The famous startup investor Paul Graham once said he could tell who was a winner with one simple question: Could you describe the person as an animal?
Graham looks for people who maybe take their work a little too seriously — someone, as he says, “who does what they do so well that they pass right through professional and cross over into obsessive.”
Moiz Ali fits this definition more so than anyone I know. He’s instinctive, blunt, and ruthless. We first met in 2014 at The Founder’s Dojo, the legendary free San Francisco business incubator started by Dave Grossblatt, and we have since become friends.
Moiz and I joined the Dojo at the same time, both of us testing different ideas and looking to start companies. A few months prior, he netted a few million bucks after selling his whiskey ecommerce company Caskers. But Moiz wasn’t motivated by money. In fact, he gave up a lucrative legal career after completing Harvard Law School.
But as Moiz would tell me this spring, when we caught up for our Trends interview, entrepreneurship was in his blood. And like his brother Suleman, he knew how to build successful companies — and fast.
Just three years after he and I were hanging out in the Dojo, he sold his next company, Native Deodorant, for $100m in cash to Procter and Gamble.
In this interview, you’ll learn how Moiz:
- Developed the idea for a natural deodorant
- Scaled sales to millions per month in just two years
- Managed Native through its early years as its sole employee
- Weighed selling the business after getting offers from multiple buyers
- Built a successful ecommerce company with less than $500K in outside investments
The play: Direct-to-consumer natural deodorant sales
How did you get the idea for Native?
I had been using Axe deodorant my entire life. I’d buy it at Duane Reade in New York and I’d stand in line reading the ingredients, or trying to pronounce the ingredients. And I’d always be like, “I can not pronounce a single one of these ingredients, and this is going to be on my body all day. What are they putting in this?”
Then, in 2015, a couple of things happened. I was looking for a new business. And then my sister got pregnant and she was like, “You know, I don’t really love the Dove deodorant I’m using right now,” because it sort of had the same problems that I was seeing in Axe. And so the confluence of those two events made me launch Native.
What numbers did you see that made you think deodorant was worth your time?
The first 30 days I didn’t see anything that I really liked. But then we launched on Product Hunt. The day we put it on Product Hunt, we were on the second page, where nobody was really going, and we got one order. And then one of my friends at the Dojo, John Rushworth, he was like, “You know what, I’ve got a friend at Product Hunt. I bet he can put it on the front page of Product Hunt tomorrow.”
So we were on Product Hunt two days in a row, which is pretty rare. And then we got like 50 orders the next day, which was great. And I was like, “OK, maybe I’ll stick with this business.”
Early wins & setbacks
Where did the early products come from?
We used a contract manufacturer in Southern California, who was making deodorants already. And her capacity was at 500 units a week. And early on what we were like, “OK, great. We love low minimum order quantities.” And I remember having a call with her and she was like, “You know what, this business is doing extraordinarily well and we’re going to scale our manufacturing to meet your needs.”
And then two days later she called me and she’s like, “There’s no way we’re going to scale anymore and we’re out.” It was one of the many times I thought the business was going to shut down.
So your immediate focus was not on new products — it was just getting sales?
Yeah. After the initial bump, we probably had like three or four sales a day. And so, we weren’t like, “OK, let me go fix this product.” We were like, “Look, first we have to see if anyone’s interested in the product. Can we sell it? And if we can, I’m sure there are ways to make the product better and we’ll go and fix those.” But first off, make sure that this business can exist. At the moment, it was more important to prove that we could sell deodorant as opposed to make a good deodorant. A few months later, that thinking would shift fundamentally and forever.
Justifying the price
How much did the product cost?
It cost us $5.50 to make the deodorant, and we were selling it for $12. But we had other costs, too. We paid about $.50 for the plastic container for the deodorant, $3 for shipping, another dollar for boxes and random stuff. So it initially cost us about $10 or $11 to sell one deodorant.
So you were just breaking even?
We were breaking even if you bought one. If you bought two, we were making a few bucks.
That’s crazy. Why did you think that would work?
We were paying $6 for a deodorant, and I thought, “I can go to Walgreens and buy a deodorant for less than $6. There’s no way that I’ll continue to pay this six bucks the longer we’re around. If we’re able to scale the business, we’ll make the economics work out.”
That’s sort of how I did the math to come up with the $12 price point. I said, OK, the cost is six bucks, it’ll be three bucks for shipping, a dollar for boxes and credit card processing fees, maybe another dollar in losses or returns. So if we’re able to break even or make a dollar, we’ll be in good shape.
Did you end up being right? Did the cost go down?
Yes. The cost fell dramatically. We found a new manufacturer when we started scaling. We went from 500 units a week to 500 units a day. And the cost fell in half. Then we went from 500 units a day to 1,000 units a day, and then we went from a 1,000 units a day to like 10,000 units a day. And then sooner or later we were at tens of thousands of units a day. And at each stage our cost fell.
A lot of founders want to make the price of their product as cheap as possible so everyone can buy it. But that’s now how you came up with your price. You baked in your acquisition costs as well.
That’s right. I wasn’t like, “OK, great. We will fundraise in order to subsidize the cost of selling this product.” I was like, “This is my f***ing money. We need to make money or at least not lose money when we sell this product. Otherwise, I’m going to have to forage around SF for my dinner.” And so, that math only works out if we have a $12 price point.
Did you think that people weren’t gonna buy a $12 deodorant? It worked, but I bet a lot of people said, “This is outlandish.”
I think that’s the case. And when we were thinking about selling the company, a lot of people also said, “We’re surprised that a $12 price point works for people.” From my perspective, there wasn’t much to lose. I genuinely thought there was a need for this. I know it’s a product that I really wanted. I tried a bunch of natural deodorants before I made Native, and they were awful. I wanted to make a product that works.
And $12 is certainly more expensive than a traditional antiperspirant. But it’s also like, you buy a deodorant once every two to four months, depending on how often you’re using a deodorant and how larger the surface area is under your arms. And so, if we’re talking about an extra $3 to $5, that’s just a dollar or two per month. I thought that would be palatable.
The way I look at it, switching from Dove to Native is cheaper than switching from conventional apples to organic apples. Or from Safeway to Whole Foods.Fixing product flaws
The first year after launching, how were you spending your time?
I think it changed a lot. Early on we were like, “Let’s get some users to buy our product.” We figured out a funnel that worked, we figured out how to run Facebook ads, for instance. And we’re like, “OK, great. Our costs are starting to come down, we are making money. Now we have to go fix the product.”
At that point we sort of gated our advertising spend to make our product much better. We’d email every customer and be like, “Hey, what don’t you like about Native? Tell me so I can go make this product better.” People would be like, “Yeah, we love that it’s effective in terms of absorbing wetness or eliminating odor. What we hate is that it feels like sandpaper under our arms and then it gets flaky and falls on the ground.” Or they’d be like, “This pulls at my hair and it hurts.” And so we’re like, “OK, let’s go fix all those issues.”
So we’d send out product samples to customers and be like, “Hey, is this any better than our old version?” About eight months after we launched the business, we were trying to work on a better formula.
But then we had an issue with the formula. It was melting at lower temperatures than we anticipated. So it’s melting en route to our fulfillment center, and we’re like, “Oh crap. It’s May, it’s getting hot, and it’s gonna get a lot hotter between May and July. We’ve got a problem.”
Fortunately, we had already been working on some new formulas. And so we were like, “OK, let’s just launch one of these formulas. We have to.” This was definitely one of those other times I was thinking the business may fail.Early growth
Did that help?
It did. We launched a new formula that was the best formula that we had at the time. Our repeat purchase rates basically doubled. Our reviews went up by a full star, and then all of a sudden we were off to a good start, so we’re like, “Great, we’ve got a repeat purchase rate of over 50%. People like our product. Let’s no longer gate ourselves in terms of advertising or in terms of selling in any way. Let’s go to the mattresses with this.”
And so in January 2016 we did $50K in revenue. June 2016 was the first month we actually had an employee other than me at the company. That month we did, I think it was like $250K in revenue. By November, we were doing $1 million a month.
Were the majority of these customers coming from Facebook?
I’m not sure that was the majority, although that was certainly the majority of our ad spend. When we were $50K a month, definitely. By the time we were at $1 million a month, we were on Facebook, we were on Pinterest, we were advertising via Google, we had a bunch of repeat purchases.
So your first year of business was less than a couple of million dollars?
That’s right. If you go from July to July, it was probably around $1.4 million or $1.6 million.Staffing up
And you were the only employee?
Until June 2016 I was the only employee.
Why did you do that? That’s crazy, right?
Yeah. I think there were a few reasons.
I was like, “Look, we need to make money and we need to build a war chest to afford stuff. I didn’t wanna go through a tough conversation with someone 30 days after hiring them and be like, ‘Look, we’re firing you because we can’t afford you any longer.’”
Second, even the act of hiring takes time away from focusing on the business. I didn’t want to lose focus so early on.
Finally, I wanted to remain as close to our customers for as long as possible. I wanna be able to understand our operational issues, our customer service issues, our marketing issues. And if I hire for one of those roles, I won’t be as involved as I could be. So let’s just push this off until it’s an absolute necessity.
By June we were doing a couple of hundred thousand in revenue a month, with $20-30K in profit a month, so we could afford to hire. And the customer service issues got to be bigger, and I couldn’t spend all day fixing them myself and deal with operational and marketing issues, too.
I am in awe, because most people would need more headcount for this. You were kind of a one-man show. How were you doing all this?
It’s bananas. There’s so much one human being can do, and while this was challenging, not hiring people made me really understand the business well. If you look at Jake at MVMT Watches, I think he operated his business with 20 people until he got to $50 million in revenue. That’s amazing. The first time I met him at brunch in L.A., I was like, “Holy shit, you are my soulmate.”
Who were your first hires?
The first three hires were customer service folks. The first one remains one of my close friends, even though she isn’t with the company any longer.
And they were handling all of the emails that you were getting?
They were handling a bunch of emails, and I was also handling a bunch of emails. We were probably getting a few hundred a day, and I was the No. 1 customer service agent for the first two years of business.Overcoming operation problems
What were your biggest challenges at that time?
The operational issues we were dealing with were insane. We went from a thousand deodorants a day, to three thousand deodorants a day, to seven thousand deodorants a day, to ten thousand deodorants a day, in the span of a few months.
Were there supply chain issues?
Massive supply chain issues. If you bought a deodorant on a Tuesday, we might have made it the day beforehand, or we might be making it on Wednesday, and your order would ship out pretty late, and that wasn’t great. On emails we’d say, “Due to high demand, orders are shipping out 7 to 12 days behind schedule.”
Absolutely. Why do you think 10,000 people a day were buying your expensive deodorant, and not something in the stores?
I think we had a product that people really wanted. When I was talking about Axe, I was saying, “I don’t understand the ingredients on the back of this.”
Those ingredients sit on my body for 23 hours and 45 minutes every day. That’s gonna happen for the next 60 years of my life, and I think there was a genuine need for people who wanted an aluminum-free deodorant that worked.
When we started the business, I was afraid that we were gonna have to educate people about aluminum. It turned out that we didn’t have to do that. People already were aware of aluminum, and a little bit suspicious of the ingredient. Many of our customers had already tried an aluminum-free product. But they complained that those products didn’t work. So they were like, “OK, we’re gonna settle and use an aluminum-based antiperspirant because there’s really no other option here.”
When we came in, we said, “There’s a new option. We’re effective, and we’re aluminum-free,” and I think that really resonated with the consumers.
But this is a competitive space, there are a lot of options. Do you think that you were just simply better at customer acquisition than everyone? Your customer acquisition strategy, perhaps that was your secret sauce?
I definitely think that we were better at customer acquisition than a lot of other people. In fact, a Facebook executive once said I ran the best ads he had seen at Facebook. I think that is part of the secret sauce. But I can tell you from our M&A conversations and from being in the industry for four years now, our repeat persons rates are unmatched anywhere in the deodorant category.
And so, I don’t think it is just our customer acquisition strategy, it is also the product. In January 2017, we were doing a little more than $1 million a month. I remember I told my brother, “My goal is to get a million dollars in repeat purchase revenue by December 2017.” And we actually hit that in May 2017.
Tell us how you incorporate customer stories in your email marketing.
Many of our ads are customer-driven. One of the emails that we still send out highlights our five favorite customer reviews. There is one person who says our deodorant makes him feel like there’s little tiny fairies working on his armpits. Another guy said it makes him feel like a million bucks when he wears it.Considering offers
So when did the acquisition talks start?
They started in February 2017. That’s like 18 months after we launched the business. What happened is that some company came knocking on our door. They said they were interested in partnering with the business. And we said we’re not really interested in any partnerships. And then they were interested in acquiring the business. And so we started paying attention to them.
We were like, OK, this could be a real acquisition, so let’s hire a banker and canvass the market and see, is anyone else interested in a fast-growing, natural, direct-to-consumer deodorant business?
And around this time you also raised money?
We raised $50K in November 2015. We raised another $250K in May 2016, so by 2016 we had $300K. And then we took small checks from people that I thought could be helpful to the business. So we took $25K from one of the founders of Thrive Market. We took a bit of money from the founder of Seventh Generation, and then we took another check from an executive at Facebook. So we raised a total of about $500K.
Those acquisition calls came soon. Did you hire a banker for that, or did you also do that?
After the initial knock on our door, we hired a banker. But we didn’t really plan on selling the business in February. They came to us.
And then, I believe you had a whole bunch of people compete for that, right?
Yeah. What happens in the deal process is that you send out a little booklet and people express interest, and they say, “Hey, this is the range that I’d purchase your company at. Then they come for management presentations, and I think we gave 12 or 14 management presentations. So we had a lot of bidders at the table.
That must have been a horribly stressful period. I’ve been through that — it’s hard.
You get through it. How did you get through it?
I just disconnected emotionally from it. And I didn’t let it impact me emotionally at all. If it happened or didn’t, I didn’t care.
And that worked?
Yeah, it worked. We got offers, and we turned them down. It was the same idea if you want someone to like you. It’s easier when you care a little bit less and are happy either way. That was my mindset.
Yeah, I’m with you there. But were you really apathetic or were you emotional and just hiding it?
I tried to be pretty ice-cold. I let myself celebrate one day, but then after I’d go home and be ice-cold. Just told myself that I don’t care either way.
I like that. For us, I knew we had a compelling business, but I’m an emotional person. I once read Steve Jobs cried when he saw that there was a CD tray on the iMac instead of the slot he wanted. I would have cried, too.
I was confident that we were going to get offers, or that Native was going to get offers from acquirers. So I wasn’t necessarily emotional about being able to succeed or having a successful business. I thought we were there already.
I think it’s an emotional process. People love your business, but then find reasons to hate it. And you’re getting three or four hours of sleep at this point. You’re trying to keep your eye on the business and grow the business while at the same time trying to sell it.
And that made it really difficult. I definitely got angry a lot during the sale process. At my family. At my team. At the bidders. At myself. Selling the business
How big was the business at the time of selling?
We were doing tens of millions of dollars in revenue a year. I want to say we were north of a $30-million runway, maybe a $45-million runway, but I don’t remember.
Are you making a lot more profit now than before?
Yeah, we were making a fortune. We raised $500,000 and I think when we sold the business we had eight figures of cash in our bank account.
Then why sell?
For a few reasons. One is, I have the skill-set to go from zero to $50M in revenue, probably even zero to $100M. I don’t have the skill-set to go from $100 to $250 by myself. I haven’t had that experience yet and so I needed help.
Two, there’s no question that it was a lot of money. It dramatically impacted my life. I don’t have to worry about money anymore. And the way I thought about it was, OK, if we run the business and sell it for $150M or $200M next year, I’m not sure what the upside is between having $100M and $200M.
But we thought if things go sideways and we end up selling it for $20M or $40M, there’s a huge difference between $20M and $100M.
I also thought we needed more help than I was going to be able to actually muster. We had a team of eight people when we sold the business. I think we had one person in the operations, one person in marketing, me, and a bunch of customer service people — and everyone was really good. But to build a $100M business, at some point we would have to take the eye off the ball of building the business and start growing a team so we can support a $100M business.
I’m just trying to process the sale. Was the multiple for the exit high or normal?
I think it’s a pretty normal multiple. You’ll see a 1x multiple for revenue for businesses that aren’t growing and a 5x multiple if things are going incredibly well. We were somewhere in that range. The question is always like, Is the multiple based on your run rate, your last 12 months of sales, or your next 12 months of projections?
The multiple we got was in line with what we expected. It wasn’t the best multiple I’ve ever seen and it wasn’t the worst multiple I’ve ever seen. It was a fair one. I think everyone, post-acquisition, is also happy with the deal.
Now the business is substantially larger, like 2 or 3 times bigger?
Yeah. Now, the business is substantially larger. We have the No. 1 natural deodorant in Target and Walmart. I’m confident we’re the No. 1 direct-to-consumer deodorant there is. We’re on Amazon for seven days and we’re the best-selling deodorant on Amazon. We’re a much larger business today than we were pre-acquisition.
And so there was never a “pinch-me” moment?
There was never a “pinch-me” moment. There’s no Lamborghini parked in my garage — in fact, I don’t even have a parking spot. There hasn’t been anything like that, it’s been more like, OK, we still want to grow this business, but the dream is 10x larger. The way I think about it is, my name will forever be associated with this business, whether I own it or don’t own it. If we can make it a billion-dollar business, then I’ll be associated with something amazing my entire life.
There were certainly a bunch of high-fives the night that we sold. But there wasn’t a ton of, “Oh my god, my life has changed.” It was more like, OK, the journey we were on has changed dramatically, but it isn’t over. The reason I was put on earth is to increase earnings per share. Just because I sold a company doesn’t mean I don’t want to still do that. New opportunities
What opportunities are there that you weren’t able to pounce on but you still think are interesting?
Well, one, I think there are a ton of pick and axe businesses that would help in e-commerce. And I think some of those are being built, and some of those will be built.
When I started my first business captured with our email platform, it got the job done but there was very little ability to segment. Now segmentation within the email industry has become the norm and is incredibly easy and intuitive. That’s fantastic, it’s made e-commerce industries much more valuable today than they were four years ago.
Now, companies like Postscript are starting to do this with text-messaging. I’ve been waiting for this for two years, and it’s finally happening!
What pick and axe businesses have you found intriguing?
Sure, there’s everything from really good shipping services, some of which exist and some of which don’t. Like, how do I get my package to a customer quickly, how do I get great tracking information, how do I make sure the business is packing and shipping orders really quickly?
I think there’s really good software to be had when it comes to inventory management, especially with respect to once you start selling in retail. So, how do you manage inventory, how do you forecast, how do you deal with PO’s, how do you deal with logistics, how do you deal with this when you are selling to a few dozen retailers?
There’s certainly enterprise SAAS companies serving the likes of P&G, but nothing for businesses the size of Native, pre-acquisition.
What other e-commerce products do you find interesting?
There’s rarely an e-commerce business that I don’t find interesting. I find coconut oil interesting. I find protein interesting. You know, there’s a business in L.A. that sells scrubs for nurses that are more stylish, better cut than traditional scrubs that you see on nurses. So genius! There are even companies selling apparel specifically made for elderly folks who have trouble lifting their arms. I find that super interesting. I find Hims and Keeps super interesting. I think tele-medicine is going to open the door to a bunch of new commerce businesses. So I love the industry and I can’t imagine hanging up my gloves anytime soon.
Are there any other product categories that you think need to be the Native deodorant of that category?
Yeah. I think there needs to be a Native sunscreen and we could be that. I think there needs to be a Native for elderly people and we could be that. We’re a brand that is built on efficacy and transparency. So, what does that mean? We want our consumers to trust our products rather than have to read every single ingredient and act like toxicologists on the weekend.
So whenever I think about our business I say, “Where do consumers want to buy products that they trust and don’t have an alternative — and then we can fill that space.”
Most people don’t realize this, but even though bigger companies create more wealth, the early days are much more exciting for founders. You’re leading a bigger team and the company makes is booming, did you find the early days more exciting?
Yeah, that’s right. When you’re making ten thousand a month, you’re like, I see so much opportunity ahead of me and the grass looks so green and all the problems that I see are problems that I want to solve. And, today, I’m more quarterbacking the team, and the team is solving those issues, so that’s exciting but it’s not the same joy as getting your hands dirty on every single problem.
I’m a big Star Trek fan and I think this is the difference between sitting in the Captain’s chair as opposed to being an Admiral. Everyone wants a promotion to admiral, but you miss solving problems in open space when are you aren’t captain anymore. The cost of progress
You tell stories of employees loving working with you. So, a) Are you as abrasive as you say you are? And b) If you are, how do you go to bed at night knowing that like, you have to be a dick to some people to win? Do you feel guilty about making some decisions, or are you, like, this is just the cost of progress?
Sure. There’s definitely guilt there. I was definitely abrasive with Ben Silbermann, the CEO of Pinterest. I was messaging him multiple times and I was, like, what is going on there? What incompetent people created a credit card form that doesn’t even have fields? You’re a billion dollar company, and you can’t set up credit card in-take fields? How are you letting this go on? Are you ignorant or lazy? It gets me worked up even thinking about this right now.
Then I met Ben, and he’s the nicest guy ever, and so I definitely feel guilty.
I think with my team, they particularly know that I’m coming from a good place and that I’m not being abrasive to hurt their feelings. I’m being abrasive to help the business. And I don’t mind them being abrasive with me either.
Sometimes, people are receptive to this. The CEO of this other company told me the other day, “If we can solve the issues that Moiz has, we can solve the issues that everyone has in his industry.” And some people will be like, “F*** you, Moiz, who do you think you are telling me how to run my business?” I understand both.
I do think being abrasive results in more progress. Is that progress worth it? Depends. But as people get to know me, they generally realize that I’m coming from a good place.
I also think it could be immigrant hustle.
Yeah, yeah, I don’t think you can be because especially with start-ups you live or die by decisions that you make. You need to solve things quickly or things can go sideways pretty fast on you. So, I think you’re right. That does come from … There must be some sort of immigrant hustle somewhere.