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- [00:01]
Sean
Roman, tell us why Hong Kong is the capital of the consumer world. Why should I sell everything and move there?
- [00:07]
Roman
I love it. We jump straight into it. No intro, nothing. I think for E commerce operators, I do think it's the holy grail and the Mecca. I feel like 8 out of 10 people watching this pod is probably making some in China or close to China. And nothing beats being close to your supply chain, number one. Number two, I just think Hong Kong is such a livable city compared to most other cities. You have incredible beaches, insane nature, really good international schools. If you have young kids and amazing childcare. Yeah, it's just very, very good. Every time I come to America and I see my, like, rich friends with young families struggling, I'm just like, oh, my God. Like, I have people with half your income living like kings in Hong Kong. Right? Like, so I think that's my sales pitch. You should totally move to Hong Kong.
- [00:57]
Sean
What I'm interested in is you just threw a big event in Hong Kong. Hundreds of brands showed up, billions of gmb. And I think you're right that if you're making stuff in China, like Hong Kong people speak English. It's very livable, it's very safe. And you are 20 minutes from your supplier and not 20 hours. So I think it makes a ton of sense. But I want to hear what's been going on in your world. You're buying brands, you're selling brands. What's new? What does Roman want to talk about?
- [01:25]
Roman
Yeah, quick context. I used to buy brands for a living, and then I grew them, and then I sold a couple of them. DTC brands. I paused that late 2024. So three years ago, I started hosting big e commerce summits around the Canton Fair. So maybe people don't know what the Canton Fair is. It's a biannual trade show in Guangzhou where factories come together across multiple categories. It's so big that there's three phases to the Canton Fair. And all of my mentees from Enterpass or my friends would pass through Hong Kong on the way to Guangzhou because the direct flights to Hong Kong are so great to Hong Kong. So I started hosting this event three years ago, trying to find acquisition targets. That's how it all came about. And by the end of the first event, I was just like, you know what? This is really fun. Throwing a party in my hometown. And it just became a thing. So I paused. Buying companies in 2024. I've been hosting these nonstop since post Covid and it's just become a thing. Where it's a party for myself and my friends in Hong Kong. So we get together for three days. I just had one last month where we had 65 e commerce operators show up, maybe 20 non e commerce operators. We had like Ali Abdaal and Izzy, the YouTube influencers. And then we have the bunch of like private equities show up. And we had a three day summit where we just kind of ran through workshops, enjoyed Hong Kong. We rented a huge boat, took it out on the water and just had a good time.
- [03:05]
Matt
What are you hoping to get out of this romance? Like when you like you're going through all the work to bring all these people together, you're no longer buying companies. So it's fun. I hear that. Uh, but the content seems pretty awesome. So like, what's the, what's the, what's the plan for you?
- [03:19]
Roman
Yeah, I'm hosting another one in October. Actually I should do the plug right now because probably by the time people watch this, I'll have a URL on P21IO. So go check it out. Sign up for the summit. Uh, what I get out of it is like an incredible network. So for me, every time I come to New York or San Francisco, I always leave super inspired. And I want the same impact in Hong Kong. For me, change starts at home. So I want to have a real impact on my hometown, like Hong Kong. That's actually the primary driver for me right now. But the second thing is like I just learn a ton. So the average revenue among the participants were was 72 million U.S. all of them were bootstrapped except for one like Suri, this toothbrush company. Maybe two. Two were not bootstrapped. The rest were bootstrapped. The average age of a business was four years. The average person attending was like 27. So it's just an incredible group of people, exceptional operators who are really in the weeds of things. So I just learned a ton so we can go through the agenda and who we had. Come talk. So at Steve Chen Speak, he's in my chapter in YPO. He's the founder of YouTube, like in the PayPal mafia. So he was one of the keynotes. It's pretty incredible. He lives in Hong Kong. So incredible opening event. Talking about how I was working with Elon, the early days of YouTube, how the acquisition came about post acquisition at Google. But then we had a bunch of other really cool people attend. So we had like probably three of the top advertisers on Applovin. So we had like one guy called Tom. Soggy I'm not sure if he's comfortable talking about what his brand is, but he's spending, you know, a hundred grand a day on Applovin. He was talking about how he was able to unlock that scale. We had Paul, who I know everyone knows from Twitter, for Moringa Rosabella. He was talking about how he scaled to 180 million in year two. So we just had a great group of people get together and share how they've grown their brands. And the playbook is so different than when the three of us grew our brands and I just find that very fascinating. So I think there are two order events. One, I want to have an impact on Hong Kong to. I learn a ton just being in the room.
- [05:34]
Matt
Could you unpack some of the like, if you're willing. Like what, what are some of the things you learned from this? Because I saw some of your posts on, on X afterwards and I'm like, there's clearly some alpha that came out of this room.
- [05:45]
Roman
There was something. It was really, it was really interesting. Let me actually pull up what I posted about it because I think number one was just like, which is very obvious, right? But like Meta is so back. I feel like the numbers I'm pumping this year on Meta, last year was horrible. The year before was even worse. But this year and the last 12 months has just been an incredible ride on Meta. And the punchline, I think overarching punchline is that partnership ads and what Andromeda is doing, whatever they're cooking at Meta is working really, really well. So it's a combination of those things that I would say is huge. I think what's surfacing now as a second order effect, I think is everyone has seen what Comfort has done and Hudson has done with TikTok and the discourse and affiliate funnels. I think instead of getting like a high level understanding of it during the event, we went very deep and truly understood what it takes to be TikTok first. So we have like a handful of TikTok brands and attribution on TikTok sucks. The ad product is not that great, but it's the best platform for impressions and that was really proven at the event. So I think like me and the team at my companies at least have really slept on TikTok and that's now become a high priority for us and that's been a very high impact, very high leverage work stream for us coming out of that event. The third thing is just like how alive crop shipping is, dropshipping is just like we thought the removal of section three, two, one would kill dropshipping. That has not been the case. People are drop shipping large volumes from China. I don't know, like, you know, I do everything by the book, so, you know, my margins are. But, you know, everyone who's not, who's not American and who's out in Asia or in Europe or in Dubai. There's so many kids from Dubai, right? Like, they moved to Dubai. They lived there for the low taxes. We had some kids from Panama. It's such a fun group. They're all dropshipping with these, like, under the belly service providers from China into the U.S. fun fact is, like, the three or four biggest providers in China, I just tweeted about it because, like, I'm an advisor at Quinn's Logistics, right? So I started going a little a level deeper on, like, how much is being dropshipped. So among the three top providers, I'd say like Unixpress, the four PXs of the world, there's more than a million parcels coming to the US every day. You know, every single day. So that was like another very big takeaway.
- [08:27]
Sean
Fulfill is the ERP built specifically for DTC and E commerce brands, inventory, purchasing, warehousing, financials, all in one system, built for the way your operation actually runs. There is not an ERP on this planet, not one that has more direct 3 PL integrations than fulfill. They integrate with over 4003 PL locations globally. And most of you listening to this right now are either running your own 3 PL relationship or you're about to. And the second, your 3 PL and your ERP aren't talking to each other in real time. You're flying blind. You don't know your true landed costs. You don't know your real margin. You're reconciling spreadsheets at 11pm trying to figure out where $40,000 went. I know because I am on Fulfill. The visibility we have now versus what we had before, it's not a marginal improvement, it's a different game. Fulfill is the only ERP I've seen that was actually built from the ground up 4D 2C. And it's not some vive coded piece of crap. Believe me, those exist. Fulfill isn't one of them. Go check out Fulfill. Tell him Sean sent you. Roman, before. Before we jump into the logistics, because I would love probably a third of the podcast to talk about dropshipping, the future of logistics, quints, everything you're doing over there. I. I gotta ask, Roman, why'd you stop buying brands?
- [09:35]
Roman
Yeah, I think it's a great question. I think number one, I felt like I was spread too thin. Number two, I got really scared with the evolution of AI. I just thought like, okay, things are going to change really dramatically the coming year. I should pause and think about whether or not buying versus incubating is a more efficient strategy. Actually think incubating now. Like I think the terminal value for some of my brands actually went to0 with AI. Like if I extrapolate and take a 10 year view, I think a lot of things we had in the Piper and the M and A pipeline were just so weak from a brand equity standpoint. Three is like I had a lot of success with the public markets, like with, you know, whether it was Applovin or what I did with Prinetics getting in early on, like imate. So I just thought, let me just pause, slow down a little bit and try to see where I can generate the most alpha. I'm still looking at brands. I bought one in 2024. I think I told you both about the brand. Like June 2024 I bought this brand that does just shy of $30 million in revenue, $3 million of EBITDA. There's a clear roadmap to getting to $10 million of EBITDA. It's going to be a great acquisition, but I think I need to aim much bigger and higher and try to buy something that's north of 75 million. So I think it was a confluence of many things and I think I was focused on way too small companies and my pipeline was filled with like sub $50 million companies. I think I'm now trying to build a pipeline of 50 to $100 million pipeline revenue companies and that's a lot more interesting. So I pause and slow down, but I'm probably going to resume it at one point.
- [11:14]
Sean
So let's really unpack your thesis. Right. So from 2020 to 2024 the idea was you are going to buy E commerce brands. You're going to find founder led brands or slightly distressed brands or something and you're going to get them at, you know, a fair market value but nothing crazy like PE was offering. In 2021 you weren't paying 10 or 15 or 30 x EBITDA or whatever these companies were paying and you made a handful acquisitions. I would say, you know, north of 10 or whatever. Right. You roll all these brands in and that was the whole thesis behind Peak 21. And so in starting in 2024, what did you start to see? They'd be like really, you said something very interesting there. Terminal value went to 0 because of AI. But what did you see that made you think, oh, these brands are bad assets?
- [12:00]
Roman
I think I started being more active in Mentor Pass. I did the events and I just saw these young kids spin up brands getting to like $10 million in monthly revenue in no time. You know the stories of Paul and like Tom Sage and all these kids. So I just thought, okay, these guys can ramp up so much quicker than any of the three of us have ever done because of AI.
- [12:23]
Unidentified Speaker 1
So
- [12:26]
Roman
it made me think more carefully and more conservatively about the businesses I was looking at acquiring because of just seeing this ramp up of these new brands, which were really AI first. I'd say it was also the trade war. Let's not forget that like tariffs and duties was just ramped up like crazy. There was a lot of stuff going on, right? Like late 2024, early, early 2025, right. Like so I think there was a, it was a confluence of many made me pause to be honest. I was just like, you know what? My existing brands are in such a great position now. It's a very clear likelihood that I can add nine figures of revenue annually if I just focus on what I have organically with my existing portfolio of brands. Right. Like, so it was a mix of many things.
- [13:13]
Matt
Roman, do you think that like, it sounds to me that it's sort of like a pause and evaluate size of bet for you. So like some of the success you had, both privately than public markets, do you suspect going forward that that's going to be something you have to actually do is. Is I guess, like regularly look and say, like, am I actually making a bet that's per, like reasonable for the size of my like worth or sort of company size? Now like at some point are you basically, are you thinking I'm going to have to buy like 100 to $500 million revenue companies, otherwise it's just not worth my time.
- [13:50]
Roman
Yeah, I think it's, it's hard, right? Like I feel like it was really fantastic, right? Like my genesis story was I started linear, got a lot of street cred because we maybe raised $2 million on Kickstarter. Ray Lee, right, Like at this Raycon office reached out to me when Raycon was doing a hundred dollars a day selling E bikes online, right. Like it was just like I think of myself as an honorary co founder. It's like 100% sweat equity. I own as much of this business as a co founder, right. Like so you know, it's a startup. Nutrition kitchen was like $1.5 million in revenue when I bought into it. And then we scale it to 20 million. So these were tiny companies when I bought into them. Right. With my balance sheet. I think to answer your question, Matt, it needs to make a lot of financial sense for me. So let's take this company I bought in June 2024. I think personally maybe I'll make like, let's say we take from 3 million EBITDA to 10 million EBITDA and we sell it for 100 million. I'll probably make after paying back my investors because I had LPs funding the acquisition of that business. Maybe I'll make 30 or 40 million dollars over a five, six year period. That's like the bull case. That's amazing. And I don't want to sound out of touch and arrogant, but it's just not enough for me to want to replicate again within subsequent one or two acquisitions. I think I can take the same time, effort and energy and just go bigger. The problem is you start rubbing against people. Like the guy who came to my event was Chr. He runs all of Pamira in Hong Kong, like in Hong Kong and greater China, like Asia. He has a $17 billion fund and he buys businesses that he bought. Dr. Martin's, took it public, he bought Reformation. He's bought a bunch of. Right. Like that does like crazy amounts of revenue. So I think like for me, buying Something that's between 100 to $300 million of revenue, I'll start rubbing against people like Chris who might leave Primera and like go, go down and like wanting to launch his own fun. And I, I think like what I'm spending a lot of time on now is like soul searching and trying to understand where do I actually have an unfair advantage and where can I actually create crazy value as a solo shareholder to some, to some extent. And I think I got very jaded because I did like the applobin investment. I did Prinetics and prinetics meaning im 8 really early on I just saw like, okay, there's a whole new universe here where I can do public markets and there are many, many other ways to play this game, to put that that way. So yeah, I'm doing some soul searching.
- [16:39]
Sean
Yeah. So the transition from, you know, private equity, buying brands, putting leverage on them, you know, growing EBITDA and then selling it to somebody else now, now kind of sounds like you're a hedge fund. You're going to do that, you're going to create brands you're going to do public market investing. And I think the past couple years have been so unique in public market investing because there, there are asymmetric upsides. Like you, you brought up two great names. You know, we watched the, all the semis and all the memory stocks, literally 15x in the public markets. And like, why waste your time with things that are locked up, things that have debt, things you have to operate when there's 15x opportunities in the public markets? So that makes it, that makes a ton of sense. But let's talk about what happened 2024, 2025. You're buying brands, you're making offers, you have companies that are doing $3 million in EBITDA that they want 10 or 12 or $15 million for. And then you get a call from a kid who's just launched on TikTok and he's going to do 15 million that month, basically. Right?
- [17:39]
Roman
And. Exactly, exactly.
- [17:40]
Sean
And you're, you're like, what am I doing? Like, why? Why?
- [17:44]
Roman
That's exactly what happened. That's exactly what happened. The June acquisition, I forked out eight figures, low, low eight figures for that business, right? Like, I've wired the guy like $9 million on closing. I had another seller financing note of something, and I bought the business. Right. Uh, but then I started getting these calls on mentor paths of kids who are doing, like, I'm going to produce $12 million of EBITDA this year. Like, and, you know, the guy barely has his diapers on. You know, probably this guy's listening to it, but I'm just like, yo, listen, Guy like you, you barely know how to put it on your pants and you're just crushing it. So, yeah, that's what happened, basically, because
- [18:18]
Sean
you said they're AI first, and I'm gonna push back on that. I don't know if they're AI first, but they're definitely small teams, highly leveraged when it comes to, you know, new tools. And then they're. They're TikTok creator first, right? These people are just way better creative and launching stuff.
- [18:33]
Roman
Yeah, correct.
- [18:34]
Sean
But do you think AI is a big part of it?
- [18:36]
Roman
They were not AI first when I talked to them. So it's like I'm mixing up the timeline at, at the time, they were really TikTok first. Now it's like, okay, we have a, an army of like a hundred fake AI influencers promoting my products on TikTok or on IG Reels. But they were very lean, right? Like zero opex, fully remote, like people in Pakistan, India and Bangladesh and Philippines. Now I'm seeing somewhat AI. First brands. We had a bunch of them at the summit. All the creatives are made with AI. All the workflows are somewhat automated with AI. They barely have any North American or Western European employees anymore because they have a lot of the hard heavy lifting stuff done with AI. I'd say procurement, obviously, customer service, a lot of that stuff. So they can hire more junior, less affluent heads of ops and heads of finance. But trend line wise I feel like these businesses are just getting leaner and leaner.
- [19:47]
Matt
Most AI tools right now are all promise and no delivery. You know exactly what I am talking about. Super fancy launch videos. This is why I'm loving what Rich Panel is doing. They have AI and support smashed together. Made it practical, made it useful, made it valuable to brands today, not on some future promise. And instead of asking you to spend weeks writing prompts and uploading help docs and babysitting, they flipped the whole script. Their AI builds your support team for you and everything it needs. I've watched it, it works. It's freaking amazing. Rich pedal even guarantees 50% of your support volume will be automated by AI within 30 days or your money back. I call that a no brainer offer. The pricing is also kind of wild. About $0.20 per conversation instead of most other vendors being like a dollar to $3, which is a little nuts. If you are Interested, go to richpanel.com demo not for some generic demo, but to actually book a call and watch them build your actual support team. Are these valuable companies?
- [20:45]
Roman
No.
- [20:45]
Matt
Over time?
- [20:46]
Roman
No.
- [20:46]
Matt
Or are they just like, it's just great arbitrage in the moment. But they're not like are they largely not building anything sustainable?
- [20:53]
Roman
They're not building anything sustainable and they know that. They're very intellectually honest about it, but like it's free cash flow and enterprise value and they're just maximizing free cash flow. But like the biggest mentee I have did $25 million of EBITDA last year, you know, and it's real. Like I have access to the management accounts. I'm like coaching them on like how to read management accounts, how to hold their head of finance accountable. It's not like fake. I'm like in their dashboard to this stuff. It's real and it's like do you need an exit if you're making $25 million a year? Not really. Right. You're not even 30 years old. I think they're not building anything of value, but they're Capturing all the value upfront. That's what's happening.
- [21:40]
Matt
How are these companies getting to that scale so fast while still capturing cash? Because like we talk about this all the time, like Sean, these companies, like product companies are notorious for just eating cash, especially if they grow fast. Like inventory just crushes you. Is this the dropship story or is this something else?
- [21:57]
Roman
This is the dropship story. So the classic setup would be that they have a sourcing agent in China. That sourcing agent will maybe float them. Let's like I'd say three out of four cases, the sourcing agent will find the product, have a really nice padding on the product, be a local Chinese person, go to the factory, source a product for them, take care of all procurement, but then take the personal liability risk of floating the payment terms to the dropshipper. The dropshipper will then scale up TikTok affiliates, Facebook ads, applovin ads, whatever it is. And then they'll dropship the product from China directly to the consumer in the US and that's a classic setup. So they never run into the working capital constraints that we have because we do ODM products that are really unique to our brands with our logo stamped on it in a really unique way. So they iterate from 0 to 5 million with very generic products. Then maybe start stamping them once they have product market fit, but they're not doing anything breakthrough and they have a really incredible working capital setup, practically speaking. Obviously at one point when they scale to nine figures, which very few of them do, but when they do, they start parking that cash and inventory. But the genesis is it is a drop shipping story.
- [23:11]
Sean
Matt, all of us have built all of our equity in the value of having a business that could be sold, right? Like Rich has some value. All you know, you know, Raycon has some value. Matt has sold brands. And it is a phenomenon where like our brands are valuable because they've been around for 10 years or 20 years exactly. And they've, and they've done, you know, $100 million a year with $10 million EBITDA or whatever someone. So we expect someone to, to pay, you know, 10x on that. But then if someone can do the same revenue in 12 hours, basically out of nowhere, it like it does lower the value of brands, right?
- [23:49]
Roman
And it just, it does. You have to be intellectually honest about it. Like it does lower the value of revenge and Raycon and like if you don't have recurring revenue, like if you're not like an I made like pure subscription grooms kind of thing and you are like fully discretionary spending category like a wallet or airbuds or whatever. It does lower the value. It does.
- [24:09]
Matt
It does is, does it not all it's at the same time it's like is there also not an opposing force where it does raise the value of a brand? So like if you are willing to go build that kind of company because the ceiling is so much higher, can you not argue that the they, they are worth more now because of this other play?
- [24:28]
Sean
Only if you're willing to pass through the filters. It's like look, yeah Groons like Groons has you know subscription also it grew faster than anybody with less capital than anybody. Like groons did $300 million before they sold in one annual year. So it's like yeah it's incredibly valuable but also they have the best growth story. Right. And what really sucks if you're a slow growing brand who is low EBITDA and has been around for a long time because that's when you get taken off the board.
- [24:59]
Roman
That's the ocean of my M and A pipeline. Right. Like so we like let's be like let's be super intellectually honest about it. I'm not going to pretend my brands are any sexier. Let's be real. Like I have double digit EBITDA margins but I'm not growing at like 300% a year. I'm not, I'm not a grunts. Like you know, like you know if I was a grunts I'd be flying from SF to New York in the private jet. Right. Like I'm just not there. Right. Let's be real. But like, like the, the that that was my M and A pipeline going into this. Right. Like so yeah, I think it poses the question of like how do you underwrite these things? How do you think about them? Who do you, who would I sell these brands to three, four years down the line and I, I think I just have to refocus do you guys
- [25:49]
Matt
on this then like Roman are you saying to my understanding it's right like you're both saying that sort of like the traditional path to building a consumer brand is largely going to be replaced by this new crop of, of like how you do business. Like you stand up. It's more drop ship direct from manufacturer. It's basically an arbitrage play. The brand actually has no value. Like so brand equity as a, a value driver isn't a thing. And that really the only people who get to go play that game are going to be like maybe certain categories, they need to have like other characteristics like growth rate, like subscription, like quality of revenue. Like, is that what I'm hearing from both of you?
- [26:30]
Roman
Like, no, I think what I think is going to happen is it's matured so much. So think about, you know, when I started linear, it's 2013, like I'm a dinosaur in this industry, right? Like, so back then there was no AliExpress. There was no AliExpress plugin to shopify where I could click a button and be live, never meet my supplier and drop ship from China directly to Kim super in the U.S. we, the three of us built this industry. This is why this plugin exists because we built so much GMB and created an ecosystem on Shopify, AliExpress and all this stuff. So I think what's happening is that there's just going to be a lot more noise and I like Sean's word filter. Like it's just going to be very hard for an acquirer to filter down to like what is the core value of Ridge and Raycom and Pella. It's very easy with these three brands because we've been around for so long and you know, Raycon has like 5 million plus customers. You know, like it's a huge brand. So bad example. But like if you have like something a third of the size, it's really hard to justify buying it. You have to be nine figures or, or bigger to merit like even being in a selection filter in my opinion. And that's why I want to go up in size. I think what would be really interesting is actually talking about public companies that I passed on. Like so, you know, I did Prenetics with imaid. But like if you go through the swath of like public companies I looked at, you can just take a couple of examples. Like look at pets for example. I just tweeted about them 1-800-Pets-com they sell like pharmaceutical for pets. I think they do 200 million a year. Don't quote me on this. 86% of that revenue or something I think is subscription revenue. They sell like pharmaceuticals for dogs. Market cap is $35 million or $40 million or something like that. Yeah, it's like nothing maybe with debt on the book, like maybe the EV is like 50 or something. Don't quote me on this. But like it's, it's tiny, right? In the pet industry with like probably single digit ebitda, millions of dollars of EBITDA potential in the short term
- [28:38]
Matt
it's
- [28:38]
Roman
like that you can buy something like that, right? With 50 million, let's say you have to pay $75 million for that. Another DTC company that's publicly listed that no one talks about. I don't know why people don't talk about it. On X is like Brilliant Earth. It's a jewelry company that's huge, has like 50 plus stores in the US $120 million market cap. They have $60 million of cash on their balance sheet, no debt, EBITDA of probably 10, 15 million and $400 million of revenue. So you can buy a company like that for $60 million. Obviously you have to pay more if you were to try to take it private. But you get what I'm getting at, right? So I have a number of these examples that we can go down through the list of. But when you're seeing that in the public markets, it almost makes more sense to buy one of these in the public markets and take them private. Or do what I did with ima, like Prenetics, like buy a part of it, let it be listed, than go around, buy these private companies at higher multiples. Like it's. We're in a really weird, weird space now for DTC multiples, in my opinion. Very, very strange place.
- [29:49]
Matt
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- [30:45]
Sean
Let's use the Billionaire Earth example, because if they have $60 million in cash, they're worth $120 million. That means the effective multiple on that EBITDA is four or five or whatever for a company that you can sell into and sell out of whenever you want, right? As long as the market's open, you can always exit that position and what you're describing is the bid ask, spread, right? So what, you know, I just talked to a top banker. So you know there's like four or five really strong mid market banks, right? So there's Jeffries, there's Raymond James, there's Molis, I won't tell you which one, but I talked to one of them and they said 75% of deals that have gone out in the past 12 to 18 months have not got a single bid. Okay? So think, if you think about that, that's people who went out, that means they have a banker, that means they did a book, that means they did all of this work and they went out and did road shows and 75% didn't even get a bid. Right. And it's because what they're asking is they have 20, 21 or they want 10x multiples on their EBITDA and the growth is only 15 or 20% or whatever. And people, people don't want to buy that because there's public opportunities that are so much stronger or different industries are ripping. You could have bought Micron stock and it's up 15x or whatever.
- [32:01]
Unidentified Speaker 1
Right.
- [32:02]
Sean
My business isn't up 15x in 18 months. It's just not like I'm lucky if I double in 15 months. Right. So yeah, it is a crazy time. It makes sense why you wanted to pivot outside of buying brands. But then you said you might incubate brands. Have you started that process?
- [32:18]
Roman
Yeah, so I think like I am incubating to experiment. So my brands suck for the TikTok funnel because I'm not solving a pain point. Right. Like some of these honesty. Yeah. Some of these brands like show like a cure for cancer. Right. Like they're just like, well, they'll be like, take this like orange pill and like, I'll get rid of your cancer. I can't do that. I have too much ethics to do something like that. But I don't think my brands are the best laboratory to learn and to actually really hone in on the TikTok funnel. So obviously we're doing it with Raycom, we're going to do it with linear, but I just don't think it's going to be an astronomical success. So I'm incubating predominantly to just hone in and learn the skill and to understand the platform as an operator. So yes, I am incubating one or two supplements brands just to test the funnel and to like really wrap my head around how you build a TikTok first brand because I genuinely, intellectually just want to replicate the success of my mentees and understand it. It's not even FOMO driven. It's just existential. I really need to learn it because if I'm going to be an E conf until I die, I can't just not have this in my toolkit. Right? Like, so I want to learn it.
- [33:36]
Sean
So, Robin, you and me are two brothers from different mothers, man, because we both have horrible categories for TikTok shop and what Hudson is talking about. Maybe for the audience, expl why Raycon sucks, Ridge sucks and why supplements are so good. Like, what, what, why is everyone making a fortune selling supplements right now?
- [33:57]
Roman
Yeah, first of all, with supplements, I think on TikTok, what I'm seeing from all the portfolio mentee companies is like, okay, the female audience on TikTok is really, really strong. So let me just start with that. Ridge is very male. Raycon is also predominantly male, very future driven and very commoditized. Red Ocean type of product. The reason supplements are ripping, or even forget supplements like QVC is ripping on TikTok is because they're selling solutions. They're selling solutions for problems that appear in the everyday. So supplements obviously is ripping because you're curing bloating, you're curing testosterone, like what Zach is doing, or you're, you know, you're curing all these problems that are really. Your willingness to pay and try is very, very high. And that works really well on a platform where you have to leave with an impression based marketing effort. And it's a thumbstopper if you have a problem. But if you're being like, hey, buy this shiny gold wallet or these earbuds that's just not a thumb stopper on.
- [35:00]
Matt
How do you explain comfort and Crocs and Portland leather and like, well, they're, they're not, they're not problem solution products. And they. But is it just because they're so female forward and like, price point?
- [35:14]
Roman
I think so. I think it's female. And price positioning and the value anchoring, the offer anchoring. Right. Like, so comfort, I think is like an outlier in all senses. So, like, it's just like Hudson is a genius, incredible operator. You know, it's crazy. He came to me, he was in my M and A funnel really early on. And like, I passed on Hudson. Can you believe that? That's like, that's like the anthropic of D2C, you know, it's like, did I do like I passed on Hudson? He got introduced to me by David Fogarty. I haven't talked to him since, actually. It's crazy. I was like, bro, you're exploding with this hoodie brand. What are we talking about here? I can't do it. So I'm so glad I was wrong. I'm like, this is hall of fame. I should actually print out that email chain and just hang it up on my office at the MA. This is what happens when you're 40 years old and you build up way too much bias and I should fire myself. But yeah, so Hudson is just like anomaly. So I think like, Portland and Crocs are good examples. Female super. Female super, super strong. Brand equity, right? Like, they're taking brand equity from built on Meta and transposing it into TikTok too. But it's really rare to find something like a Raycon, a ridge crushing it on TikTok, right? Like, it's just. It's just hard, frankly speaking.
- [36:34]
Sean
Hey, I'm doing. I'm doing about 200, 300k a month right now on TikTok.
- [36:37]
Roman
I'm doing the same too on Raycon. But that's like, I mean, compared to my teasing per day, they're doing it per day, right? Like, so I'm just like, we still suck. Sean, I hate to say break to you.
- [36:50]
Matt
Every time Sean posts a screenshot, I'm like, what's Hudson thinking right now?
- [36:55]
Sean
Hey, I'm trying, dude. I'm Gen Z too. Okay? So I think it's really interesting and I. And let's. So going back to 2024, 2025, you brought up something else at the beginning of the show, that Meta was bad and now you think Meta's back. So now let'2026 the opportunities you're seeing. We're going to end this show talking about logistics, dropshipping, all the new cool stuff you're doing. But what's. What's working for you right now in 2026? Because I'm having a great year too, but I talk to people and they say that it sucks and it's horrible out there. So maybe, you know, help everybody out there. What's. What's working with Meta right now and overall, what's working outside of this TikTok method?
- [37:34]
Roman
I think, you know, Meta sucked for us too, like massively in 2024, 2025, and what I see as a common thread for the people it sucks for is that they're still leaning on their hero products from that era, post Covid era or Covid era. And they haven't launched enough new products. So I'd say like 60% of my success in these brands that are crushing on Meta is because we're launching new products and bringing newness to our audience. On Meta. That's very similar to the core offering we had in 2022 to 2020 before. So that's number one. Number two is partnership ads. When I talk to my mentees who have a experience on Meta and I ask them how much of your account is running on partnership ads? The answer is usually sub 5%. My accounts are running at 60%. Like anyone can go into my ad library, right? You can go into my linear ad library. We're running maybe 500 ads now. During us, during a sale, we're running a thousand ads. So we're not like huge on Meta. We're not like imaid or Comfort or any of these big brands. But we have a decent amount of ad diversity. Half of those ads are partnership ads. 60%, I'd say, of that spend is going towards partnership ads. So I think what's happening if you take two, three steps back, this is a thesis I have, is that Meta knows that the feed is going to be filled with AI slop. So when you launch a partnership ad with someone with an IG account that's more than 10 years old, right, like, you know, it's a legit person, has 100k followers, is super active, super trusted, you get two things. One, Meta will prioritize it in the auction because it's authentic, it's real, it's validated. Number two is you bridge the trust gap because it's like an influencer shilling your product instead of like a random UGC creator. So I think the biggest lever I have, the biggest message I have to founders, like, okay, maybe your product has gone stale and you have to do something new. I think like Moise did it really well back in the days with Native. Like he would launch new cents. We do all these things to just bring newness to Native, like a deal rinse thick. I think you need to bring newness to your product. But number two is like, just run a ton of partnership ads with real Instagram accounts, with real followers and just spend on it.
- [40:01]
Matt
Can you then go into, like, contrast that with your comment on Applovin and how you're seeing people spend six figures a day there? Because I, I think that I just want to understand like the landscape. We've talked TikTok shops and like the whole Hudson thing, and then now it's like meta partnership ads, even at the performance summit this year, it was like, they just basically drill that into your head when you get there, and then you're saying there's people who are spending six figures on AppLovin. Like, is there a common thread here? Like, or is it just a completely different playbook over there too?
- [40:34]
Roman
Yeah, so I think I'm spending, like, 5 to 7% of my budgets on Applovin. I'm not even that big of a spender. It's pretty crazy. I mean, it's meaningful for us, but, like, as a percentage of our US spend, we're probably spending north of 10%, because Applobin doesn't work in Western Europe. We're very global. So, like, in the US we're spending more than 10%, but it's not like 20%. Right. So the main takeaway for us from the summit was we had Tom Soggy talk about how he ramped up to 300k a day during Q4. Right. Like, it's crazy. Like crazy. And the punchline I came up with was he has no sunk cost. So when he spun up his brand, it's like two years old or whatever. Like, it's very fresh off the boat. He had the path of going with Meta, Applovin, TikTok, yada, yada, yada. And he just happened to make Applovin work first and just double down on that channel. And I think for us, like, at Raycon, at Linear, Applovin, still, today is a little bit of an afterthought. We create the creatives for Meta and then we upload them on Applovin, hoping they're gonna work. It's like this, right? And that approach works if you want to have it be 10% of your spend, but if you want it to be 90% of your spend, like, some of these kids were, like, 90%. Like, we had three people in there spending six figures a day on Applovin, which is really meaningful, really material. And you have to be like, I'm obsessing about Applovin. I'm obsessing about the end cards, like, going all deep. Like, the end cards were interactive, like, gamified. Like, they were just, like, all in on. On Applovin. So I think that was the biggest takeaway. Like, no sunk cost. Applovin first.
- [42:25]
Sean
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- [42:38]
Unidentified Speaker 2
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- [42:39]
Sean
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- [43:12]
Matt
Do you guys have brands that you know that do each platform like accept like top 1% on each platform?
- [43:18]
Roman
I know one brand. I know one brand that does it.
- [43:21]
Matt
How? Like I've wondered this. Like, you know Roman, I guess a good comp for me is like we've never made Amazon work but we've put like if I look at it, it's like we've made Amazon work to the level that we've obsessed over it and invested in it, which has been like an afterthought if I'm being truly honest. I've never really chased it in any brand and I'm like, I'm so default a meta guy that that's where I spend all my time. And I'm just wondering like is anybody master has anybody figured out like is it feels hard to hire like hire a person who's going to obsess at that level over Applovin or TikTok?
- [44:01]
Roman
I think it's. There's one guy I know that's made both channels work where it's equally weighted. I would say maybe 40% meta, 40% applovin, 20% random stuff. But beyond that I actually don't know anyone. That was the other takeaway from the event. It was very binary. So everyone is spending 5 to 10% on AppLovin. Everyone is in my camp of spend. But then there were these outliers like these three kids that are spending like six figures a day. So it seems very binary. Maybe because the platform is new, because people are acclimating to end cards and all these things. I think that's gonna change over time personally, but I don't actually know that many people in that bucket.
- [44:42]
Matt
Matt.
- [44:43]
Sean
Well, I think every brand just has strengths, right? Like if it's channel from a sales perspective or a spend perspective. Like I don't do wholesale. Well, I suck at wholesale. Like cannot get it to work. We have a whole team spending time and effort on it. But then you have somebody like Mike who, who crushes at it it right. Like we are D2C, we are Amazon, we are meta and we're in the 5 to 7% camp on Applovin and TikTok like everybody else. Matt, you had a point you wanted to hit.
- [45:11]
Matt
Yeah, I got a few actually. I think I want to come back to on this sort of like making these platforms work like Roman, you start. One of the things you said earlier is like you're noticing that some of these newer generation of brands are also like AI first in their. Not just the company building but it almost sounds like there's an AI creative trend that you guys saw at this event and I'd love to just like where is that working number one. So like is that a on all platforms? Is that what you heard or is that more concentrated in like Meta or Applovin or TikTok?
- [45:46]
Roman
It's just such an.
- [45:47]
Matt
It's a fascinating topic for me.
- [45:49]
Roman
There were two kids at the, at the event. They went from 1 million to 7 million a month purely on the back of just scaling up AI creatives. So there's two levers. One, they launched a bunch of new products and they brought them to market with an automated AI flow. So they would have a sourcing office in China. China would take a picture of the product against generic white background. They would then have an AI workflow, render it, turn it into P2P on their site, then turn it to create ads with that picture and then run ads automatically. The workflow was like literally like okay, generic white e commerce pictures coming from China all the way to P2P to the AD account. All meta first. So I can't answer your question on where it's leaning into whether it's TikTok, AppLovin or Meta. But this is like the best prime example I got from the event. And they were showing us the workflow at the event which was really eye opening to me. So that's becoming more and more of the standard. It's very hard to implement at Raycom just because of the size of the product. Very hard to implement at Linear. Somewhat easier to implement at like the other companies I have, but we're nowhere near. Like if you look at my ad accounts, 5% of my creatives are enhanced with AI, you know, and maybe 15 to 20% of my working ads are pure AI and they're predominantly statics, they're not even video. But that's becoming more and more this trend. So this brand in particular, 90% of their ads were AI created.
- [47:27]
Sean
I'm actually more interested in what you said about how OPEX is lowered. Right. And we've seen opex go from 15% and you brought up reformation. They're probably at 25% of revenue going to opex. And then we watched it go down to 10, then we watched it go down to 8. And what do you think best in class for 2027 is going to look like?
- [47:46]
Roman
Yeah, good question. That's what I'm asking myself too. Like what is best in class opex on a move forward basis? I think it's going to be sub 5%. Personally, I think it's going to be sub 5%. You want to cut as deep as you can and spend as much as you can on paid marketing. I think it's going to be sub 5% at like $100 million of revenue per year.
- [48:09]
Sean
Right. Because creative costs go to near zero. Right. You know, people cost. You're gonna have five people running these entire companies. But what are there softwares you're getting value out of? Or is it just cut everything, put every single dollar into meta because that's what. Or TikTok or AppLovin, because that's what drives people. Like, is it just burn all the bridges, go all in unpaid ads? I'm just curious how radical the future is.
- [48:32]
Roman
I do think it is like burn all bridges and go all in. Unfortunately, I wish I had a better answer, but I think it is that simple. I think it is really like how lean can you go and how much can you spend against ltv? I think that's what it's going to come down to to win the race. And then I think evolution. So we went to Casetify's office during this event, right? So for context, Casetify, this is this behemoth of a phone case company. Behemoth like hexclad Big, right? Like maybe bigger, to be honest. And it was so inspiring because Wes has like ocd. Like he's like an incredible like Steve Jobs type. Like, everything is just like the office is just like insane. We have videos of it itself. Like, it's just like, it's crazy. So we went to his office and the topic was how to scale retail. So he's gone from zero to more than 70 physical stores globally and they're murdering with their stores. So I think if you can get to nine figures in revenue on your dot com. Step number two, to really be AI proof and to build a brand is to go offline and open retail stores. That's.
- [49:43]
Matt
That's my or, or, or go into retail.
- [49:46]
Roman
Yeah. Or go into retail wholesale or. Yeah, exactly. Either wholesale or if you're in, you know, non discretion, like if you're in like non essentials, you probably have to open your own stores to really build a brand with a movie.
- [49:59]
Matt
It's like we're entering a world where it's just extremes, you know, like on one hand you've got like. We're talking about the hollowing out of everything in a brand except for paid media.
- [50:11]
Roman
Right.
- [50:11]
Matt
And the factory. And everything between the factory and and paid is like, literally it's all up for like just moving around and shrinking. And then on the other side, like what you're hitting on is as AI gets more prolific offline analog real also becomes more important.
- [50:33]
Roman
Exactly. I think the best example, like whenever I'm in New York, I mean, I think we all know Buck Mason. Sean, I think you introduced me to the founders of Buck Mason. Right. Like, because I want to learn about retail. Yeah. I just signed my first lease for LINEAR actually in Hong Kong. Like, I'm really excited. I'll come back next year after we open.
- [50:49]
Matt
Jewelry is a great place to do retail. Like, they work so well.
- [50:53]
Roman
Yeah. Like, Buck Mason's store in Soho has like a coffee shop. Right? Like, it's like, it's an experience. It's like a living room with like this. Everyone should kind of Google Buck Mason, Soho, it's like such a cool store. You want to go in there, hang out? I think that's the future. And I think if you really want to evolve and kind of move forward, you have to think about that when you cross $100 million in revenue. One thing I want to add is like, I think GMV target for Shopify in 2026 or 2027 is 600 billion. Right? Like 600 billion or something. And back in the past, I'd say 30% of that would be spent on ads. I think in the future that's going to be 40 to 45%. I spend 40% of my revenue on marketing. I think the average is lower because I've just seen so many companies in the M and a pipeline spend 20, 30% and rip a lot of profits. But the brand I bought in June was spending less than 10% unpaid of total revenue. Right. Like at $25 million, just to give an idea. So I think the future is just, you know, that's going to go from 30% to 40%. Right. So we're going to go from like 150 billion of ad dollars on Shopify, like 120 billion maybe now on ad dollars powering Shopify source to probably 200, 250 billion, right? Like over the next two years. It's going to be dramatic, I think.
- [52:18]
Sean
And people always say, oh, Meta should buy Shopify. That was like a common thing. But they don't have to because half of Meta's revenue is coming from Shopify merchants anyway.
- [52:29]
Roman
It's like exactly. For me, if take meta, right? Like $180 billion in revenue, 55% operating margins, right? Like it's a behemoth. It's going to get to $300 billion in revenue in the next two to three years with the higher operating margins. Because they're firing everyone, right? Like they're just firing like they're, they're doing exactly like what's happening in DTC is happening everywhere, right? Like it's like obviously they're cutting people, they're spending it on AI. At one point the capex is going to stop and they're going to like rein in on capex spend. We just know that that's a truth that's just waiting to happen. And as that happens, I think players like TikTok will follow. Because if you think about TikTok, why does the ad product suck? I think the product sucks because they have TikTok shop. The ad product Spark ads is just optimized for like really short attribution windows and it's made the ad team at TikTok a little bit lazy on building something that replicates Meta which is basically creating a marketplace where people bid for LTV and not short term transactions, right? Like that's it.
- [53:38]
Sean
And the power and beauty of Apple when it came out is it was the only company that figured out how to make as good of an ad engine as Meta. And if everyone else does that, it's a boom for E commerce. But I do want to say totally and what you're talking about is perfect state capitalism. It's like there's the people who make the products and then all the money goes to get the attention and everything else gets cut out. And we've all seen these VC backed companies and we're friends with some of them who they still spend 20 to 25% of revenue on people. And I'm like, what the hell are they doing all day? I talked to a brand, this brand's not VC backed, it's a new brand, very, very fast growth. First year they did 20 million, second year they did 40 million. It's a physical goods company. And I was talking to him And I'm like, yeah, so tell me about your team structure. They're like, yeah, we have 40 people. And I'm like, why? I'm like, what do they do? Like you're doing $40 million. Why do you need 40 people? It's like they don't make the product, they don't ship the product. Like, what are you doing with all those people? It could, it should really be 5 or 10. Is is the reality of the future we're going towards.
- [54:42]
Unidentified Speaker 2
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- [55:21]
Matt
Yeah, I think it's hard to argue that. I don't think you can actually take the opposite side of what you guys are saying.
- [55:26]
Roman
Right.
- [55:27]
Matt
Like I do know somebody. I know a guy actually has probably 55 million in revenue, lots of product. So like SKU variety is pretty high. I think there's six employees in the whole place. Like it is really, it's like, it's a perfect example of like and there's young dudes that have just figured out how to do things in a scrappy way. It's like very technology first. And I think Roman, what you're hitting on with the TikTok shops meta thing is like they both have the inverse problem of each other. So like TikTok shops doesn't have an ad platform because they figured out how to monetize shops. Meta has never figured out commerce. Like guys, we're old enough. We've been around for every iteration of Facebook shopping and they've all failed. But I think they fail because Facebook has like the highest revenue per user monetization ad platform in the world. It's really hard for them to turn anything else on and out like out compete that thing like so that the bar is just so high for both of them to kind of cross over. I mean it'll be interesting to see if there is an iteration of this with like maybe Instagram, TikTok shops copycat. Like maybe they figure out a dollar per user number that's higher than their ad product.
- [56:39]
Sean
Matt, you are 100% correct. How can they, how can they build a better thing when they have the world's greatest business to ever exist? It's like, it's like, why is Google scared of AI? It's because they have a crazy cash flow money machine that finally somebody might take a slice of. But okay, this was good. So I'm going to summarize the episode. Up until now, what we talked about is you got to move to Hong Kong because that is where it's the center of commerce. Everything's made in China. It's just the reality of the world. And you want to be as close to those factors as possible so you can negotiate better prices, you can work out any issues, you could see samples faster. And it's a very safe city. It's a very fun city. There's a lot of things going for Hong Kong. The second thing is Roman was buying a bunch of brands and I think everything he said applies to every single private equity group. They looked around and they said, look, the public markets are ripping. AI is over here. Why would I tie up capital in assets that are overvalued? And why not just launch them themselves? The third thing is we saw this new generation, this wave. Hudson is the poster boy of it. But TikTok shop powered brands that get great creat, they put them over on Meta and they scale the hell out of them and they do $10 million in their third month and it just, it makes us look stupid for sitting around for 20 years trying to get a brand to do $10 million a year. The fourth thing is, the fourth thing is what's working right now. He is, it's partnership ads on Meta. It is diversifying into more ad channels and is taking the UGC Creative or the AI Creative and scaling it up everywhere. Now let's get to the fifth part of this podcast. Roman, you are now an advisor for quints. Everyone thinks of quints as the place to buy nice sweaters, but they just raised a $10 billion and no sweater company can be worth $10 billion. So what is actually happening inside of quints? Why is it going to be a hundred?
- [58:23]
Matt
Talk about this manufacturer to consumer.
- [58:27]
Roman
I think quince is the poster bullet if manufactured to consumer. Right? Like so Sid, the founder who is very reclusive and secretive, I've convinced him to come on operators to talk to you guys. So I won't butcher his story. I'll let him tell it himself. But I've known him for probably more than five years, maybe eight years. We use the same three PL in Hong Kong. So that's how I got to know Sid. And I just saw this business go from zero to like an insane amount of billions and billions of dollars in revenue over a very short period of time. Incredible company that actually embodies the whole MTC principle. So all of their suppliers actually consign products with them. So it's like suppliers agree to be FBA sellers, basically on quids, then quids takes care of the rest, acquisition, fulfillment, all that stuff. And I think the business works so well because their retention curve is just next level. So they built up this incredible capability of drop shipping their own products from India, from China, to the end customer in the US Using a crazy logistical setup. So they built that out. They then decided to externalize it, asked me to be an advisor to Quint, and the value proposition is just so good that I want to use it myself for Linear and Raycon, because you are able to ship a product from China to the end customer in the US at the price of. At a fifth of the price of FedEx. So insanely cheap. Which helps us not tie up working capital in inventory by sea. Freighting it to the US unbundling it and shipping it through a3PL so it's faster and cheaper. And they basically just decided to externalize this capability. And I think that's the future of commerce. Just get closer and closer, cut out every middleman and all the fat between the Chinese factory and the end customer. So this service is just like, insane. I've never seen something like it. I actually tweeted about our first client on Quinn's Logistics. They're selling stuff to suburbia in the US Like a thousand suburban moms every single day are ordering their product. And on average, we're delivering the product in less than six days door to door from China, including Sundays. Right. So it's super fast. The founder can now turn inventory much faster. And I think it's like what all these other dropshipper providers want to build, but they just didn't have the speed to match it. But these guys have kind of solved it. I think even for Raycon, when we move over, it's going to be faster because Quinn's flies these planes all across the US So they'll have a plane go to the west coast, to Chicago, to middle America, so they just get much closer to the customer. Because the parcel moves like a human. So if you think about it, when I board my flight in Hong Kong at 2am, I'll land in New York the same day at 6am and I'll just walk through immigration and get to my office at 10am They've basically done the same for a parcel. That's basically what they've sold. So it's just insane. And it's been fun to watch this scale up. I think just from my Twitter, we've gotten a 200 million ARR pipeline, which speaks volumes of not my following, but how much of a product market fit they've kind of hit, right? Like, it's insane. I couldn't believe it when I saw this spreadsheet. I was just like, what is this? This is insane. You know, it's like insane.
- [62:00]
Matt
Okay, but like this whole like, thesis that you have that you posted about, which is like, we're like M2C is the future, right? Can you, can you unpack that for people listening? Because like, you put this thing up on, on X, I think I messaged you right away. I'm like, roman, what the. And I'm like, we gotta talk. So like, unpack the thesis. Because, like, Quince is a good example. But like, why do you think this is going to be the future?
- [62:26]
Roman
I think the best example is like my keynote speaker at my first event three years ago, Angus Kong. So people can Google him on YouTube. People should obsess about him. He's like the Hudson of China. Okay, so the guy does like crazy numbers. I don't know how much he wants me to disclose, but we're going and touring his factory and his setup in China on my summit. So if you come out in October, you can see how. So he's basically an affiliate marketer. He doesn't own the factories, but he works directly with the factories. He'll literally go in and launch a hundred products per day. Like a hundred per day. I'm not exaggerating. Like, he'll do 3,000 products per month. Approximately 2,000 to 3,000 products per month. Spin up, landing pages, run ads, pump them. As soon as they start declining, he'll stop and move on to the next product. And they're just running the whole machinery for profits. His HR structure is really crazy. But I think that's like the actual future of commerce. You'll have like super powerful affiliate marketers partner with factories in China directly. With AI, the language barrier is much lower. Like, these guys can write fluent English, they can write scripts, they can do all the stuff they use American copywriters, Westerners like myself for and then go live and sell their products directly. Dropshipping from China. Obviously you can't drop ship a big piece of furniture, but like some earbuds or some jewelry or a ridge wallet. Super easy, right? Like super easy. So I think that's the future, frankly speaking, I think we're going to see a lot more of that.
- [63:58]
Matt
Where does brand come into this then? Do you think that the brand builders are also going to do this or
- [64:04]
Roman
do you think maybe. But like if you think about it like 80% of, sorry, I'm exaggerating here, but probably 60 to 65% of my consumption is like stuff like this, like this, this roll of paper, right?
- [64:17]
Matt
Like, yeah, like unbranded. Who cares?
- [64:19]
Roman
I don't even know what the brand is, right? Like I don't care. Like it's just a pure commodity to me and I hate to say it, it's probably going to be the same for like wireless earbuds and some jewelry. Like there's going to be like things you just buy purely for style, price and convenience. And I think like, obviously a lion's share of value and profits will be captured by real brands. But I think there's a whole swath of this like Amazon FBA style businesses done in a D2C way. Why have they not been done in a DTC way before? Because it's operationally complex to sell on Shopify or On.com. and I think the ability to sell On.com is going to be as simple as an FBA listing. You're going to have to put in minimum listings, right? They have to have a good product. But I think. And D2C is going to be FBA ized, right? Like it's just going to be like completely Amazon, like eventually.
- [65:14]
Sean
Roman, I'm glad you brought up Amazon because this idea of externalizing a resource is Amazon. Like Amazon aws is a 200 billion a year wing of the business that they externalized. And I've Talked to senior VPs at Amazon and they're trying to externalize everything right now. So Amazon pay is Amazon one click. Like Amazon Logistics they're trying to get money for. And what Quint is doing is the advantage Temu and Shein had of going directly to vendors and then airing it into America. Quint is like, we will let everybody do that. Right? And that's why, because people are like, why is Quint worth $10 billion? It doesn't make sense. It's because they're trying to be the aws of logistics from China to the US So and I think it's, I want to pinch you guys an end state. The end state of commerce is whoever can spend the most on attention will win in. And that's why OPEX is being cut. That is why, you know, you're removing warehouses, you're removing creators, you're removing everything. Because every dollar that goes into attention is the, whoever can do that at the end state wins. And that is the world we're in where every single dollar needs to go to marketing. And it sucks. I love my team, I'm going to keep them. I love everything. I love, you know, building a brand and culture and vibing. But the brass tax is capitalism is whoever gets the most attention is going to win. And whoever puts the most money into it is going to win, win. So that's what I, I don't think it's.
- [66:36]
Matt
I think Sean, it's just all you're saying is there's likely a lot more companies, but with just fewer people per company.
- [66:44]
Roman
Right.
- [66:45]
Matt
And that like more and more money goes into distribution.
- [66:48]
Roman
Okay.
- [66:48]
Sean
The world is everyone's an FBA seller.
- [66:51]
Matt
So I was gonna say, like, are we all just like running like a hundred different. You know, what is the, the brands in fba? It's like if I just mashed my keyboard like a cat. That's my brand name on fba. Like it doesn't really matter.
- [67:04]
Roman
I'm going to take that copy what Sean just said, like, it's a world where everyone is an FBA seller. It's 100% like that's hitting the nail on the head. And that's actually so well distilled because that's what made me pause in 2024 is like, I could kind of, I couldn't articulate it back then, but I was like, something is profoundly changing now. I've been doing this game for at that point, maybe more, definitely more than 10 years. And I was like, something has changed. This was an inflection point.
- [67:31]
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- [68:16]
Matt
What's your take on Shopify then? Guys like Roman, I know you've had some takes on this, but like where, where does. And I guess like this maybe a different way to answer this is like where does the.com value lie, right? Like, and Shopify's role in this ecosystem is pretty substantial right now.
- [68:33]
Roman
I'm a super bull on Shopify in general as a stock. It's very expensive, right? Like it's priced on a sales ratio. It's not priced on an EBITDA ratio because people are extrapolating that at one point it's going to go to 1 trillion a year instead of 600 billion a year. 1 trillion a year in GMV and they're going to have a lot of pricing power. I think what's at risk now is their pricing power. Like so if they came to us today and said like, hey, your Shopify plus is going to go from 2 grand a day to 10 grand a day, I think most of us would just suck it up and pay it. But you know, is a month. A month, Yeah, a month. Sorry, yeah, a month. Sorry, yeah, yeah, unfortunately a month. Yeah, exactly. So we would suck it up and pay it, right? Like let's be intellectually honest about it. That being said, what I think is going to happen five years from now is you're going to have what like these kids that came and are spending on Applovin instead of Meta is you're going to have this potential of like just clicking a 1 button on Medusa and you know, have a front end fully loaded that Shopify, like with an order system like Shopify. So I think they're going to have a lot of competition coming the next three years. There's going to be a Medusa like next wave, whatever those platforms were that I wrote in my thread are going to come up and really give Shopify some pricing pressure. That's my two cents. I do think Shopify is a little bit weak at a couple of things. Like I've been with Shopify since day one, right? With my brands, like going global on Shopify is a pain in the like it still is. Like localizing all that stuff is really tough and my brands are really global. And number two, I think is like it is not truly AI first Right. Like, if you think about one of my mentees that I wrote about is actually Norwegian, of all places, like myself. So he did like 45 million dollars in TTM revenue on track to do 100 million this year. And his whole setup is Claude terminal, just like launching products in a very similar fashion. Like Angus. Not 100 a day, he's doing like 50 to 100amonth. But he's spinning them up using Claude. Once they work in the US he just has it translated into 50 different markets, spinning them out. Replicating that workflow in Shopify is extremely difficult today. So if you want to think about in the world of where everyone is an FBA seller, I don't think Shopify is the best tool right now. Would I bet against Toby and Harley? No way. We've met them both. Like, I would be like a run for the hills before I do that.
- [71:07]
Matt
Right.
- [71:07]
Roman
Like, I wouldn't be that dumb. But right now, if you were to ask me, I think they're at risk and they have to make some big changes to accommodate the future of E commerce, in my opinion.
- [71:17]
Sean
Yeah. You know, one worry I have about the Future of all SaaS, all services is in 3 years with unlimited compute and unlimited tokens. If I asked Claude, hey, I want to sell something, it would just build its version of Shopify, right? Like, you know, Dario, the founder of Anthropic's idea is that there's a country of geniuses inside of every single server rack. And if you really had 300 million PhDs, if I asked, hey, what's make me the best selling whatever, it would just do it and it would create entire workflows and systems and thousands of lines of code and then that's what it would. I would just be sitting, drinking a smoothie or whatever.
- [71:58]
Matt
So, yeah, I think, Sean, I'm with you. I think, like I, I, I think that that's like directionally correct. I think the timeline is just way off. I mean, I think we are like decades because what Roman is saying and which I, I think I agree with both of you. I just think it's like 20 or 30 years away because you're talking about connecting, like everything is code, anthropic to factories and that everything in the middle is like not valuable because everything in the middle can be code or it can be pushed over to the factory. Like, that's kind of where we're at. Like, even the media buying is like, well, Facebook's got all the demand that AI is going to talk to this, their AI and It's going to hook up to whoever owns the factory and that everybody that used to do all the work to facilitate all that stuff is just gone, including Shopify. I just. It is so many moving parts.
- [72:47]
Roman
I don't know though. But because Matt, like I built like so, you know, for me, like right now I'm really focused on picks and shovels, right. Like, so I think my equity at Quint is going to be worth like cities.
- [72:59]
Matt
Yeah, I think it's a great play. Prince is like.
- [73:01]
Roman
It's great. Like I. So I did something where I thought about it like what Sean did. Right. So at linear, we upgraded our packaging and we've had like a huge LTV lift. So I started packaging supplier. So I'm now selling packaging because like all my mentees need packaging. And the interface I'm building for the packaging is an AI first interface. So you can render all yourself. I'll send you the demo link once it's ready. But then I'm taking on like first principle of E commerce. Like, okay, Sean might be. My clients are new to the game. They're new to E commerce. Like they're kids fresh off the block and they don't understand if you shave off like 1cm on the side, you can save a dollar with USPS. Right? So I think service providers are going to build things that can interact with agents. That's what I'm trying to do at least as a thought experiment because I think like going back to Sean's thing, the reason I think, Matt, you're extrapolating the timeline is because you're still dealing with humans on the other end. But if you start having vendors build really agentic first, I think it's going to be very, very different. Right? Like, I think so. Right? Like, I would work with my. If I was like a jewelry factory and it was like truly AI first, I would 100% like work with me. Right? Like, so, yeah, I think that's. That's like dude, totally.
- [74:19]
Matt
But you know, like, I guess my argument is always we're a bunch of dudes and you have to discount dude logic. And because like the, the way that
- [74:28]
Roman
we move through the world is very
- [74:30]
Matt
different from like more emotionally intelligent beings. And like the way that we consume is very different. Like, I am happy to have robots by most of my. With like some amount of exceptions and I am happy to not interact with any other humans.
- [74:48]
Roman
That's not true for a lot of
- [74:50]
Matt
the other people in our species. So I just, I think it's like we have to Remember, there's, there's like a lot of participants in the economy and a lot of like, incentives that are competing. As much as I love this, like, future.
- [75:03]
Sean
All right, guys. Roman, I love the idea of starting picks and shovel businesses. Like, I'm thinking about starting more manufacturers. I would love to get some equity in your packaging companies or go ahead and just send the advisor agreement over. I'd love to get that, but. Okay, so we just unpacked where we think commerce is going. It is going to be more money spent on marketing. It is going to be close relationships between manufacturers and end customers. And how does a brand sit and navigate that? If you're a brand doing 10, 20, 30, $50 million a year, that's our core audience. This is going to be a negative episode for you. But you should, like Roman has said countless times, be intellectually honest. Like, where do we think the world is going with AI with all these kid brands like you call them 18 year olds wearing diapers, basically like coming out and doing $20 million a month punching you in the face. And they have different rules. It's a different game. Don't get left behind. Roman, what's the one tip you'd give to a brand owner? They're stuck. You know, they're not one of these fast growing kids. They're doing 10, 20, 30, 40, even $50 million a year. They were praying for an exit. What's, what's the lesson you would give to that?
- [76:11]
Roman
Cut cost and take out distributions every single month. On the 30th and 31st of the month, you send yourself a calendar invite saying dividends. And then you take half of the profits in your business and you spit it out yourself. Then you ask yourself, how can I double that dividend in the next like 60, 90, 180 days, whatever your timeline is. But just start saving up money and take it out the business and leave your ego at the doorsteps and choose lower growth for more dividends. Dividends first, always. That's my core message because I still talk to founders who are drunk sailors who think like a private equity is going to come in and scoop them up. It's not happening anytime soon unless you're crushing it and you have recurring revenue.
- [76:56]
Matt
So it's basically operate like your brand equity is zero.
- [76:59]
Roman
Yes.
- [77:00]
Matt
And all you have to get is cash at the company.
- [77:03]
Roman
Plan for the worst, hope for the best, but that's it.