfortable whitelisting for, you know, 250 bucks a month or 500 bucks a month. That could go up all the way to, you know, I've whitelisted celebrity pages for, I think it was like probably five to $10,000 a month, depending on how big the celebrity is. And then I've also seen brands do this as a percent of spend. So they might say, hey, we're going to actually align your incentives with ours. So as much content as you create, that's awesome. We're going to test it all. And anything we really test that works, that we're going to scale, we're just going to give you 1 or 2% of ad spend as a part of, you know, your compensation for creating that content that we're running as an ad. Either version kind of works. It really just depends what is your level of spend, how many impressions do you think you're going to get on that, and whether you have an ongoing kind of retainer relationship or everything is sort of just one time, the last piece or actually second to last piece for this is briefing. So with influencers, you tend to hear a lot that they want to brief themselves. They don't want to be told exactly what to say. And in my opinion, if they're capable of it and they consume your product on a regular basis, you should have them put together a brief for how to sell the product and then just double check it, make sure they're not missing anything important or they're not saying anything that could get you in trouble. If they aren't somebody who is constantly consuming your product or has been or really knows it inside and out, then I would suggest that you let them, you know, use, try mess around with your product a bit and then give them a rough brief based on what you see working well on the paid side and let them sort of finesse that, you know, rounded out and produce that content. The last option is if you know you're on A tight timeline. You don't have time for them to mess around with the product. You need the content back, give them a brief. But my recommendation is always to break it out into pieces so you can reconstruct a puzzle later. What I mean by that is instead of just one brief that has nine bullet points of things for them to read off or half a page long script for them to read, I would actually recommend that you focus on creating seven different hooks that you can actually leverage from the paid side in terms of what you know works well or what you know does well on an organic social side of things. You know, seven, seven main talking points, five to six, call to actions. And now you've got, let's say 20 clips that you can now edit in different ways and bring together, splice differently, test different hooks with different main talking points, you know, main talking points with different call to actions, et cetera, et cetera. It just allows you to test a bunch of stuff versus just get one piece of content back or three pieces of content back and then be stuck with that and, you know, be forced to do that. Part of that is also making sure that you have the ability to edit this content in house or you know, on your own versus just the creator editing it. Because if they edit it, you know, you're going to get a final video file with the music in place, with the transitions in place. You're not going to be able to properly cut and splice and you know, isolate the narration audio versus the music audio and things like that. So I would recommend you get, you receive all this back as a Google Drive folder of raw clips. And then it's up to you as the brand to decide how you're going to edit this all together and combine it. The last piece for this is dedicated landing pages and offers. So you know, if, let's say I'm running an ad for Hintwater and you know, I've got this ad, it's a great ad, people are clicking it and it's just going to the homepage or just going to the collections page, you know, that's not going to convert as well because people just got really excited by me and what I had to say about Hint and all of a sudden they click and they get to a page that's completely disconnected from where I was driving them from. Now with that, I would recommend that you have a dedicated landing page and ideally also a merchandised offer or a bundle or some something of that nature that, you know, positions it as, hey, you just came from Nick's ad. These are Nick's favorites. And also here's a deal. And also here's more information to learn about things that you may have questions on because all you did was click an ad, you didn't decide you were ready to buy. So I would focus on all of that. It's basically dedicated landing pages and offers proper briefing, compensation structure of how you work with them and then really understanding and making sure why you are working for them or working with them. Is it content, is it reach, is it alignment, or is it whitelisting? Those are basically what I think it takes to build a really strong whitelisting program or even just working with influencers. Most brands that tend to work with influencers by way of like an influencer agency or just by signing up for one of these platforms and trying to find content creators, those can work, but they're not as, you know, advantageous or efficient as sort of the outline I just gave the outline I just gave is something that I would recommend creating a process around once or twice, you know, the first couple of times you do it and then that's something, you know, you could scale to like somebody from oceans, for example, in Sri Lanka, where you've got this process, you know how it works. You know how to search for them and essentially hand it over to them to start executing. Hundreds of brands like Garrett Popcorn, July Luggage and Selfie Leslie are making six figures in incremental revenue through Instant Supercharged Retention marketing platform. It takes 15 minutes to go live and you see results just within days. You most likely already send side abandonment emails, but because most of the traffic on your site is anonymous, you don't get to email 98% of these site visitors. Instant gives you another chance to convert these visitors into buyers and send two to three times more cart abandonment emails than you were before, helping you double your abandoned flow revenue. Want to see it in action? Sign up by March 26th to get 50% off your first month, just go to Instant One Limited. That's Instant One Limited. Okay, that was a good rant on influencers. I'm going to jump into the next thing, which is a question I was getting asked in our Slack channel, which is what makes a brand investable. So there's so many brands that come across my table in terms of wanting an investment. Everything from hardware to software to apps to the combination of hardware that leverages software to food and beverage products to telemedicine to whatever it is. There's a lot that comes across and a lot of times I well I actually only invest based on the things that I know. So I'll never invest in a category I don't have experience in or into a industry. You know, like travel for example. I don't know the travel industry that well so I couldn't, I couldn't really invest in a booking.com competitor or I don't necessarily know the insurance space super well. So I can't really invest in an insurance company competitor. But here are the things in my opinion that in the world of CPG, direct to consumer retail and SaaS, we'll get to SaaS after this one. This is sort of one of the things that I look for when I'm making an investment. So the first thing is something that allows a brand to differentiate itself from its competitors without costing extra. So what do I mean by this? Well, a lot of times this is a built in audience. Maybe a celebrity is a part of the brand, they've got a bunch of followers, a bunch of eyeballs. Maybe it's that the co founder's family owns the linens production facility in India and they get at cost product versus having to pay for that margin to the manufacturer. Maybe it's that their last business did really well in Target. And so with this business they have a immediate door to get into Target, whatever it is. There's something that differentiates itself from its competitors that then allows them to get there. You know, for David, protein, it was the protein technology which leads me into the next thing which is some level of innovation. So this protein technology is something that is exclusive to David. You know, if you've seen this beverage called Update, it's an energy drink, they have an ingredient called Paraxanthine that only they had the license to for the first year or two. So again that's some level of innovation and differentiation. Another example of that would be K18 shampoo. It has an innovative compound in the shampoo that is unique to them. Bonafide Health, another great example, they have patented formulations that no other competitor can copy even though it is a supplement business. So some level of innovation is what's required. And also I can tell you from a performance marketing standpoint, the brands that have this level of innovation, even if it's something as simple as Hexclads hexagon pattern on the pan, it allows you to just cut through the noise and sort of, you know, filter yourself out from everybody else who is competing at the lowest level. The third one is a team that understands the main metrics. So what do I mean by that? If you've ever been a part of a brand pitch and they're starting to tell you that their anticipated CPA for acquiring new customers is $7 or $10, you know, and that their CPA is going to be declining as time goes on or, you know, the cost of driving web traffic is going to go significantly down, you know, any of these things. Those are some of the biggest red flags to me because it clearly shows me that they've actually never run ads in their life. They don't know how hard it is to get a $7 or a $10 CPA. Unless you know, you're, you're Mr. Beast or you're somebody who's got an insane celebrity presence. You know, don't get me wrong, we've got some clients who have this cpa, but they balance it with a massive business being driven organically. So it's not that these are mostly for brands that are largely successful without paid and are just adding paid at a significantly smaller amount compared to what is already otherwise driving their revenue. Next thing is building something of a platform versus just a single brand or single product. Sku. So you know, Lalo is actually a great example of this. This is a business that is creating a platform to sell to parents. And they're not just selling one product, but rather once they get a parent hooked on one of their products, they've got a whole suite of other products that they can upsell. Now the only caveat to this is if they are subscription businesses that have very clear problem solutions. So for example, AG1 is a great example of this or Imate or Brian Johnson's longevity mix. Anything that is subscription focused is still okay. However, I don't recommend this for one time purchase products. So for example, if you're selling a weighted blanket, you probably don't really have an investable business because somebody's just buying something once and then never buying again. And this is definitely a fallacy or a trap I should say a lot of people fall into, which is, I've got enough margin, I can go and acquire customers profitably and maybe you can, but there's really not enough margin. At the end of the day, when you factor in shipping and your own cogs and your overhead and the cost of customer acquisition and the fact that this person's not coming back again, you have a very low chance of, of them coming back. Next thing is making sure that a brand has multiple revenue streams. So I love subscription revenue plays off of hardware. You know, whether it's an air purifier that has a filter subscription, a water shower head that has a filter subscription, the eight sleep mattress you buy once and then you pay 17 bucks a month for the app and the optimization of your sleep. These types of business models work extremely well and they tend to have a high ltv. Those three specific examples I just shared all have a very high LTV because they contribute to you living a better life. But multiple revenue streams is a much better way to go about this. Easy to demonstrate and explain why it makes your life better. This is something that a lot of brands don't. Well I should say a lot of first time founders tend to miss this because they haven't necessarily gone to market and gotten the punch back that no one's buying their products. And usually from that is when people recognize that it has to be demonstrable and it has to very clearly show the problem and solution. The next one is that it's more important to pay for this brand, this product, you know, this service than to save money in a time of needs. No one's going to cancel their colostrum or their filtered water or their pet food subscription, but if it is something that they are likely to cancel when there is any sort of financial hardship, then you know you're sort of setting yourself up to deal with that at some point in the future. Multi beneficial products so supplements that have 10 different benefits. Food products like IMI which is low carb, high protein, tasty ramen. Beverages like hint that are flavorful but no sugar, no sweetener, no calorie. These are multi beneficial products. These tend to do extremely well also and just have a high ltv. They also have the ability to tap into different audiences for different reasons because of the different benefits that they have. And the last thing I'll say that makes a business investable is a reasonable valuation. You cannot go to market with a $20 million valuation and a deck anymore and you definitely can't do that now. Before you shouldn't have been able to do it. But a bunch of VCs who don't know anything about consumer were throwing money into the consumer world. And today what I'm seeing is a lot more realistic where brands will usually raise a very small amount as kind of their precede that might be to test something, get the first PO done, validate it, make sure it works and then they'll usually do another small extension after that or they might go raise a proper seed round depending on the results of, you know what happens from that initial run. Now moving on to the SaaS side of things. Much shorter list. But what makes a software company or a SaaS company investable? Well, the first thing is that it solves a top five founder problem. This could be understanding your numbers, you know, keeping subscribers happy, sending emails out because that contributes to revenue. This could be, you know, churn reduction software. This could be AOV stacking software, like a rebuy. Whatever it is, you want to make sure you're solving a top five founder problem because if you're not, then it's one, the sales cycles are just harder and two, you are going to be the first on the chopping block when it comes time to save money on expenses. Second thing I wrote was that it contributes to the overall brand KPIs they need to hit in order to continue growing or raising money or scaling the business. So again, a lot of those things I just mentioned actually kind of fit into that. But companies like Affiniloop or companies like Iris or companies like, you know, Shipstation, basically companies that help you keep the infrastructure going, that allows you to continue to scale, those are great software companies. You know, if you are a random addition to SMS and you do one feature and you're looking to charge a monthly fee that is scaling based on usage, you know you're gonna have a very hard time trying to compete there. Ideally, software companies that are investable also have a multi prong approach to lock in with you as the brand I mentioned Rebuy a second ago, it's another great example. They've got, you know, I don't know, 47 products that you can use within their app and that allows them to plug in and kind of start the journey with brands in different ways. Whether it's the reorders, whether it's the, you know, smart upsells in the cart, whether it's on pdp, AI based upsells. Whatever it is, it just allows you to, it allows a brand to try to test out the product in different ways and then allows rebuy to land and expand, which is great. Next one is that it can easily be set up and it drives incremental revenue or profit and you can see that being attributed directly. So there's a lot of software that, you know, let's say you use a site speed optimization tool. If you can't see the actual dollar amount that is being driven as incremental revenue and then translate that to incremental profit based on the software you're using to optimize site speed, you're probably going to stop paying for it because you're not able to see the direct ROI here. Next one is, has proprietary technology and benefits. So a lot of AI based apps actually is where I see this not hold true. There's a lot of AI companies that are raising, especially in our e commerce, retail, SaaS space, commerce enablement space and you know, they're just basically a layer of software that leverages APIs the same way that, you know, SMS platforms leverage Twilio, the same way that subscription platforms leverage Stripe, and the same way that TV platforms leverage beeswax. A lot of these AI platforms are just leveraging APIs from OpenAI or Perplexity or Google or hey Gen, if they're doing video work and you know, they're not necessarily creating anything like super new or innovative. There's not really anything that's proprietary. Everything is just, you know, combining wrappers or sorry, combining APIs and putting it all together into one platform, which maybe there's enterprise value in that. But me as a, as a, as an individual, I'm not going to invest in something like that. The last thing of course is a reasonable valuation and that is unfortunately something that is not very common in the software world. Usually I've seen up to, you know, $1 equaling $1 in revenue, equaling $100 in valuation, which I think is a bit ridiculous. So, you know, making sure you have a reasonable valuation. The reason for that is because software companies tend to not be profitable, unlike, you know, direct to consumer brands or retail brands that can be profitable if they, if they work at it. And so what you want to make sure is that if you're investing in a company that's, you know, valued at $20 million, they have to get to a point where by the time they've spent the money they raised, they are at a point in their company where they can raise at greater than 20 comfortably. So you know, maybe they raise at 30 or 40 and they can bring more money in versus if they, you know, let's say they raised 2 million on a 20 valuation and they spend 2 million, it only generates them, you know, 200K in ARR. They're not going to be able to go raise at a greater than 20 million valuation and then they're going to have a down round which is going to, you know, directly impact the dollars that you just put in. So that's all for today's episode. We covered working with influencers, what makes an investable brand and what makes an investable software. Just a quick reminder, we are going to do the Short Form Content Summit. So if you are looking to, you know, up your game as it relates to short form content or driving awareness without spending a bunch of money, go to Nick Co Virtual Summit Sign up. There's about 500 people that signed up in the past week, so hopefully you're a part of that. If you're not, go ahead and give that a sign up and I'll see you next week. Have a great week. Thanks for listening. We'll be back next time to cut through the noise on CPG retail and E commerce. If you enjoyed this episode, why not share it with a friend? And be sure to subscribe wherever you listen so you don't miss the next one.