How to build multi-Billion Dollar brands? with Co founder of Chubbies and Loop Returns

Summary

In this conversation, Preston Rutherford discusses his early life, memories, and how his upbringing shaped him as an entrepreneur. He shares the reasons behind building Chubbies and Loop Returns, emphasizing the importance of using personal experiences as fuel for entrepreneurship. Preston also provides insights into the concept of branding, explaining that it goes beyond logos and design elements. He discusses the role of advertising for established brands and startups, highlighting the need for a balance between transactional ads and storytelling. Lastly, he shares how he and his co-founders maintained a successful business partnership by dividing roles and responsibilities and fostering open communication. In this conversation, Preston Rutherford shares insights and experiences from his journey as a co-founder of Chubbies Shorts and Loop Returns. He discusses the organic process of finding co-founders and the importance of respect and alignment in a founding team. Preston also talks about building and scaling a team, emphasizing the significance of culture and values. He addresses the challenges faced by venture-backed CPG businesses and the lessons that can be learned from the SaaS industry. The conversation concludes with a question for the next guest about their biggest setback and how they chose to persist.

Takeaways

Finding co-founders should be an organic process based on shared ideas, feedback, and excitement.
Respect and alignment among co-founders are crucial for a successful partnership.
Building and scaling a team requires a balance between being a family and a team.
Consumer product businesses take time to grow and require a strong brand and trust from customers.
Lessons from the SaaS industry, such as the importance of brand and trust, can be applied to CPG businesses.

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Transcript

Mudassir (00:02.868)
All right, awesome. Please do a clap for me. Yeah, yeah, awesome, thank you. This one helps in audio and video syncing because we're doing it remote, yeah, okay. Awesome, all right. Hey Preston, welcome to the show, sir. How are you doing today?

Preston Rutherford (00:06.732)
Me?

Preston Rutherford (00:12.523)
Oh, perfect.

Preston Rutherford (00:19.146)
I'm doing well. How are you doing today?

Mudassir (00:22.304)
Thank you so much for your time. Fantastic, you know. We're listening to a lot of the podcast, the HustleCon thing that you guys did, and all the amazing things that you're sharing on LinkedIn, on YouTube, and other podcasts that you've been on. So it's fun getting to know you, getting to know the identity behind the brand and stuff like that. I hope it's gonna be a fun conversation.

Preston Rutherford (00:37.678)
Thanks.

Preston Rutherford (00:44.798)
sure it will be. Yeah, thank you and thanks for checking some of that stuff out. I appreciate it.

Mudassir (00:49.916)
Absolutely. All right, so every single time I host anybody on the podcast, one of the things that I have learned, which I ask almost everybody, is what's the earliest context you have of your life? Like behind all the success, because you're now associated with Chabis, you're associated with Loop returns. Behind all of these successes, who is Preston? What's the earliest context you have of your life that you can give us?

Preston Rutherford (01:16.286)
Wow, that's a great question. So gosh, born in Tucson, Arizona, and actually Spanish was my first language. So I think that's one of the first memories that I have is just learning Spanish and just being a little guy. I guess I don't remember back to when I was crawling, but just living in Tucson, I'm an only child.

And just playing around with my parents, I think is just one of my earliest memories. And I felt so fortunate. My parents were just very loving, very involved and invested in allowing me, even though it didn't really come from means or money or anything like that, but just giving me an opportunity to.

get exposed to things, play sports, learn about the arts, all of those sorts of things, go to good schools. So I feel very fortunate and was always surrounded by, I think, love and positivity and support. So I think those are some of the first early memories that I can think of.

Mudassir (02:38.336)
Awesome, what a cool memory to have. Do you think those early memories and your brought up has made you a better entrepreneur today?

Preston Rutherford (02:48.926)
Of course, yeah, and it's hard to tease those things apart, but one of the most productive or constructive views I believe an entrepreneur can have is whatever their background, use it as something that will help you, something that will fuel you, something that adds to your story rather than excuse why you cannot do something.

I was very fortunate to have the upbringing that I have, but to the extent possible, I tried to use every bit of it as what makes me who I am. And many of the great founder stories that I read about, they did the same thing. None of them used it as an excuse for why they couldn't do something. So I think that's one of the key takeaways that, because I'm obsessed with learning.

from other founders. Charlie Munger calls them the, becoming friends with the eminent dead, and whether or not they're dead or alive, it's one of my absolute favorite ways to spend time when I'm not working.

Mudassir (03:53.993)
Yeah.

Mudassir (04:01.696)
What are you learning recently?

Preston Rutherford (04:04.162)
What have I learned recently? Oh, great question. What have I learned recently? Well, I've been listening to the Founders podcast, which is great. And one of the most recent ones was about Les Schwab, who Charlie Munger said was one of his favorite entrepreneurs. And one of the takeaways from Les is,

incentives and the importance of incentives as you think about building an organization, building a team, growing something. Now that's not necessarily going from zero to one but maybe one to a hundred but I thought that was a very interesting component. The second I think is

Preston Rutherford (04:59.038)
also comes from less is simply doing something the way you think it should be done, ignoring commonly held wisdom. I think that's one of the things that I've always tried to do is just look at everything from a blank slate perspective, kind of like completely ignoring what had been done in the past, because what had been done in the past is what got us to where we are today. And if you have a better vision for the world, it's going to take something else. And...

Mudassir (05:12.196)
Okay.

Mudassir (05:26.525)
Yeah.

Preston Rutherford (05:30.542)
All of those rules are in theory meant to be broken. So I think those are the two things from a recent podcast that I totally learned. And also hearkens back to Steve Jobs being one of my favorite entrepreneurs and one of his videos that hasn't gotten a lot of...

A lot of notoriety is the one, it's an older one. I think it's, you can find it, I think at like the Computer Museum or the Silicon Valley Computer Museum where he fundamentally talks about the fact that this world, everything in this world was made by humans no smarter than you or me. And that we as individuals, there's no reason why we don't have the same ability as anyone else to completely mold this world in which we live.

everything about this world in which we live. We don't necessarily have to view this world as fixed or immutable. We as individuals, exactly who we are, have just as much of a possibility of changing the world, molding the world as any other human on this earth. And so those are some ties that I made that help me just every day understand that it's possible. There's no reason why I or you.

Mudassir (06:41.75)
Mm-hmm.

Preston Rutherford (06:44.222)
any of the listeners of this podcast can't do the thing that they want to do.

Mudassir (06:49.62)
powerful. Okay. I did not expect I had like, I know it's going to be like a deep conversation, but I did not expect like us to get so deep like this early on. Okay, so.

Mudassir (07:04.412)
You know, we spend quite a bit of time researching you, researching the brand, researching companies that you build, companies you invested, the newsletter, the things that you talk about. Like, we've been through almost all kinds of content that you're producing. Before I, you know, and one other thing that, you know, I've seen multiple times people have asked you is, how do you build, you know, Chubbies? Because people have kind of, you know, associated your identity to that brand.

rightfully so as well. I wanna ask you why you build Chubbies? Like why exactly, like, and then why build loop returns? Because I've used both of them, so I just wanna know from personal perspective why both of them exist and why you build those.

Preston Rutherford (07:40.366)
Sure.

Preston Rutherford (07:51.054)
Sure, good question. Why on Chubbies?

Preston Rutherford (07:56.106)
Honestly, it was, I'd say both offensive and defensive. So on the offensive side, well, let's start with the defensive side. Uh, I was not that good at working for other people and it did not feel like. The place where I was most fully alive. And I think the three other Chubbies co-founders felt somewhat similarly and that there was.

Mudassir (08:03.829)
Okay.

Preston Rutherford (08:24.262)
feeling in our in our bellies or in our guts that there was something else that life held for us. So I think that was the defensive piece. The offensive piece was we were in a place where we were out of college, had worked for four or five years, felt like we had learned some things.

felt like we could do it now that we had been in the quote unquote working world, working for other people for some time. I think we felt naively or not that we could do something, that we could build something and that we wanted to. And this was before we were married. We had children before we had mortgages. You know, we had, we were just paying rent in San Francisco.

P&L was very simple and the, not that that's again, not that that's a reason why not to start, but at the time.

Mudassir (09:17.716)
Yeah.

Preston Rutherford (09:25.458)
It allowed us to, I think it was a point that gave us all reason to start. And it just seemed fun to get to work with three of my best friends and to start something that seemed like it would positively impact the world. Now we honestly didn't even know what we would start.

So the way I like to frame it is we were entrepreneurs in search of a company or entrepreneurs in search of a problem to solve that's how it started, but we got to a place where We sort of realized okay, what are what is our circle of competence and it wasn't going to be building the next

Mudassir (09:55.532)
Okay.

Preston Rutherford (10:07.354)
social media app, which some of our friends did actually build from Stanford. So it was, that was legitimately something that people did. And again, hearkening back to the Steve Jobs quote, it's just amazing. But we felt that there was a consumer product that for a variety of reasons in our backgrounds, each of our individual backgrounds, I think we felt pulled to a physical product.

Mudassir (10:17.572)
Okay. Yeah.

Preston Rutherford (10:34.21)
that we could sell to consumers for whatever reason. My reason was, my previous experience was very much in consumer internet software, selling advertising space in a digital product. So it felt very, again, of course, not that there's anything wrong with that, but the lack of something tangible where I could.

Mudassir (10:46.218)
Wow.

Preston Rutherford (10:56.494)
sell you something, you pay me money at the time of the transaction, and then I deliver you a product that you can touch and feel and that I can see you smile when you receive it. That was something I craved. And I think again, we all had our reasons why we were pulled to making a consumer product. So I think the why was very much, gosh, this would be so fun. What a blessing to be able to work with our best friends and just

Mudassir (11:04.559)
Mm-hmm.

Preston Rutherford (11:25.794)
Go for something, go all in on something to create something. And then number two, I was really tied to creating a consumer physical product. And then I think number three, we felt that there was a product gap and a brand, although we weren't very articulate on what brand meant, but an ethos or an identity or even a vibe gap in the market. I mean, I think at the time shorts were very long.

heavily pocketed. So it did sort of feel like there was a little bit of a, hey, I feel like there is a product differentiation to be had here, but then maybe equally important or more important, we've just felt like men's fashion at the time, men's apparel at the time was an extremely exclusive, you're not cool enough for us vibe, unfriendly, unwelcoming.

Mudassir (12:02.016)
Mm-hmm.

Preston Rutherford (12:21.726)
Not fun. And so from that perspective, we felt like, oh my gosh, this just needs to exist. It doesn't exist. The way that these other apparel companies, clothing companies are talking to us. Just, I don't want to hear it. I don't like it.

And it's not the way I would do it. So there was also a bit of, gosh, there are some broken things to fix. So that's a little bit of the why on Chubbies on the Y on loop. I mean, we were in Chubbies and we felt pain. We felt pain firsthand with how rough returns and exchanges were for, most importantly, for our customer, but also for our team and for our P and L statement. So for the customer, it was very slow.

very slow, many, many emails, having to photograph your product, having to wait to hear back on whether or not you violated the return and exchanges policy. I mean, it was just very broken and it, I think, reduced the love for our brand. So there was a customer problem to solve. Second, on our team, it took a lot of time from our customer service team, customer experience team.

Mudassir (13:12.832)
Mm-hmm.

Preston Rutherford (13:35.566)
manually on a one-off basis looking at whether or not a customer violated the returns policy, manually attaching a PDF return shipping label in an email that someone had to actually do those clicks, type those buttons on the keyboard, and then on the P&L for the business, many, many returns could have been exchanges.

Mudassir (13:57.384)
Mm-hmm.

Preston Rutherford (13:59.094)
And when you have so much friction, inevitably you lose many of these customers to other brands or to just. Nothing right oblivion, they just drop off and wouldn't it be great to offer the customer the thing that they wanted to do, which is if I'm looking to do an exchange.

Let me do it, let me do it right away and let that product start coming to me right away. I don't want to have to wait. The size was wrong. I wanna use your product. Let me use your product as soon as possible. I just need the right size or whatever it might be, right? That's the problem to be solved. But when you can turn a lot of those returns into exchanges and potentially allow the customer to buy an additional product, that then becomes very interesting where you turn a pretty massive cost into a pretty massive benefit.

Mudassir (14:37.642)
Yeah.

Preston Rutherford (14:52.71)
So everyone wins, but it felt like there was just such a clear problem to solve because the pain was so visceral at the time. So that was very much the why it was gosh, so much pain and it seemed like we could solve it. Part of our ethos and approach. I mean, I mentioned I was at a consumer internet startup and, uh, Tom, my co-founder and a few of the other

Mudassir (15:07.028)
Yeah.

Preston Rutherford (15:15.234)
folks in the company were very comfortable with building technology. That was something that we did. I mean, we're at the end of the day, we're all a bunch of nerds and we love to build software to solve problems. And loop was just a product that we built for ourselves internally and other brands.

Mudassir (15:36.383)
Wow.

Preston Rutherford (15:39.134)
which was one of many things that we did, whether it be externally facing on our website, internally facing to just help us get things done. But this was just another tool we built for ourselves, not even thinking about whether it would be.

Mudassir (15:41.15)
Mm-hmm.

Preston Rutherford (15:53.478)
something that other folks would use. But other brands did come to us saying, hey, this would be useful for us as well. And the thought hadn't even crossed our mind, but then we got to a point where, oh, okay, maybe it does make sense to make this available to other people. We don't wanna be distracted by it, but, because we were a little fearful of losing focus on building the consumer brand.

Mudassir (16:00.668)
Yeah.

Mudassir (16:16.948)
Yeah.

Preston Rutherford (16:17.018)
So did put an entity together, a team in place, that sort of thing. And so that team has done amazing things with turning loop into what it is today.

Mudassir (16:29.42)
Okay, I wanna go back to, you know, you mentioned one thing a couple of times, so I wanna ask you that before I ask you, how do you, you know, balance the time working on Chubby's and working on Loop? Like, how do you differentiate the two teams and the two big, gigantic, enormous companies? But I wanna ask you, you know, one particular thing, and this is my favorite question, which I have asked, I think, 10 people already who have built nine figure businesses before or something. What the heck is a brand?

So in this early five minutes or something like that, you mentioned that word four times because I've been counting that. So, and it's just like, you know, brand, brand. What exactly is it? A lot of the time what we see is people have associated this one particular word to logo. Sometime it's the design entity. Like, you know, a lot of people do that interchangeably. So I wanna know from your perspective because you're a marketing guy, or at least you know.

You say that you're a marketing guy? Yeah. OK. So what's a brand to you?

Preston Rutherford (17:29.87)
I play one on the internet. Yeah, I play one on the internet. I stayed at a Holiday Inn last night. Yep.

Preston Rutherford (17:41.27)
Yeah, great question. And it's an important question because the answer we would have given at the beginning for the first many years of the business, I think is a very different answer from what I would have given today. Speaking directly to what you said, logo, color scheme, font, though tone, tone of voice, those things I consider to be branding, branding components that serve as inputs into

Mudassir (18:07.068)
Okay.

Preston Rutherford (18:10.186)
what your brand is. Not that they're not important, but they're not the most important thing. The most important thing is the brand, which is two things. In the mind of a consumer, it's the reason why they select you, versus any other brand. Any other provider of a product, I should say.

It's the reason they go to you versus go to amazon.com or Walmart to buy the cheapest version of that thing. Or it's the reason why they select you versus going through a completely rational process of comparing, at least for men's apparel, comparing materials, stretchiness, color, fabric quality, whatever those sort of like rational checkboxes you might.

Mudassir (18:30.892)
Okay.

Mudassir (18:48.299)
Yeah.

Preston Rutherford (18:59.322)
go through if this was a completely sort of like rationally driven logical process. So it's in the mind of the consumer, it's the reason they purchase you. And a very special or important, excuse me, I should say detail of this reasoning is they don't have to be prompted by any kind of direct response ad. When they are in market and ready to purchase whatever product you make, when they're in market for your category, they choose you.

Mudassir (19:21.621)
All right.

Preston Rutherford (19:27.486)
and they come to you without that need to nudge, right? Not that nudging is bad.

But when you have a very strong brand and when the strength of the brand is increasing, the probability of them coming to you without being prompted goes up. Prompted meaning with a direct response ad, some ad that fills all of our Instagram feeds every day. Now, that's one component of the definition. From a business perspective, from the perspective of the actual company selling the thing to the consumer or even to the business, the definition of brand that I've learned

Mudassir (19:48.133)
Mm-hmm.

Preston Rutherford (20:04.994)
is the revenue you have when you turn everything else off, meaning what do you have when you turn off your ads? What do you have when you stop new product launches? What do you have? What revenue would you have if you turned off all of your promotions and discounts? What then do you have?

That is the financial objective definition of your brand and the strength of your brand. And a great example is on one end of the spectrum, I think you have...

Mudassir (20:26.418)
Mm-hmm.

Mudassir (20:32.566)
Mm-hmm.

Preston Rutherford (20:36.81)
And again, nothing against this, but you have the dropshipper who's just finding these little arbitrage opportunities, finding something on AliExpress or wherever, right? Where people aren't buying from you because they know who you are and they have a strong emotional association with you. You're catching them on the click and you're doing all of the things. That's one end of the spectrum. Again, nothing against that. On the other end of the spectrum.

name any of the most famous brands in the world. Let's use Coca-Cola for instance, Nike for instance. Right, if they were to turn off all of their ads today, they would still make a lot of money tomorrow and the day after tomorrow and the day after that. And that's because there's so much one term that I did not know while at Chubby's, but I've since learned is I've been actually starting to try to understand real.

marketing and advertising in this marketing science stuff is just the notion of mental availability, right? It's the probability that when someone is in market for your product, they choose your product, right? That's mental availability. And so the mental availability in for Coca-Cola, for instance, is as high as it gets, right? It's almost if using a hundred point scale, it's almost a hundred out of a hundred, right? So, okay. So to your question

Mudassir (21:52.79)
Yeah.

Preston Rutherford (21:56.118)
those there's the branding piece right which is great not um not lacking importance but it is a distraction if that's what you do view as branding or a branding exercise or if you go say I did a brand relaunch or those sorts of things I do fear that they could be a distraction from the actual work of building and strengthening your brand because the reason

you build a brand, the reason you start a brand rather than being a commodity or

Let's just use that, a commodity where the purchase is fundamentally because you're the low-cost provider. The reason you start a brand is so that you can generate profit, so that you can raise prices, so that you can have strong margins, so that you can build a business. And it should be the case that...

Mudassir (22:37.334)
Mm-hmm.

Preston Rutherford (22:55.422)
for an incremental unit of increasing brand strength, that should give you, whether it be more pricing power, the ability to sell more, more profitably, the reduced need to consistently and strictly rely on direct response advertising. Like that is the reason you build a brand. If you're doing it just to update the colors on your website, it's not that.

may not necessarily ladder up to the objective financial goals of building a brand. Again, not that it's bad, but that's what I've learned is the definition of a brand. And then once you have that clarity on what a brand means, and then there's much more clarity in terms of objectively how to increase the power of or the strength of that brand.

Mudassir (23:48.105)
Okay, that's a great definition. You mentioned one thing which is advertising and Nike and Coke and all that. So it's a two-part question that I have in mind. So one is why Nike and Coke still run ads? So that is part one. And the second one is for smaller businesses, for you know, early stage CPG startups, you

Advertising seems to be the only way to get into the market. So if I were to start a new men clothing apparel business, I know I'm competing against the biggest of the biggest. So getting the click, getting that type of attention is my only way. I am not going to be able to build a brand. And I know it's a long-term game. I understand that, building a brand. It takes a decade or something. I don't know what.

in order to get to that point where people, you know, subconsciously they have that, they okay, if I need to buy something in the tech, I'm buying something from Apple, right? But it takes years and years to build that. So second question is, if I'm starting something new today, advertising, pay per click, is my only, is my only shot. So what's your opinion on that? Like, you know, how can...

small companies, how can early stage companies, how can early stage startups build a brand? And the first one is obvious, the one like, why Nike and Coke still run ads? If they can turn it off today, still be the gigantic brands that we love, why do that? Like, why kind of waste that effort?

Preston Rutherford (25:32.034)
Great, so first question, Mikey Coke, name your large brand. Why do they still spend money on marketing advertising? My answers would be super curious to hear them actually say this. But from my outside perspective, it would be two things. One, there is a decay curve, right? So let's say,

turn off all advertising today, you have 99% of the revenue you would have the next day, 99% of that the following day, right? So there is a decay curve. So why is there a decay curve? There's a decay curve because there's competition, there's still competition, right? Pepsi might start to build mental availability faster than Coca-Cola.

Mudassir (26:04.061)
Okay.

Preston Rutherford (26:20.002)
and they might reach people who are just entering the soft drink market. Uh, they might also convert some previous Coke fans, right? So there are other, there's a competitive environment as well that. I would think drives that component. The third, I think is they're still trying to grow. I mean, I don't know what Coke's growth rate is from a top line or bottom line perspective and same for Nike, but.

Mudassir (26:39.464)
Yeah.

Preston Rutherford (26:45.986)
they're still growing businesses. They're still, there's still room to grow, even though they're the largest, some of the largest, most well-known brands in the world, they're still, some of them are growing very quickly, very large world out there. So those are some thoughts on the biggest. On the second question, how do you get started? Is direct response pay per click?

Mudassir (26:56.896)
Mm-hmm.

Preston Rutherford (27:11.81)
the only path for getting going, whether you're a CPG, any kind of like consumer brand, DTC or otherwise. It is an option. However, and it is, I don't wanna make it sound like Chubby's didn't do any of this stuff. So we did, we did for a long time.

Mudassir (27:29.683)
Okay.

Preston Rutherford (27:32.906)
Maybe not at the beginning beginning. I think at the beginning beginning, when we had no money, we had to try to come up with things that were super creative, that got us free distribution. And that's the advice or maybe not even advice. This is what we did and I think it helped and it worked for us. When we were going from zero to something, a very little bit of something, we were just not.

Mudassir (27:35.081)
Mm-hmm.

Preston Rutherford (27:59.026)
As I've later learned, we were not just limited to the box of spending a dollar on a direct response ad, measuring the ROAS, and then basically just fitting in to that very specific and maybe somewhat limiting box.

Mudassir (28:14.887)
Mm-hmm.

Preston Rutherford (28:16.81)
of thinking about growth. Like before that, it was, let's do this crazy campaign here on Facebook. Let's do this crazy grassroots thing where we could maybe take our email list from here to here. And maybe it would cost.

money in terms of time or people, but from a dollar's perspective, it was quite limited. So I think that's the learning that I might suggest, which is no, there are infinite ways to do things that are memorable, that reach a lot of people, that are fun and creative, that don't necessarily rely on buying a keyword or targeting.

Mudassir (28:51.549)
Mm-hmm.

Preston Rutherford (28:58.21)
the audience of your competitor, and then just having like a slightly stronger offer or whatever that might be, that might get you short term increases or spikes in revenue, but in no way are you building that like fundamentally resilient base of revenue that I was talking about earlier that relates to the definition of brand. So to your point, it takes time, but it doesn't have to take a decade to get to any semblance of business, right? When Chubby started, we weren't even selling online.

Mudassir (29:09.622)
Mm-hmm.

Preston Rutherford (29:26.902)
We were just selling to people in San Francisco. We were wearing the product. We were wearing little tiny bright shorts and people would come up to us because the product was so different. And we happened to have some shorts in our backpacks. And this was also, this was pre Venmo.

So we had the square card reader that had just come out and people would either hate it, talk about how we're a bunch of idiots, or people would love it. And they're saying, I love this, where can I get this? And we would say, well, I have, happen to have them in my backpack. And then they'd swipe their credit card and then they'd walk away with the product. There's so much that you can do, it's just traditional hand-to-hand combat of selling in person. Like that is a possibility.

I also think of Liquid Death. I don't think they're running any PPC ads, right? And they sell water for gosh sakes. I mean, the commodity of commodities. But they've done some amazing things where I look at the things that they're doing and I'm like, that's an awesome idea. And I'm sure that's getting a lot of reach and it's getting people to talk about it. And I walk away from seeing that thing and I'm like, these guys are awesome. These guys are so creative, so fun. And I just have respect for it.

Mudassir (30:09.153)
Mm-hmm.

Mudassir (30:13.352)
Yep.

Mudassir (30:25.003)
Yeah.

Preston Rutherford (30:36.458)
as a person, right, also as a marketer. So these things are totally possible and it's less measurable. So I wanna acknowledge that there's power.

there's something very enticing. And again, we were enticed by this too, at Chevy's as being very like data-driven objective people. We wanted to be able to measure the accountability of every hard earned dollar that we had, right? Cause the fear is real, that you might waste money, that you might light it on fire. If you try this crazy, like if you, to use the, I'd say the most typical example is run a Superbowl ad, right? That's millions and millions of dollars, but there are a variety of things in that category as well that you could just view as, I might get something,

I also might get nothing, and I might completely waste this money. So there's a little bit of we've been trained now to rely on this short-term real-time data that has been provided by the medas and Googles of the world, which again, I think, worked for a very long period of time and might even work to a certain degree today, because I'm not just saying only do non-direct response digital stuff, not at all.

But I guess one takeaway I might try to leave people with is let's not only do that. Chubby's only did that for a long period of time. But there is a healthy mix. But in the earliest of early days, sure, maybe try a little bit of it, but there is a mental opportunity cost.

when you start allocating a lot of your time to the direct response only stuff. And then you start spending a lot of your time optimizing, taking your click through rate from here to here. Whereas maybe that time could have been better spent completely out of the context of. Whatever pay per click ad and just really thinking about blank slate Facebook and Google don't exist. What is the most notable, memorable, far reaching thing that I can do?

Preston Rutherford (32:27.394)
that has nothing to do with paid social. And that is a real trade-off when you have real constraints.

the constraint I would harken it to or define it as is on our team, we have eight, 10, 12 hours a day of thought minutes. And you're either devoting your thought minutes to this thing or this thing. So the more you do this thing, the less you're doing this thing. And so the opportunity cost is real in terms of where we devote our fixed number of thought minutes. So it is a, it is a real set of decisions we have to make.

Mudassir (32:57.043)
Mm-hmm.

Preston Rutherford (33:01.458)
And it can so easily turn into allocating all of your resources to the very measurable thing, the thing that gives you the tightest, quickest feedback loop. And I get it again. I've, I've done that, but looking back, I would have, I would suggest, and then I would, if I were to do it differently, I would hold off on that a little bit more. Or I would limit.

the investment to something where I was still allocating a lot of my thought minutes to all of this other really interesting, creative, notable fame building things where you could in theory spend a lot less and get a lot more.

Mudassir (33:45.488)
Okay, okay. One thought that I usually have, every single time I talk to, so I come from a world of product, so I don't understand a whole lot of marketing, a whole lot of ads and stuff like that. I'm dumb that way. So the question that I wanna ask you is, we have seen finest of the finest ads. I'm a huge football fan, soccer fan, not the football one. And we have seen Nike did this thing, like amazing commercial.

Never mention a day that, you know, buy our shoes, buy the cleats. Never mention buy the jerseys or anything like that. Just keep producing this sort of an ad, like, tell the story, tell the story. You happen to mention, you know, Super Bowl. Most of the biggest brands would do the same thing, right? One thing that I never understood, even though, like, maybe I never tried to understand that, is ads like these, you know, the one that tells the story, they never tell to sell you anything.

How do you measure your OS on that? How do I own that?

Because you know, for example, if I were to...

Preston Rutherford (34:52.032)
Yeah, that's the billion dollar question, right?

Mudassir (34:54.204)
Yeah, so if I were to put this watch in an Instagram post and say, shop now, it's very much tangible, very much data driven, right? How many people clicked, how many people buy, how many people did this thing, that thing. So it's just very transactional, I can measure that. But if I were to tell a story like how this one little tiny piece of tech improved my life because I have a nerve damage or something like that, and like how I, like blah blah, all of that stuff, how do you measure that? Like I never understood that.

Preston Rutherford (35:23.522)
Great question. And it has been historically hard and expensive to do that. So I will acknowledge that for sure. A couple of points, thoughts. One.

Mudassir (35:28.17)
Yeah.

Preston Rutherford (35:37.85)
If, yes, you can measure that, it's very transactional, you can measure the ROAS on that watch ad you were talking about. Now, what happens if, for some reason, Facebook blocks your account or you didn't pay whatever, your ad bill and so your ad's deliverability goes to zero and then your business goes to zero? That is a real possibility for a lot of these companies.

are trying to get off the ground that could really happen and that could put you out of business so that is an existential risk because there they haven't built anything in the minds of people to think okay this I'm why would I buy this watch if I didn't see this ad would I buy this watch if I didn't see this ad why would I right

Mudassir (36:11.924)
Mm-hmm.

Preston Rutherford (36:34.338)
The reality is that that's how most transactions in the world take place or should take place, right? It's not a rational thing. It's an emotional thing, right? Our little, we're very lizard brainy, right? We don't make system one and system two thinking, right? Daniel Kahneman is just Kahneman is amazing. And we make a lot of our decisions with just this like quick non-rational.

Mudassir (36:43.496)
It's an emotion. Got it.

Mudassir (36:53.664)
Yeah.

Preston Rutherford (37:02.042)
And that's just the reality of humans. So one approach is, is think about the downside of only relying on that hyper transactional situation, even if it is hyper measurable, the downside is real in that if you, if it stops for whatever reason, or if the economics change to where it becomes less profitable, you can very quickly go out of business because you have nothing else. You've built no other compounding asset value.

which is our goal at the end of the day, right? It's something that can exist across many generations, generate lots of profits, create a lot of jobs, create huge financial outcomes for the owners, the creators, like that's what we're all trying to create when we're selling anything online or in person, right? Now, a lot of us want it immediately, right? Which I totally get, but that's one component. The other is...

Preston Rutherford (37:56.474)
if you sort of think about, okay, let's tell this story versus let me just tell you, like, you gave the perfect example. How do you then measure that? Now, the reality is that there's a traditional way, and then I think there's a non-traditional way that is maybe more modern. The traditional way has always been do a bunch of surveys on a bunch of people who kind of represent.

the general populace or your audience. And you then, you ask them a variety of questions that then becomes your brand awareness number, your aided and unaided brand awareness, other submetrics, I don't know, like brand favorability or how people regard your brand. Some of it's objective, some of it's subjective, but I think even the objective stuff is very subjective. Chubby's has spent a lot of money on surveys.

So done that, but a lot of shortcomings associated with that. But that has historically been the way that you then measure, OK, my brand awareness has gotten up. Therefore, it should generally translate to a change in market share in my competitive set. How to quantify that has been historically very difficult. The reality, though, is that there are digital ways to do this. People are taking action on behalf of any. Company product.

digitally, whether it be via social media, follows, likes, shares, mentions, joining email lists, Googling your company name. All of those things are not purchases, but they are behaviors that have a dollar value associated with them that we should be able to value. It's hard. But that is a way, in theory, to measure this story type stuff. Right?

But at the end of the day, to sort of tie a bow on it, you have to believe that the reason people buy isn't always rational. And you have to believe that it is possible that people will buy from you without having to shove an ad in their face. If you believe those two things, you, I think, can get to the place where you could start to tell stories or just do very fun, memorable things that aren't begging for a transaction right away.

Mudassir (40:16.341)
Mm-hmm.

Preston Rutherford (40:21.054)
And then in closing a stat that for me completely changed how I think about this, because I was very much in the I'm going to convert you. I'm going to convince you everyone I'm showing my ads to. They're in market for my product. And I just have to write a better caption. I just have to target it slightly better. I just need to make sure that I'm optimizing this image, the angle, right? The clarity of the product.

the landing page, right? I mean, that's what I spent most of my time on for a very, very long time before I think we learned more about how to think about approaching effective brand building, but.

One of the stats that blew my mind was just the 95-5 rule that I knew nothing about for a very long period of time, which is 95% of your audience at any given time is just simply not looking to buy a product in your category. It's not about you. It's not about me as a worker and employee at Chubby's. It's just about the fact that 95 out of 100 people who I'm showing my stuff to are just not even looking for men's tiny shorts or whatever your product is at any given time.

Mudassir (41:23.037)
Okay.

Preston Rutherford (41:23.65)
They're doing their thing. So the reality is that if you're trying to build a business and a company, and all you're doing is just begging for transactions.

95% of the folks who view that is just going to fall on deaf ears. So even if you're just purely an objective capitalist, you wouldn't view that as the wisest way to allocate your capital, because you're simply not going to convince or convert, force them down the funnel. So then objectively, you would say, okay, well, then, what is the right way to talk to these people? And then I think that's the other way that you would sort of like objectively, or from purely a self interest perspective, get to the fact that, well, I need to tell stories, because that's how

That's how humans make decisions.

Mudassir (42:10.796)
Okay, thank you, thank you for sharing that. So I wanna go back a little bit, when you were mentioning that, I think you had four co-founders, the four best friends built this brand. So unfortunately or fortunately, I don't know how to portray this thing. So I haven't had that level of success when building a brand with my best friend or something like that. So there was one particular time.

I begged one of my best friends to start a company with me and the year later I was like trying so hard to just get rid of him. It happens in the startup world, right? It's not the best thing, but it happens a lot of the time. You guys have done that for a decade or done it amazingly. So I want to know from you two things. How the four of you got along so well on business standpoints? Like personally maybe because you were best friends, so it was easier that way.

So that is one, like how did you get along on business, opportunities, business, acumen, all that. And two is like, how did you guys divide the roles and responsibilities and make sure you're not overstepping each other and not like, you know, pulling the ranks, that kind of stuff, because it's very easy to do that. Because when it gets tough and it gets tough really, really quickly, when you start building something, it's very tough. So it's very common to start pulling the neck, like, hey,

It's my company, it's my idea. This is how you gotta do it. It's my way to do it. So how'd you guys balance all of that?

Preston Rutherford (43:43.63)
Sure. So from a framework perspective, in terms of how to approach it at the highest level, there's a non-zero risk in anything that we do, right? So with when you introduce other people as co-founders, there's always the risk that it doesn't work out for whatever reason, right? That it just goes horribly wrong. But the upside is also very compelling.

And so you make your risk adjusted decision, but the upside where one plus one plus one plus one equals way more than four, it equals 400. The fact that there's some probability that could happen, I think at least for us, made it kind of like a no-brainer.

And not that there was very much this top-down, very strategic thinking as to whether or not there should be a co-founder or not. It was very much the process of coming up with and getting the thing started was conversation. It was sharing ideas and getting feedback on ideas. And so there was a very organic process where...

It just wasn't some person who had some idea in some kind of a vacuum and then started working on it and then went out and raised money by themselves. Right. That's just not how the thing got started. So it was just a very natural, organic thing. So that's one thing. There's always risk. But then the potential for upside, at least in our situation, made it extremely compelling. But it was more than anything, more than any sort of like measured approach. It was very organic. And there was just excitement.

those things that just flows very nicely. One of the most beautiful things about just how people and momentum can build up very organically. The second thing is, I think we had a lot of respect for each other, respect for their perspective as being valid because of them being fundamentally someone worthy of respect persistently, which is huge, because that plus,

Preston Rutherford (45:47.83)
the unshakable certainty that all four of us were aligned on what we wanted at the end of the day, on the ultimate goal, that we wanted what was best for the brand, right? Those two things, the respect, and knowing that we all have good intent on behalf of what is best for the company, what is best for the brand, and again, to be super clear, not that it was always sunshine and rainbows, constantly...

arguing, like seeking truth, right? And not that we were perfect truth seekers, because sometimes personal stuff would get involved. Defense, I can only speak for myself, but like defensiveness, insecurities, inability to communicate effectively, all of those things happened. But the foundation was always there, of that respect and certainty of good intent. So anyways, that's the, I think that was the approach and that's my thinking on co-founders. And then I know just as an individual that I lack.

Mudassir (46:22.72)
Mm-hmm.

Preston Rutherford (46:45.538)
the ability, I think, to start something myself in the best possible way. I just need other people, so it's a realization that I have. Those are some thoughts on co-founders.

Mudassir (46:52.116)
Mm-hmm.

Mudassir (46:59.036)
OK, how big the team is on both chubby side and loop returns, like in terms of total number of employees?

Preston Rutherford (47:03.83)
Honestly, I don't know. I'm not involved in the day-to-day with either of those businesses right now. So honestly, I don't know the employee count. I mean, I know for a time at Chubbies, when we had a lot of stores open, maybe over a hundred, given most of them being store employees, but I may think, gosh, I don't know.

Mudassir (47:21.681)
Mm-hmm.

Preston Rutherford (47:24.682)
maybe let's say roughly 40 to 60 loop. I have no idea to be honest. I've never been in the day to day outside of that sort of like very initial zero to 0.5 sort of thing.

Mudassir (47:32.755)
Yeah.

Mudassir (47:36.18)
The reason why I want to ask you is because in my relatively smaller career, what I've seen, like I've only been able to see taking companies from zero to one. That's where I spend most of my time. I've never been, like maybe one to 10 as well, but never been able to be a part of the company where we have actually taken a company from 10 to 100 or a thousand, whatever you want to put that number on.

The reason why I want to ask you that question is because hiding like, you know, 10 employees is very fundamental. It's very strategic. You need to be able to like figure out like, these are the people that we want to work with because it's trenches, it's hard work and all of that. In terms of, you know, values, in terms of building that sort of a culture, when you move past that, those 10 people, like you get to, I don't know, a hundred people, you get to 500 people, you have managed to open branches across the countries.

across the globe. How do you make sure that every single person, employee, I don't know, 590 that you are hiring today is also aligned on the same values? He's also becoming the part of the same culture. How do you do that?

Preston Rutherford (48:49.13)
I'd say it's hard, very hard. And then you do have to make the, excuse me, decisions as a company builder. And we got some really great advice from one of our board members who was one of the co-founders of Netflix, and they were very well known for their culture doc and for their culture. But one of the decisions you have to make is, are you a family or are you a team? So family.

Mudassir (49:04.035)
Mm-hmm.

Preston Rutherford (49:14.442)
makes very different decisions on how to discipline, who's in or out, right? Very different from a team, right? So it's a real decision. And I think for a long time, we chose to be more like a family, and that was a decision that we made. Not that meritocracy did not exist, and not that we didn't evolve, and not that we didn't have a healthy balance, but that's a decision. The other thing I might say is it's hard. It's very hard. And...

I personally would say that I never mastered the art of recruiting, of hiring, of growing people, of even being a great manager. I mean, I wouldn't say that I was really good at any of those things. I tried. I think I learned some things, but it's very difficult. But even with 100 people, I do think it's possible to still be a part of interviewing every person at least that's touching your part of the organization.

spending time talking a lot about how you view the business, why you exist, who you are, and seeing if you can tease that out and see if that's something that really resonates with this person. For us, we chose passion, culture fit, above other things because we believed that people who are fundamentally multidisciplinary and very excited and passionate about what we're doing could learn.

because none of us were classically trained really at anything that we ended up doing in building this business. So obviously over time that changed when more specialization happened and where we really wanted to find the best of the best, but for a long period of time, it was very much generalist interdisciplinary. Are you hungry? Are you excited? Are you passionate? Are you committed? And, and, and that's very much what drove it. But then from a culture perspective.

Mudassir (50:40.757)
Mm-hmm.

Preston Rutherford (51:02.722)
We just spent a lot of time just trying to talk about it and articulate why we exist, who we are, how we view things, how we intend to operate in hopes that it would resonate with the people we brought on.

Mudassir (51:14.736)
Awesome. So appreciate all the wisdom, Preston. So what we do is we have a decent week of audience now. Very, very fortunate. Very fortunate of having all those people who listen to us and whatever we're producing. We recently crossed 60,000 downloads on Apple Podcast. All of that stuff, like we're in top 20 US entrepreneurship, not to brag. But what we do is, thank you so much for that. It's all the people that we...

Preston Rutherford (51:31.095)
Wow.

Preston Rutherford (51:36.514)
That's great, congratulations.

Mudassir (51:43.968)
have the privilege to host on the podcast, like nothing special about us. One thing that we do is we kind of made it this hobby, every single time anybody's coming on the podcast, we float out this message, sometimes in the email is sometime on LinkedIn, like here or there, like, you know, Preston is coming, send us your messages, send us your questions. So we got a lot of those questions for you, obviously not gonna have a time to go through all of them. So we try to figure it out.

Preston Rutherford (51:46.2)
Sure.

Preston Rutherford (52:07.214)
Great.

Mudassir (52:12.084)
the best of the best or at least the ones that are worthy of your time. Okay? So some of those I already asked you or you have touched those already, so I'm going to skip those. But the ones that really need your answer, I'm going to ask you those. So the first one is the journey is never easy. What would be your advice for founders who are just starting out, regardless of industry? Like, you know, could be CPG, could be SaaS, could be any industry. Yeah.

Preston Rutherford (52:24.02)
Okay.

Preston Rutherford (52:37.738)
Yeah, any industry. What would advice be? So there's a little bit of a nagging need to do something. If that exists, just pull that thread. But if that doesn't exist, and if the reasons for getting started in the first place are I wanna get rich quick or.

Preston Rutherford (52:58.006)
You know, because you probably won't get rich, it's going to be hard. I mean, I do believe in Elon's quote of like, what is it, building a company is like eating glass and staring into the abyss or something like that. I mean, it's just very hard. I mean, that's the reality. And there is a non-trivial.

Mudassir (53:02.028)
Okay.

Preston Rutherford (53:22.958)
percentage or probability that you'll just not be successful. You'll not make money. You will go out of business. You will fail. Now, failure is a very interesting word. My belief is that failure only happens when you quit, when you give up. So I should be more thoughtful with how I use that word because if the first business that you start goes out of business or for some reason doesn't work,

You have so many opportunities to change, to tweak. Pivot, I think, is a trendy word. There is infinite opportunity in the world. There are infinite things in the world today that are broken, that can be fixed by people no smarter than you and me, right? Harkening back to the original quote from Jobs.

So in terms of getting started, advice, getting started, knowing that it's gonna be hard, knowing that there's probably a higher probability of you not, of your first thing or second thing or whatever, not working, then working, and that's okay. Like Jeff Bezos' quote is, he thought he had a 30% probability of Amazon being successful. Right, Jeff Bezos, like, I don't know where he went to school, Princeton or something, amazing, brilliant person.

Mudassir (54:39.616)
Yeah.

Preston Rutherford (54:43.05)
Was it what quant trader or something at one of the best firms? Like so many reasons why anything this person does should be successful, but he still put a 30% probability on success. And I think he raised his first money giving up 30% of his business. Maybe he raised like a million or something, right? Jeff Bezos. So when a person like that tells you that, Oh, maybe I have a 30% probability of success, like Rose colored glasses, constant optimism is needed. However, there's also a practicality component.

Mudassir (54:56.848)
Mm-hmm. Yep, yep.

Preston Rutherford (55:13.004)
to it, the practicality, the importance of acknowledging that there is it, that it will for sure be hard and that there is a high probability of this not working, I think allows you to be prepared for the inevitable, extremely difficult, heart-wrenching times that will absolutely come. Because this isn't just

I want to start something. Oh, I'll just spin up my Shopify store or whatever. Oh, I'll just find a supplier. Oh, and then I'll just start tweeting screenshots of my Shopify revenue page showing how it's going up into the right, right? That is not reality. So is your reason for doing it compelling such that you will persist? That's all you have to do is just persist.

Mudassir (55:37.492)
Mm-hmm.

Mudassir (55:47.581)
Yeah.

Preston Rutherford (56:02.386)
so many overnight successes, right, that took a decade or 25 years or 50 years or whatever, right, they just persisted, that's it. It's just like constant pressure applied over a long period of time is how you go from not doing it to doing it, and it's gonna be embarrassing. You're gonna look like an idiot to your family and friends, to people you respect.

They're going to be like, what are you doing? Why are you giving up time with your family? Why are you working so hard on this thing that you're making no money off of? That, I think, is one of the hardest components of this whole thing, because you're an idiot until you're brilliant. There's really nothing in between. So are you willing to be an idiot believing something that most other people don't, because that's fundamentally what you're doing when you're starting a startup?

Mudassir (56:46.065)
Yeah.

Preston Rutherford (56:52.906)
is you believe something that most others don't. Are you willing to do that and be the idiot for a very long time and just continue to persist? Like, are you internally validated enough? Or are you externally validated? I tend to be very externally validated and so that's something I fight all the time is ignore the noise, what is the mission? And just be focused there. Am I doing the right thing? Are my inputs as correct as possible?

Mudassir (56:52.981)
Yeah.

Preston Rutherford (57:18.954)
So anyways, those are a couple of points, a couple of thoughts, but I, you know, when you're doing it, you have to think a lot about this. Remind yourself, why am I doing this? The other thing I would say, hearkens back to your co-founder question, like the infrastructure was in place, right? I had three other people who could pick me up when I fell down. Three other people who, regardless of if we had a bad day, we could just talk to each other and that made it okay. Right.

And then I think the final thing is, it's not about the destination. Like so trite, but it's, having lived it, it is so true. The win is the work, right? If you have the opportunity to work with people you love or work on something you love, or both of them, that is the win in this life. There is no better win. And so to the extent you can acknowledge that, that the pain, the fire drills, the...

Mudassir (58:01.216)
Mm-hmm.

Preston Rutherford (58:11.506)
midnight emails, but the wins too, the ups and the downs, that is truly the win. It's not some mythical binary exit. Then I think you're also ready to do it. Because one of my favorite quotes from

The founder podcast is like so many of these founders who have been extremely, extremely successful. A, they didn't care about the money, but two, their only exit plan was death. And I just love that. Like they're just gonna do it. They just love it. They love the game. And why would they do anything else?

Mudassir (58:39.801)
Yeah.

Mudassir (58:44.156)
Yeah, I asked somebody a question. Some institutional VC, I think that I had a privilege to host him on the podcast and they have like, you know, managed to have like, I don't know, a dozen plus exits or something like that. And I asked him, do you really need to have an exit in mind? Like every single time you start a company? And I did not know that because I was naive at not know that. And then he taught me this thing and he was like, the best of the best companies are never meant to be sold. The best.

liquidity event happens when you're not, when the founders are not looking to, you know, sell the company or do something like that. It's just because they love it so much that they just want to continue to do that. Exactly as you're saying that. So totally agree to that.

Preston Rutherford (59:27.018)
Yeah, and they can say no, like they could say no to the billion dollar acquisition, like Mark Zuckerberg did, right? To who was it, Microsoft or Yahoo or whoever, because he believed in something. He loved what he was doing. He probably had an acknowledgement, not only that the vision was so large and he was on a mission to accomplish it, but then on the converse that, what would I get with those dollars, right? I mean, I would still want to do this thing regardless. And so, so many examples of that to support your point.

Mudassir (59:30.784)
Yeah.

Mudassir (59:44.285)
Yep.

Mudassir (59:48.394)
Yeah.

Mudassir (59:53.596)
Mm-hmm. Yeah, yeah. OK. So the second one is, we see backed CPG slash DDC businesses going out of the business. And 2020, 2023 has been a tough season for them. What's your take on why so many companies got shut down, or on the verge of bankruptcy?

Preston Rutherford (01:00:15.158)
Yeah, it's hard, man. It's really hard. And a couple of thoughts. So VC, a lot of nuance here, right? So like it depends who you raise money from, what their fund timelines look like. So basically like how long-term are they? Who is the partner? Did they take a board seat? What kind of control do they have? And then you as a founder, how much control and...

Mudassir (01:00:23.913)
Mm-hmm.

Preston Rutherford (01:00:42.706)
strength of vision do you have to do the right thing even if it's painful in the short term? So there's all this nuance. But also how much you raised, which then completely governs the size of the outcome you are then required to deliver on, or at least you think that as a founder. So some nuance. For instance, Chuppies raised in total, I don't know, 10 to 15 million or something like that. Some...

VC-backed, CPG, and probably the minority of that from traditional VC. So wealthy individuals, friends and family, advisors formed, I think the majority of the capital raised. I could be misquoting, but I think I remember correctly there. So source of capital is also very important. What are their timelines?

Mudassir (01:01:18.012)
Okay.

Mudassir (01:01:33.428)
Mm-hmm.

Preston Rutherford (01:01:34.334)
It doesn't have to be VC only. There are a lot of sources of capital out there. Family offices, ex-founders who've had exits who are looking to maybe work with three or four or five different brands. Like there's, there's a lot of money out there that isn't necessarily traditional LP backed VC that needs the unicorn to justify all of the failures to hit that. Whatever.

unlevered 25% IRR that they need to deliver to their LPs, right? There are a variety of ways to go about it. Now, the thinking on my thinking on VC and consumer brands and raising a ton of money is this, if you've got time, if you've got at least a decade, great, but you're not going to, I don't.

There are outliers to everything I'm saying here, but in general, this just takes time, unless you've invented or patented something where, you know, your product.

Mudassir (01:02:28.688)
Mm-hmm. Yep.

Preston Rutherford (01:02:36.338)
adds 20 pounds of muscle to your user without adding any fat and reduces your biological age by 50%, then sure, by all means, you need to raise as much money as possible and move as quickly as possible. Now, if you're selling yogurt and you have some slight nuance where the source of your protein is whatever, then sure, there's a product differentiation, but it is still going to take a lot of time.

And you might get into a lot of stores quickly, but then you have to do, you have to sell through, right? And all this stuff, again, people aren't gonna make their buying decisions fully rationally. So to acknowledge that, it takes time. You'll get some very highly involved people right away, but it'll take time. So this is all to say that the thing that generates profits for a consumer product by and large,

Mudassir (01:03:07.177)
Mm-hmm.

Mudassir (01:03:14.315)
Yep.

Preston Rutherford (01:03:29.686)
unless it is massively technology differentiated or patented or whatever it might be, is a reason for a consumer to pick you versus the million other alternatives, right? And that just takes time to get there.

Mudassir (01:03:43.354)
Mm-hmm.

Preston Rutherford (01:03:45.102)
And the only way to get to the most profitable form of new customer acquisition and retention is, as I was talking about earlier in the conversation, where it's when people come to you without being prompted by any kind of direct response. That takes

changing minds, changing minds takes time. So it's just, it's a time, it's very much a time thing. And then it's also just fundamentals of these types of businesses versus the traditional fits for traditional venture capital. But again, acknowledging that I think in our minds, we all have a very specific, like it's like raising money from.

Mudassir (01:04:03.358)
Yeah.

Preston Rutherford (01:04:26.726)
Sequoia or name your sort of like top tier San Hill VC firm where in general they're looking for DecaCorns right these 10 billion dollar exits but they're taking these massive risks on cutting edge technology things like that. The opportunity that they have in making those bets is that if the one out of a hundred are able to grow extremely quickly they can do the very basic thing of

Mudassir (01:04:29.02)
Branding.

Preston Rutherford (01:04:57.082)
massive headcount expansion, turn on the sales machine, and then they can really start to generate a lot of cash very, very quickly. And that spigot is something that's simply that inflection point where profit generation becomes massive and

gives you that 20, 30, 200% IRR when the first 10 years of the business you lost money. And then for the next 10, you're generating exponential profit growth. That just doesn't exist with the vast majority of consumer brands. So just the IRR calc, in my opinion, just doesn't work for a traditional VC. Now, obviously the VC thinks it does. That's why they allocated the capital, but we just haven't seen it.

Mudassir (01:05:33.802)
Yeah.

Preston Rutherford (01:05:41.342)
unfold for the vast majority of businesses, even the ones that have gone public. And a lot of it, I think, is tied to the fact that they weren't able to either that the, they tried to monetize beyond the strength of their brand.

Mudassir (01:05:41.643)
Mm-hmm.

Mudassir (01:05:45.279)
Yeah.

Mudassir (01:06:00.224)
Mm-hmm.

Preston Rutherford (01:06:00.362)
So if the brand and the size of the brand, the strength of the brand was always outpacing how they were monetizing it, whether it be with product expansion or just expansion in a variety of ways, I think they would have been able to grow much more sustainably, much more profitably. And when things didn't work, like the things I was talking about at the beginning of the call.

new product launches, direct response marketing spend, store openings. When some of that stuff doesn't work, you still have that resilient base because that is your brand. And again, this is all consumer focused. Like I'm not speaking about all of the other types of businesses, but those are just some thoughts. And again, not that I wouldn't take money, but I would be very thoughtful on who you're taking money from and...

Mudassir (01:06:38.346)
Yeah.

Mudassir (01:06:49.622)
Mm-hmm.

Preston Rutherford (01:06:51.194)
make sure that they acknowledge the amount of time it takes and are going to be okay with some kind of a, I wouldn't say a middling outcome, but just acknowledge the reality of consumer brands, right? That it just takes a lot of time.

Mudassir (01:06:55.017)
Yeah.

Mudassir (01:07:09.616)
Yeah. Yeah, totally agree to that. Okay, so the next one is, I already have answered that one, this one as well. So the next one is CPG, what is it? Okay, yeah. So I wanna ask you this question, and the reason why I wanna ask you is because to your earlier point when you're saying the CPG brands take, it takes time.

So I was reading something, I don't know, a week ago or something like that, specifically around venture backed CPG businesses. And one thing that I have learned is...

The CAG is always higher in CPG business compared to a SaaS business. So it's just like, you know, like this platform that we're using. So they can spend, I don't know, like $10. I become the customer, if they provide the value, I continue to use that. They don't need to spend the same money again and again. If I'm buying, if I'm in a parallel business, I need to sell one short, nobody's buying that on subscription, right? So it's just like, you know, you need to keep hiring, keep acquiring more and more because it's never ending loop. And then again, you need to...

burn a lot of money in order to do that, unless you kind of go creative and do all of that. So the question that somebody asked you is, which is again of a lot of interest to me as well, so CPG brands are a lot harder to grow compared to SaaS businesses. Is there a way, you know, early founders or people who are just starting out, they can learn something from the SaaS industry and implement that into the CPG industry?

Preston Rutherford (01:08:50.094)
Hmm, that's interesting. I mean, candidly, I need to acknowledge my lack of expertise in SAS. But it's an interesting thought experiment where

I mean, one thought that comes to mind that we always thought about when we were doing Chubbies was, gosh, wouldn't it have been great if we got into like the socks subscription business or whatever kind of like apparel subscription business. We actually tried to do subscriptions. We called it a Chubbscription and... Not well, not well.

Mudassir (01:09:16.102)
Yeah.

Mudassir (01:09:21.539)
How did it go?

Mudassir (01:09:25.286)
Okay.

Preston Rutherford (01:09:25.59)
But we tried it. We tried it. But from the perspective of SaaS, I mean, the reality with SaaS is that, yes, it comes down to product, but it also comes down to the brand. It also comes down to how it is marketed, how it is viewed by the buyer. Now, albeit likely a slightly more rational buyer, but not completely, because the buyer of SaaS is not doing a feature by feature comparison. Now, obviously, those comparison tables exist on many of these.

websites, of course, but it's still, I trust this one versus this one, and it might not just always come down to product features. So the reality is that...

You learn from SaaS that brand matters too. The association that you've built, where you've built trust, that this is the, whatever it is. Like this company has the best people. This company is going to have the best customer service. Like there's something that gets you to believe that they are gonna be the best thing for me. And I might even pay more versus this other one. It might not be just strictly feature space, right? So I think the parallels abound.

Mudassir (01:10:26.994)
Yep.

Preston Rutherford (01:10:32.414)
And I don't think it can be simplified or distilled down strictly to subscription versus non-subscription. However, if you're able to build a subscription business in consumer, like by all means, but that's, there's, I think it's more around rationale for trust and belief in you that the consumer has that I think can be very applicable to.

who are using, like even the software, like Riverside that we're using to record this podcast, right, there must be 100 other podcast recording softwares out there. However, 100% of the podcasts I've done are all in Riverside. Now, I haven't done the analysis on a feature by feature basis, or how they're charging, or what the upsells look like, or whatever, but clearly Riverside has become the de facto, and that's the power of trust, and brand, and social validation, et cetera.

Mudassir (01:11:09.083)
Yeah.

Yeah.

Mudassir (01:11:26.398)
Mm-hmm.

Yep. Okay. Awesome. At present, we do have one small ritual on the closing ritual on the podcast. So what we do is we ask all our guests a question for our next guest without telling who the next guest is going to be. Obviously got a question for you and obviously going to take a question from you for our next guest. Okay? So the question, the last guest left for you is...

Preston Rutherford (01:11:46.446)
Sure, have fun.

Mudassir (01:11:54.448)
In your recent memory, what one social post slash article has changed your opinion on anything? Like one post you saw and you were like, oh, okay. I viewed it differently, that kind of a thing.

Preston Rutherford (01:12:07.822)
Good question. Really good question. Let me think for a moment. What social post has changed the way that I think about something?

Preston Rutherford (01:12:25.87)
changed the way that I think about something.

Preston Rutherford (01:12:32.542)
What are coming to mind are, the confirmation bias is real. There have been some posts that have validated things that I believe that I felt were less commonly accepted, but that's not what we're looking for. It has fundamentally changed what I believe. We can edit this out, of course, but I do wanna be thoughtful. That's a fun question. Change what I believe, social posts, or just piece of content.

Mudassir (01:12:45.476)
Yeah.

Mudassir (01:12:53.846)
Yeah, absolutely. Yeah.

Preston Rutherford (01:13:20.174)
Hmm, this is such a good question. And it's also making me realize how much of an echo chamber I'm in, where I'm not really exposing myself to the diversity of perspectives that I really want to, that I want to be.

Mudassir (01:13:34.825)
Yeah.

Preston Rutherford (01:13:46.446)
I wouldn't say this is super recent, but.

Preston Rutherford (01:13:53.59)
Honestly, I've just been so... Yeah, I mean, the example I think I would use is...

Preston Rutherford (01:14:06.074)
A lot of the things I talk about are more recent realizations, whether it be from the latest days at Chubbies to even after. And the reason I bring that up is because I did for a very long period of time think that you just had to be a great performance direct response advertiser in order to win in consumer in the modern age. So I do think that seeing...

how Liquid Death is an example, it's just one brand that I just tend to follow somewhat closely. It's just played a different game. And so their posts specifically, and not that Chubby's never tried to come up with crazy ideas, but just the ability that they've had to achieve, to do these non-obvious things at an extremely high level that then it achieve extremely high.

Mudassir (01:14:41.545)
Yeah.

Preston Rutherford (01:14:59.838)
organic reach, I've just been very impressed at. And so I think that has changed my thinking and given me more confidence in being able to say, if I were to do it again, or if I were to share any kind of a recommendation, I would say, look at those folks, because...

Mudassir (01:15:10.448)
Mm-hmm.

Preston Rutherford (01:15:19.158)
And again, I could just be totally wrong. So I think I would use that as a copy of it. But seeing some posts from them time and time again, where maybe two or three things that they have done have just sort of wowed me as both a consumer and as someone who, I guess, practices the craft of doing these sorts of things in terms of wow, that's just so good. And they're just...

Mudassir (01:15:32.533)
Mm-hmm.

Preston Rutherford (01:15:43.978)
everyone's zigging, they are zagging, and they are doing the right thing. So I'd say that would be my answer right now. I don't feel like that's 100% the answer I wanna look back on and be super proud of, but I do think it's constructive enough to share as an answer to that question.

Mudassir (01:15:47.156)
Yep.

All right, sir, thank you so much for the time. I appreciate all the wisdom, all the candor, all the knowledge. So thank you so much again for the time. It means a lot to us.


Preston Rutherford (01:16:55.426)
Thank you, yeah, full of gratitude for the opportunity. I really enjoyed it. The questions were great. I thought this was extremely high quality and fun, and I hope it will be useful to your audience. Thank you.

Mudassir (01:17:05.916)
Absolutely.