The year is 2015, and Moiz Ali is 30 years old and has sold his first startup Caskers, a craft spirits ecommerce company, for seven figures to a Family Office. It's good money, but not retire to a private island money, and he’s on the hunt for his next business idea. He finds it walking the aisle of CVS where he looks at the ingredients on deodorant labels and can’t understand a single one. Aluminum Zirconium Tetrachlorohydrex, Isopropyl Palmitate, Cyclopentasiloxane the list went on and on with unpronounceable ingredients. This combined with the fact that his sister was pregnant at the time and worried about the ingredients in her Dove deodorant made him think there was opportunity in the deodorant category. His idea was to create a deodorant with recognizable ingredients that didn't contain any aluminum which blocks the pores to prevent sweating which many viewed as unhealthy. While all startup stories are somewhat apocryphal, Moiz is a straight shooter, so we tend to give his story more credence than most.
Moiz bought the domain name on GoDaddy on his birthday in July 2015. He chose the name Native to invoke the idea of natural ingredients without pigeonholing the brand into only using natural ingredients. He landed on nativecos.com since native.com was already taken. He launched the business 12 days after buying the domain. He launched the website with zero deodorants in hand and no photos of the physical product. Instead, he found someone to 3D render the product to use as images on his site. He was speaking to manufacturers about having them make the deodorant, but he wasn’t sure people would shop for deodorant online. At the time the main channel for deodorant sales was brick and mortar at the Duane Reades and Targets of the world. Because of this uncertainty, he treated the launch as a test and would order the deodorant once he made sales.
He decided on the price of $12 a stick (which it remains today) from working backwards from his costs. His manufacturer charged $6 a stick to make the deodorant, it cost $3 and change to ship, and there was $1.50 in random expenses (box, card etc.). The all in cost was $11 and change so he set the price at $12, so he was breakeven on each sale. His competition was charging $3-4 a stick for traditional antiperspirant, so he knew at scale he could expand his margins well beyond breakeven.
He launched on Product Hunt and was downvoted so much that he landed on the second page (no visibility) and got one sale that day. $12 for a days work. Moiz thought he could open up a more lucrative lemonade stand. He planned to refund the customer and shutter the business, but someone who worked at Moiz’s coworking space Founders Dojo knew an employee at Product Hunt, and they were able to get Native on the first page of Product Hunt the next day. On the second day of being on Product Hunt, he got 50 sales for a grand total of 51 sales. This gave Moiz the confidence to contact his manufacturer and order 100 sticks of deodorant. This manufacturer was a true mom and pop operation - one woman who was making the product in her hobby room in Southern California.
Moiz is living with his brother at the time and packs and ships the first Product Hunt orders on the dining room table with U-line boxes and crinkle paper. Once the orders are shipped, then sales drop because Native is no longer on Product Hunt. Moiz tries the playbook that had worked well for him at Caskers and contacted media outlets about Native. They told him to kick rocks. They had no interest in covering a deodorant.
Having failed at PR, Moiz turns to paid marketing. He buys $500 worth of Google ads and gets $100 worth of sales. It doesn't take a Harvard trained lawyer (which Moiz is) to realize the business isn't working.
Realizing that Google ads aren't working, Moiz shifts his attention to Facebook where he starts to see traction. He creates an excel spreadsheet where he tracks the performance of every ad he has running. The spreadsheet tracks the click through rate (CTR), the cost per acquisition (CPA), and the return on investment (ROI) of every single ad. Using this tracking method he is able to learn which ads and angles are resonating and he doubles down on what's working, and he starts to see real product market fit.
The business scales from 100 units a week to 500 units a week and his manufacturer’s son gets sick and she quits. He’s close to throwing in the towel again, but he finds another contract manufacturer in Texas who is willing to offer extremely low MOQs - 80 sticks.
Native goes from doing a couple hundred dollars a month in July 2015 to doing $75k in revenue per month in January of 2016. Then in May 2016 as summer temperatures began to rise, their deodorants started melting. At the higher temperatures the deodorants had the consistency of lotion. Instead of quitting, Moiz works with his new contract manufacturer to solve the melting issue. They stop all current production and decide to release a new formula that they had been working on. It had only been tested on about a dozen people, but the feedback was positive and anything was better than the existing lotion deodorant. Moiz had no idea if the new formula would work, but six weeks in he knows he had a winner. The repeat purchase rate was up, and the product reviews were improving dramatically.
In May of 2016, Native is doing $100k per month and it’s still just Moiz. He does customer service, operations, and marketing. Saturdays would be spent at Workshop cafe cranking out CS tickets, so they got responses within 24 hours. On the marketing front, he is still using his spreadsheet to track his Facebook ads daily to understand Product Market fit.
In June of 2016, Moiz hired his first employee to handle customer service. Native does $250k in June and Moiz hires another person to do customer service. The business starts to pick up momentum. He improved the product so the repurchase rate goes up and word of mouth grows. He also spends more on ads and the compounding improvements create a snowball effect and lead to exponential growth. By November of 2016, Native had 5 employees and is doing $1M per month.
In February of 2017, a privately held company doing $1B in revenue expressed interest in buying Native. Moiz met with them in June of 2017 to discuss terms and after the meeting there’s no reply for 90 days. Radio silence. This puts into motion a process where Moiz decides to sell the business. It has 8 employees and is doing $30M in annual revenue (and $1M in monthly net profit). Moiz hires a banker to run a process to sell Native. At this point, Native only sold deodorant online, but Moiz pitched the future growth potential. He knew a CPG company could expand the Native product assortment as well as put it into retail and grow internationally.
Moiz creates a list of 100 potential acquirers and then goes on the road and does 16 management presentations where he introduces the business to 16 potential acquirers. It's a competitive process where P&G, which hadn’t bought a business in 10 years, emerges as the number one potential acquirer. There was just one issue. Moiz didn't own the trademark to Native, and P&G won't buy the business without the trademark. Late nights ensue to lock down the trademark which they do on November 3rd, 2017 and the deal with P&G closes on November 8th, 2017. Native was sold for $100 million (3.3x revenue multiple).
In two and a half years, the business grew from a $1k investment from Moiz into a $100M exit to P&G (a 4,541% IRR!). Along the way, Moiz raised $500k and owned the vast majority of the business when he exited (over 90%).
Note: Before we get into the playbook, let’s address a huge piece of pushback we see on the Native story. “Yeah sure it worked for Moiz, but he launched in 2015 in the golden age of cheap Facebook ads. No way $12 AOVs would work today. It’s so much more competitive.” We disagree. We think the lessons from Moiz’s story are universally applicable no matter when you are operating your business. We are confident that there is another Native launching today that people will look back on and think they had it easy because they were operating in today’s advertising environment and not the future more difficult one.
Relentless Product Iteration 🧪
By his own admission, Native’s initial product was mediocre at best. Moiz iterated on the physical product like tech companies iterate on software. He bought deodorant from every competitor and noted every detail that made the competition better. He tested over 100 variations of the Native formula. He would rub the deodorant on t-shirts and wash them to test if they stained. He would apply versions of Native and run around the block and have his brother smell his armpits to test which version had the best odor fighting capability. He would send out free samples to his best and most vocal customers and have them compare the samples to their existing formula. He would also do A/B tests with his product. He would send one group of customers one version of the deodorant and another group a different version with a slight ingredient change. One example was comparing baking soda milled to two different particle sizes. He would then compare the review score of the cohorts with each version 6 weeks after purchase and the reorder rate of the cohorts 12 weeks after purchase to determine the winning formula. This product iteration led to improvements increased the customer reorder rate at Native from 20% to 50% and raised the average review score from 4 stars to 4.7 stars.
Small Batch US Manufacturing 🏭
To unlock the full potential of product iteration, Moiz needed to manufacture in small batches in the US. If his product were shipped on boats from China, the cycle time between product iterations would be much slower. US manufacturing allowed Moiz to form a close partnership with his manufacturer and to rapidly iterate on the product. This unlocked product improvements that increased re-order and word of mouth which allowed the company to scale. This also unlocked a just-in-time inventory system that freed up capital from inventory. If you ordered a deodorant on a Wednesday, the deodorant that was shipped to you would be made either Tuesday the day before your ordered or Thursday the day after you ordered. US manufacturing also allowed for a more flexible supply chain, faster demand creation & fulfillment, and tighter quality control.
Customer Feedback Loop 🗣️
Early on, Moiz would respond to all the customer service tickets himself. This was the way he would learn about all the issues with the business. Each customer service ticket was an opportunity to improve the business. He never made a customer wait more than 24 hours for a response. As the company scaled beyond just Moiz, the company would hold customer service 'power hours' where each week every employee including Moiz would respond to CS tickets. This ensured everyone at the company stayed close to customer feedback. Additionally, by only selling through his website Moiz was able to maintain the close connection to the customer and get feedback to improve. This is one reason he eschewed channels like Amazon which would disintermediate his direct connection to the customer. By selling through his own .com, Moiz also owned the reorder data that he could use for A/B testing. Moiz describes customer feedback as the lifeblood of an ecommerce business. Without it you are dead. If you are obsessed with your customer and iterate on their feedback, you will eventually create something that resonates.
Metric Obsessed 📊
Moiz was obsessed with every metric in the business. The foundation of his metric obsession was the excel document he created to monitor the daily performance of his Facebook campaigns. By hand entering performance metrics, Moiz ensured he understood intimately how each campaign was performing. He didn't just use his gut to make marketing decisions but rigorously A/B tested messaging and creative and let the metrics guide his decisions. Ditto for the website. All of the changes he made to the website were A/B tested for statistical significance. Moiz was also laser focused on margin. He knew that certain box sizes and weights would incur shipping surcharges and optimized accordingly. He also knew his product review metrics by heart. This metric obsession allowed Moiz to keep a close pulse on the business as it rapidly scaled.
Singular Focus 🔬
One product (deodorant), one channel (.com), one geography (US), and one primary marketing channel (Facebook). Moiz didn’t launch into multiple growth channels. He tested PR and Google which didn't work, but then found Facebook and went all in. Rather than diversifying away from Facebook once it was working, he doubled down. Native didn't do any influencer marketing for the first year and a half that they were in business even though every other competitor was doing influencer marketing and investors were pushing Native to do it. Moiz resisted. He knew that launching an influencer marketing program at that time would just be a distraction from his Facebook marketing efforts. The temptation is to look for other channels once one is ‘working’. Moiz fought that temptation and benefitted. Moiz also kept this focus in other aspects of the business. He was approached by Target, Whole Foods, Ulta, and Sephora about offering Native in physical retail and said no to all of them. He knew that acquirers would see the growth potential in SKU expansion as well as expansion into retail and international. He knew that expanding would only distract him from the core business which was still growing incredibly quickly.
Learning Machine 🦾
Early on in Native someone once asked Moiz what he knew about deodorant that made him qualified to run a deodorant business. Moiz responded, “I know nothing about deodorant, but in 6 months, I will know everything there is to know about it.” This attitude combined with tenacity is a powerful force in any business venture.
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