Nick Green is the co-founder and CEO of Thrive Market, which is an online retailer with over 2,500 high-quality healthy foods, vitamins, home goods, and beauty supplies. Thrive Market is doing $200 million in sales and also raised $200 million from celebrity investors. Some of those investors are Demi Moore, John Legend, Deepak Chopra or Tony Robbins. On the VC side, they have investors like Greycroft, e.ventures, and Kapor Capital.
In this episode you will learn:
- Joining startup hubs to incubate ideas
- The bumpy ride of entrepreneurship
- Scaling membership platforms
- The importance behind retention rates on subscription services
- Influencer marketing
- Raising capital from celebrity investors
- Building and exiting a venture
ACCESS THE PITCH DECK TEMPLATE
About Nick Green:
Nick Green is the co-founder and CEO of Thrive Market, an online wholesale buying club on a mission to make healthy living easy and affordable for every American family.
Thrive Market currently offers the 4,000 most popular natural and organic products in the world at 25-50% off retail, shipped anywhere in the U.S. for free.
For every paid member on the site, the company also sponsors a free membership for a low-income family.
Prior to co-founding Thrive, Nick Green was the founder and CEO of Ivy Insiders, an education company that made college test prep more affordable and helped over 20,000 students get into better colleges before being acquired by Revolution Prep in 2010.
Nick Green passion is combining technology and business to solve big social problems. When he isn’t pouring his energy into that effort at Thrive Market, he enjoys traveling, water skiing, and supporting other social entrepreneurs as an angel investor and advisor.
Connect with Nick Green:
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FULL TRANSCRIPTION OF THE INTERVIEW:
Alejandro: Alrighty. Hello, everyone, and welcome to the DealMakers show. We’re going to learn a lot with our interview today, and I don’t want to wait longer before I introduce him. So, Nick Green, welcome to the show today.
Nick Green: Thanks for having me, Alejandro. Happy to be here.
Alejandro: So, Nick, let’s do a little bit of a walk through memory lane here. For college, you went to Harvard, and then you started your first business. You were doing internships at places like McKinsey. So, why did you decide to take the leap of faith right away?
Nick Green: Actually, I started my first company before I ever did an internship. I got to Harvard thinking I would become a lawyer eventually. That was what success meant to me at the age of 18. After my freshman year, I was basically having trouble getting any internship. So, I stumbled into entrepreneurship because as a freshman or sophomore most companies aren’t actually interested in hiring you. So, other than pretty menial work, there aren’t a lot of opportunities, and I said, “Why don’t I just go home. I want to be back in Minneapolis where I’m from for the summer, and I started teaching SAT courses. I came from a place where people didn’t really have a lot of options for test prep. When I saw the SAT for the first time, I was taking the SAT, and I got to Harvard and saw a lot of my friends or met a lot of people that had been studying for the SAT since very early. So, the idea for the first business was let’s open the opportunity to prep for these exams to folks in places like Minnesota where I grew up and all over the country that may not have had the opportunity otherwise. For a summer, I ended up working with about 250 kids. As a business, making tens of thousands of dollars, but more importantly, seeing the impact I could have on hundreds of kids’ futures and really got hooked on entrepreneurship from there. I built that business over about five years starting that freshman year in college to eventually hiring other undergrads from Harvard and then other schools. By the time I did that internship at McKinsey, my business “on the side” was already quite successful. To be honest, the only reason I did the internships was because it wasn’t the type of success that I was familiar with. It didn’t fit my conventional kind of model for success. Really up until my senior year, I still thought I would go do investment banking or go do consulting, and this little fun thing on the side would just be that: on the side. But, when I really felt into what I wanted to do with my future and having invested as much time, basically, as I’d been in college on this business, I decided, “Hey, I’ve got to give it a try.” McKinsey was a great place and awesome experience, and they were nice enough to say, “Look. We agree with you. Give it a try. We’ll wait a year, and you can decide if you want to come and be an analyst then.” I guess, as they say, the rest is history. It was a bumpy road from there as an entrepreneur, but once I was in, it was impossible to go back.
Alejandro: I hear you. The name of this business was Ivy Insiders?
Nick Green: That was Ivy Insiders. Yeah.
Alejandro: Really cool. So, you grew that business to like over 500 locations, 43 states, and this was all in under three years. With this business, was it just like yourself from a founding team perspective, or what was the founding team behind the business?
Nick Green: It was just me. I call it accidental entrepreneurship because, to begin with, just because I didn’t want to get a real summer job or wasn’t able to get an internship. Then I said I’ve developed this curriculum. I called it SAT game theory. The whole idea was to turn the whole SAT into a game. Then I did the same thing for the ACT and eventually, SAT 2s, and AP tests. Actually, it’s interesting. I was always pretty good at test-taking, but I remember there were kids in my graduating class in high school that were every bit as smart as me and some that were smarter that weren’t good at test-taking. I tried to reverse-engineer: why was I good at taking the test? What I figured out is I kind of approached it like a game. I found it like a puzzle. Presenting that to students, I think took it away from this realm of being this evaluation of your potential or your intelligence or anything else and made it something that was simple and fun. So, once I had that curriculum, I said: why don’t I hire other kids that did really well on the test, are good test-takers, went to schools like Harvard, and send them back to their hometowns to do the same thing?” So, that was the model. It was basically a micro-franchise model. What was really cool was that we helped tens of thousands of kids get better scores on the test. We charged a third of what others are charging. We had what we called a No Empty Seats Policy where any seat that wasn’t filled in the class was given to a student for free who couldn’t afford it. Then we also helped these undergrads from Ivy League schools go back and learn what it was like to be an entrepreneur. We gave them kind of a business in a box, funded their marketing, taught them how to do sales, taught them how to teach the courses, and they actually ran their own businesses for the summer. We grew to about 500 branches. I worked on it for about three years after school, but it was almost four years during school. So, it was actually closer to six or seven years. Then we had an offer to be acquired by a company called Revolution Prep based out here in LA. That’s what brought me to the West Coast.
Alejandro: Before we talk about the M&A process, how did you guys capitalize this business?
Nick Green: Again, I was a solo founder, and I had the good fortune of having zero opportunity cost to my time. I was building that business while I was in school. So, it’s not like I needed a salary, and because it was a services business, the capital requirements were actually quite low. So, I was able to be profitable from that first summer. Basically, roll some of the profits back into continuing to grow the business. Eventually, we did build an online component where we used those summer branches to seed online test prep during the school year, but I never raised a dime of outside capital. What I’ll say is it was in some ways a very empowering and satisfying thing which I didn’t really even know at the time because I had no reference point. But it was also a very lonely road. I didn’t have investors and mentors there around me, and I didn’t have any cofounders who are in the same boat as me. As I tell the story now, it sounds like this upward trajectory, seven years, sold the business, yadda, yadda, ya. The truth is, I feel like I failed my way to success in many ways in that business. Despite studying economics at Harvard, zero real business experience. I can tell you that the classroom doesn’t translate at all into what it takes to be a really scrappy entrepreneur. In a lot of ways, I feel like I had to unlearn the keys to success that I had learned in 13 years of academics. Academics is all about following the rules, checking the boxes, being really risk averse. Not taking the risk. In entrepreneurship, you’ve got to break the rules. You’ve got to color outside the lines, and you have to be really comfortable with discomfort and with being out of your depth, and with confronting failures. Like I said, I failed my way to success and learned a lot in the process. One thing I definitely learned is after that business I didn’t want to do it solo again.
Nick Green: That was one of those things before I started Thrive is, I knew I wanted to work with great co-founders who I could learn from and be on this crazy rollercoaster of entrepreneurship together with.
Alejandro: Got it. And the M&A process for this company, for Ivy Insiders, at what point did you decide it’s time to explore this option?
Nick Green: It was inbound, to be honest. We had grown fast, and I think got on the radar screen of some of the bigger competitors and started getting some calls. Again, I had zero experience with M&A. I still had a vision for how I was going take this business to move to the online side. We were doing some stuff with online tutoring during the school year. So, I actually at that point said I think I should explore the M&A route since there’s interest from some of the bigger competitors, and I should also think about raising money to actually build a real technology platform. This was back when online video still wasn’t great. We were doing our tutoring online over Skype, and we actually used a dual camera setup where we had this webcam on a little neck that you could put over a piece of paper, and the tutor could write things on the paper that the student could see online. But it was all very early. We wanted to build a custom flash interface to take this tutoring setup to the next level. So, what I ended up doing was running a dual process where I said I’m going talk to folks about raising money, and I’m going to entertain these M&A conversations. That proved to be really effective. It wasn’t like I was being highly strategic when I did that, but the fact that I had options to capitalize the business, a decent evaluation, and build something from there, really, we’re going to need some leverage in the M&A conversations. Then ultimately, on the M&A side, for me, it was just about gut feeling and fit what was going to be best for the business. I talked to some of the bigger guys and just knew it wasn’t going to be a culture fit. Certainly, not a place I wanted to spend a few years doing earn-out and then met the folks at Revolution Prep. It was co-founded by two guys who were themselves, entrepreneurs. They had been building that business for a decade. I really saw them as people that I could learn from. They were a bigger company, obviously, but it was kind of like a little bit of a startup devouring another startup in the sense that I got to go in and still be relatively early in their business and be able to have an impact. Their company was also very mission-driven. They were not only on the test-prep side but also building K12 software and working with districts like LAUSD that had many low-income students to use technology to improve learning outcomes. That was a really inspiring and fun experience too. I spent 18 months there and then rolled off in 2013.
Alejandro: And the terms of this transaction, were they public?
Nick Green: They were not public. No.
Alejandro: Got it.
Nick Green: And it was a small transaction. It wasn’t something that would have created venture returns for VCs, but it was certainly life-changing for me, especially at the age of 26, and especially on 100% of the company. It felt like a huge success which in many ways, I remember at the time feeling it was very undeserved because I felt like the path to get there had been very rocky.
Alejandro: Yeah. I can imagine. So, you were for a bit with Revolution Prep doing the vesting and resting as they would say. Then you decide to leave, and you go to Launchpad to become an entrepreneur-in-residence for them for seven months or so. Tell us and walk us through this decision and shift in your career.
Nick Green: I spent a year-and-a-half at Revolution. During that, I would say it was more vesting than resting, but I feel like I learned a lot there. They were moving at a very fast clip. They had just arranged a pretty large round of private equity when they bought us, and there were some really interesting developments happening in that business. But I ultimately decided that I wanted to be an entrepreneur again. So, I had a friend who I knew from college and had become closer to in LA who’s the managing director of a startup accelerator called Launchpad LA. His name is Sam Teller. He’s a brilliant investor and very connected in the LA startup scene at a time when that scene was just getting going. This is 2012, 2013. So, over the course of six months, I went into Launchpad and basically used it as just a lab for me to think about businesses that I could start, talk to other entrepreneurs, do some angel investing, and over the course of that six months, I probably saw 500 companies. I was on the investment committee for the accelerator. I invested in probably a dozen myself and didn’t see any that were businesses that I necessarily wanted to work on until I met my co-founder Gunnar. He actually came in to pitch me on a concept he was calling Shop Drive. The idea was to basically build Groupon for healthy food, buying events where people could buy healthy products at wholesale prices. The business model was very different than what we ultimately landed with Thrive, but the vision was exactly what it continues to be today which was make healthy living accessible to every American family. I love telling the story that by the end of that first meeting, I remember I was pitching him on working on it together. So, we had a number of meetings after that, and we had very complementary skill sets. He had a lot of vision and just a huge heart that was driving this mission to make healthy living accessible which really resonated with what I wanted to do on my second at-bat. Health and wellness is probably the one thing that’s more fundamental than education, human health. At a personal level, related very much. I grew up in Minneapolis, Minnesota, a place that you look at the Mid West, not necessarily the healthiest part of the country. I happened to have a mom who was really, really focused on our health. My mother is Mexican-American, and on that side of the family, there’s a lot of type 2 diabetes and other lifestyle diseases that she saw in her family and was really determined to not be an issue for our family. So, I had a personal connection to it at that level and was really excited about the mission. It was the best decision I ever made but also signing up for something that has turned out to be a bigger challenge than I even imagined at the time.
Alejandro: Got it. Thrive Market obviously is born. This is the most recent company, and what you’re leading after meeting your co-founder, Gunnar, that was pitching you the concept. What was the founding team then for the company Thrive Market?
Nick Green: There are four of us; four co-founders. So, Gunnar and I met and spent probably four months iterating on the business model. How are we actually going to take these high quality, natural, and organic products that you’d find in places like Whole Foods at 25% to 50% markups? How are we going to take those and make those affordable, at, or below the price of conventional equivalence? That was our goal. One idea initially was to do this Groupon model where you could pool resources, buy with a wholesale account, but it would take two to four weeks for people to get their products. That’s not the way people want to grocery shop. So, we studied a lot of other models that were out there. Where we ultimately got really inspired was the Costco model. Costco charges a simple annual membership fee, and then they take all their margin there instead of on the products sales. What we realized is that if we just created a wholesale account ourselves directly with the brands, and then we passed along all the savings to our members, as long as we’re making enough margin on the membership, we can take no margin on the product sales, and that ends up actually bridging that 25% to 50% price gap, and finally making the organic product affordable at the price of the conventional ones. The numbers really worked. We knew it was going to take a really significant scale to get there because we’re not a high margin on the product sales. It was going to require vertically integrating in ways that very few e-commerce companies do. There have been a lot of challenges in that element of business. It’s not just a technology company; it’s also a very operationally-intensive business. We also knew we needed to create a real brand experience. So, our third co-founder, Kate Mulling, had come over from—she was at Refinery29 quite early on, and had been the editor-in-chief at the Chalkboard Magzine which is one of the original health and wellness lifestyle blogs. So, she came onboard and was very instrumental in driving the brand early on. She’s the one that convinced us to change the name from ShopDrive to Thrive Market. Then our fourth co-founder, Sasha Siddhartha, a serial entrepreneur himself, Stanford, computer science, and economics, had been at Microsoft for seven years and was basically the most brilliant startup CTO in the LA tech community at the time who just happened to be rolling off his last venture. I remember basically, more or less, getting down on my knees begging him to join the team. He at first said, “Let me invest instead.” But we didn’t accept no for an answer. He’s been just an amazing partner to work with. Yeah, four co-founders and again, name and date of my first experience because I was a solo co-founder, but it’s been just amazing to have the support of people who are aligned with the mission and bring very different skill sets and backgrounds to the table.
Alejandro: Really cool. Originally, you guys started with kind of like a co-founder and co-CEO structure, and you most recently, I think it was last year you became the sole CEO of the entity. So, what did you learn from having a co-CEO-type of structure?
Nick Green: The first thing I learned, in general, is that if you have a high-growth startup, the business is changing, basically transforming every six months. That requires as co-founders a lot of flexibility in what you’re going to do and what your role looks like. At the beginning, that meant that from everyone there’s a little bit of divide-and-conquer, but it’s also everyone is wearing a ton of hats. Then as the business scales, you have to basically be really clear and really honest with yourself about where your areas of strength are, and then how do you fill in the gaps to bring stronger people in each area where you can no longer scale? So, we were really fortunate in those early days to have a lot of leverage from the fact that there were four co-founders; four people who were deep in the business, a major—not just equity stake, but just emotional stake in its success. I think we wouldn’t have succeeded without that, but the business—I’m skipping over a lot here, but because we grew so fast so early, what each of us was going to be able to actually do scalably changed very quickly. Kate actually rolled off stopping full-time in the business about a year in. She loved the early stage, but she wasn’t the person that wanted to be managing a huge team as we navigated growing the business in the growth phase. For Gunnar and me, as I said, we had very complementary skill sets. So, I was quite operational. I was focused on fundraising. Gunnar was really focused on building our influencer program, and doing partnerships, and telling the story of the business, and working on some aspects of marketing. We overlapped on marketing quite a bit. So, it was a really, really powerful partnership for the first two years. Of course, as we scaled, each of those areas that we thought we were really good at, we started finding other people that were replacing them until I had a lot of the executive team reporting in, to me, and Gunnar was really focused on the partnership side. So, it made sense. It was a very natural thing. As that happened, at some point it became more of me being solo CEO, and it made sense for Gunnar to be focused on strategy, and partnerships, and mission. So, he was in a Chief Strategy Officer role. Then more recently, he actually rolled off of that role and is now on the board and no longer day-to-day either, but still very active in helping to drive the strategy of the business. It’s been a real learning experience for me, and I feel very, very fortunate that I think all of us as co-founders were pretty intellectually honest about where our strengths were. Even though technically I’m the CEO right now, I free like my role is really Chief Facilitator. There’s nothing anymore in the business that I can do better than the executives who are reporting to me. So, my major role—I like to think of myself as the most humble person in the company, or at least I hope I am because I’ve had to recognize everything I thought I was great at, there’s someone better at. My role is to make sure we get those right people in the right spots.
Alejandro: Got it. I believe I came across this story. I heard that during the early days, it was just growing. You were talking about it grew quite fast, but you had this workspace that was like 2,500 sq. ft., and all of the sudden, the demand was out of control, and you guys started to move the containers to your own houses and your garages because you could no longer keep up with the others. Tell us about this experience.
Nick Green: Before I get to that success, which itself as you sort of eluded to created some challenges. Let me first say, the first year of the business before we launched had all the makings of a colossal failure. Gunnar and I had each invested hundreds of thousands of dollars of our own cash. Before we brought Sasha in, we had invested in an outside consulting group to build the website. That was a complete flop. We actually were rejected by dozens of VCs in LA, New York, and San Francisco. So, I don’t want anyone to believe that that was a smooth ride to success. It was every bit as bumpy as the first business, and I think if you want to kind of distill lessons, that’s just the nature of entrepreneurship. But we ultimately got really lucky in a sense because the influencers who we had been talking to about promoting for the business, as we were struggling to raise funds and these VCs in very affluent parts of the country weren’t really understanding the mission of the business. These influencers who were bloggers, and YouTube stars, and Instagrammers with huge audiences all over the country were saying like, “What’s going on? We get it. We understand the mission. We know the audience, and the market is out there. Why don’t we invest?” It was this massive inflection point turning whatever you want to call it when we decided to open up our convertible mode to these influencers, many of whom had never done a private investment before. We raised our first million dollars in $25,000 to $50,000 chunks. We ultimately brought in over 200 investors in our first eight-and-a-half million dollars with very little institutional support. The reason we grew so fast was because those same influencers who now are investors in the company went out and told their audiences. Our first office was a little bigger than 2,500 sq. ft. It was probably about 6,000 sq. ft., but it was basically a converted garage. So, it had the big garage doors, and we built our warehouse in the center of that office. So, we were basically working along the perimeter during the day, and then packing boxes at night. Within a few weeks, we were turning that warehouse over every day and a half. We ended up putting storage containers in the driveway. We were being hated by all the neighbors because our parking was taking up all the space. We had FedEx trucks lined up outside the house. It was just total craziness. I think it was three months in we hired our SVP of supply chain, John Winkels who was a former director of supply chain at Kroger, and the guy who had done million-plus sq. ft. warehouse buildings, heavy automation. We truly had no business hiring him except for that he, like a lot of people before and since then really cared about the mission. I remember him coming in, and I think it was probably all he could do not to turn around and walk the other way the moment he saw our operation, but fortunately, was able to overcome the amateur hour and get us on track. We launched a 40,000 sq. ft. fulfillment center about probably a month and a half after he came onboard. So, he stood that up very fast. We now have over 800,000 sq. ft. of space across facilities in Rio, Nevada and Batesville, Indiana. So, we’ve come a long way in the last four years.
Alejandro: Really cool, and we’ll talk about the fundraising in just a bit, but I want to dive in or dig deeper into the influencer growth hack that you guys did. You were talking about that you got in the hundreds, but the influencer concept is somewhat new. I think that especially with social media, this concept has exploded. So, for the listeners that are really out there right now listening to our conversation here, what kind of pieces of advice would you share with them about engaging influencers?
Nick Green: I think the first thing is that you have to engage them authentically, and you have to be engaging authentic influencers. Every influencer, they’ve built a big audience on social, but that doesn’t happen by accident, so they are authentic about something. People are following them because they are experts in something. They are leaders in something. They are thought leaders in something. You’ve got to find the influencers who actually are relevant for whatever you do. We had some celebrities who invested in the business, and I can tell you, we don’t get nearly the impact from a celebrity tweeting about us as we do from one of our health-and-wellness influencers blogging about us. So, we really start to find the influencers that are credible for what you do, that when they talk about what you do, not just when they talk about something random, people will listen, they’ll care, and they’ll have trust. So, finding those authentic influencers is really key. Then for us, it served as a great test of like how authentic is our business? Because these influencers, unlike the investors that we have pitched really do understand the space. They understand the psychology of their customer or their audience, and many of them are themselves would be in the audience, in the target-customer set. Our best influencers are bloggers. Our top influencer has a blog called Wellness Mama®. She’s a 30-year-old mother of six who lives in rural Kentucky and was struggling to make healthy living possible for her family and started this blog to share her experiences and share her insights of wisdom with others. It was a really good witness test for are we on the right track with our business? I would say the first thing is you’ve got to find those authentic influencers. You’ve got to make sure they actually connect with your business and care about it. If you’re having to just pay them, and it’s a completely transactional relationship, that’s likely to show through in the promotion, and it’s likely to not have the same kind of impacts of particularly long-term in building and driving customer acquisition. Then I’d say the other thing that we did that was really unique is that we actually got them investing in the business. So, they were on the same side of the table as us, became partners in the business, real stakeholders. Then if they invested, we let them take a portion of their affiliate commissions in equity. So, when they promoted, of course, we are going to give them upside in the promotion, but we said why don’t we give that upside in the form of additional equity in the company? So, that really doubled-down on creating alignment between the influencers and between us because they’re real believers in our business and align to it authentically. They were super excited to build their equity position, and it really ended up turbo-charging our acquisition in a way that we got to probably a 30-million-dollar runway without spending anything on paid media outside the influencer channel. So, that was our sole one-trick pony if you will because it was so effective.
Alejandro: Really cool. I’m sure talking about the acquisition and the customers, you probably learned quite a bit on membership models, and retention, I think is everything. So, what have you learned about retention?
Nick Green: Retention starts at the beginning in the same way as I would say on the influencer side, it was important to get authentic influencers who really cared about the lifestyle and believed in the mission, and could speak about it credibly. Getting high-quality customers who actually are having a problem solved by your service is the key. There’s always this debate as to whether good customers are born or made, and it’s obviously both, but if you don’t start with someone for whom you already solved a really meaningful problem, it’s really hard to turn that person into a good customer. We haven’t always done that right. I know there were times in the heady early days where we would bring someone in with a really deep discounted offer. We’d give them a free sample to start the trial, or we would sort of camouflage the membership, kind of the gym club model style where you’re hoping that people will just passively continue to stay onboard rather than churn. We’ve learned over and over and over again that that is not the way to build a high-quality business. So, we’ve become extremely disciplined about the types of promotions that we use on the front end, the quality metrics that we look to be leading indicators of how a member’s going to perform, and just real transparency about how the membership works, why it’s valuable, and let people self-select into the membership. What we found is that that creates the foundation to have high retention. Then the rest comes down to just delivering overwhelming value. You hear people talk about the 10X Rule where you’ve got to be doing something 10X better than the next best competitor. Well, if you’re charging a membership fee, I think it almost even has to be more than that. You’ve got to really deliver value. So, we’ve been maniacal about just iterating on the product experience, iterating on the user experience, iterating on our catalog. We call ourselves the un-Amazon in the sense that Amazon’s going to carry 100 almond butters. We only want to carry the top five almond butters. We want to curate instead of having heavy assortment. So, using that as a source of value. Then I think the other thing for us that’s been really huge is creating value for our members that goes beyond this utility. Yes, you’re going to get great prices on organic products. Yes, you’re going to make the membership fee back in savings, and you’re going to discover new products, and you’re going to make your healthy lifestyle easier, but you also are supporting carbon neutral shipping. You’re also supporting zero waste fulfillment centers. Each membership sponsors a membership for a low-income family. So, we’ve tried to also create a community that reflects our values for the reason that we started this business, which is creating access to more people for healthy living and creating a more sustainable future for our planet. We try to bring people into that role where they align to that at an emotional level, feel like they belong to a better way of doing things. I think when it comes time to renew, they’re making that decision not only based on the utilitarian value that they’ve gleaned over the prior year, but also based on the sense of membership in a community of higher values.
Alejandro: Got it. Really cool. We’ve touched a little bit, shifting gears, and talking about the fundraising. You touched on this earlier, but at what point were you like, “I’m not bootstrapping this one. We’re going to raise money, and we need to raise it right now.”
Nick Green: We knew we would have to raise money. It’s an operationally intensive business because of the low-margin structure we had to vertically integrate on the fulfillment side. We do a largely direct procurement from our vendors which requires some strong technology as well as manual endeavors. We knew that we wanted to basically do bespoke work on the influencer’s side which required creating an internal agency. We knew as we started to do paid media that we weren’t going to be outsourcing that because we’d be paying out a transaction fee on the media cost. The economics of our business and the challenges of the e-commerce put us in a place where we were going to raise tens of hundreds of millions of dollars if we were going to get this business to scale. So, it wasn’t a question of if. It was really a question of when. I think the challenge for us, obviously, was when we went on to the institutional investors, they just didn’t see it. Even if we had convinced some of those investors to invest, it wouldn’t have been the right thing because they didn’t really believe in what we were doing. They didn’t get it at a visceral level. Even though when we raised our Series A and our Series B, we did raise from institutional investors. It set the tone for us in making sure we were bringing on people that were truly aligned to the vision that we had, and shared the values of the business.
Alejandro: Nick, how much capital have you guys raised to date?
Nick Green: We’ve raised close to 200 million dollars.
Alejandro: Got it. You were talking about some of the influencers coming. Your cap table literally looks like you went to the Oscars, and you started to pull up your slides. I mean, it’s unbelievable. You have people like Demi Moore. You also have John Legend, Deepak Chopra, Tony Robbins. It’s unbelievable. On the VC side, you have investors like Greycroft, D’ventures, Kapor Capital. Tell us how you found them and how you closed them as investors.
Nick Green: On the influencer side, it’s a very small world. A lot of these health and wellness influencers know each other. A lot of celebrities know each other. So, we got the ball rolling, and then really, the story and the mission kept that snowball building. People that care about this space, that care about access, and that believe in democratizing access to healthy living came onboard, and kind of in droves. So, it was an outbound process initially but rapidly became an inbound process. And those were small checks. So, we have hundreds of people that combine probably invested less than 10 million dollars total in the business. Then we have a few investors on the institutional side that invested dramatically more. So, I would say with the celebrities, they kind of talked to one another and wanted to get onboard, and then provided a certain type of support that’s been really valuable. The health and wellness influencers have provided huge support that’s been really valuable and also have told people about it. Then on the institutional side, I think once a business starts having success, that game becomes very easy to play. The early stages are inherently speculative. Do they believe the story or not? Once you have the numbers to prove it, it gave us a lot of optionality to pick the right institutional partners. Greycroft has been amazing, Dana Settle. One of the founding partners is on our board, and then in these partners, the Endless Group which drove our Series B has been an incredible partner as well. That is the largest investor in the company.
Alejandro: Really cool. Obviously, it took some rejections to get this cap table together. You were alluding to it before that you were rejected quite a bit, so just out of curiosity so that our people listening can really understand that you need to get rejected before to the yes. How many investors rejected you?
Nick Green: It was at least 50 VCs back at the seed round. Even once the business was on a rocket ship, there were still rejections. Then what you discover too is you end up rejecting VCs and other investors because they’re not the right fit for you. So, I don’t look at any of that. There was a time when it was very, very hard, especially when I felt like the business was an exceptional risk, but that pain of rejection, I think starts to lessen when you realize whether it’s you or it’s them, if it’s not the right fit, it’s not the right fit.
Nick Green: If the business is going to be successful, yes, you need capital, but you also need capital from the right kinds of people who are going to add value in other ways and are going to be really aligned with where you want to take the company.
Alejandro: I think that rejections, they also help in terms of feedback and how you can optimize the story, and perhaps some holes that you perhaps haven’t thought about. So, in your case did you go back, or brainstorm with the team, or took a look at your deck, and then perhaps tweaked it a little bit based on what you were hearing if there were certain patterns?
Nick Green: Yeah. I think it’s in both. You iterate on the sales pitch because you may not be communicating effectively what the business is. The biggest thing there for me, and this has been a lesson as a CEO in communicating to my employees and executive team as well as in fundraising is just maniacally simplifying, distilling things down, not clouding the picture any more than you need to. Even though investors say they want data and they want support, at the end of the day they also want a really simple narrative for why it works. So, that was the biggest lesson there. I think the other thing like you said is getting feedback about like if some area of the business is going to be challenging. The investors who rejected us early on, part of it was they didn’t see the opportunity. If you’re a VC living in San Francisco with Whole Foods all around you and plenty of disposable income, you’re not viscerally experiencing what it’s like to be a middle-class mom in middle America. But I think another big part of it was they did see the challenges of building a scaled e-commerce platform at very low margins. So, a lot of those challenges they brought up to us were things we were underestimating. It was really valuable feedback that prompted us to make some of the early hires on the merchandising side, on the operations side. We still made a lot of mistakes, sometimes, in spite of warnings, but we were able to at least heed some of those warnings and use them to bolster the business. I think the big lesson there is whether it’s from the fundraising process or anywhere else. Entrepreneurship, you’ve got to be facing the facts, like you are going to sink or swim and you have everything on the line. You can’t deny gravity, so anything that is true, you have to be openminded intellectually honest enough to recognize and then incorporate. I call it being reality-based. It sounds like a simple concept, but it’s actually really hard to do. I think all of us to varying degrees are creating different stories in our heads to protect our egos and avoid pain and avoid confronting challenge. For us, we had a culture of feedback internally. It’s a business now, and I can tell you that as co-founders and for me as a CEO, getting candid feedback and being receptive and acting on it from investors or anyone else has been like one if not the key to whatever success we’ve had.
Alejandro: Right. Give us a sense, Nick, of how big the company is now. Perhaps products that you have or orders.
Nick Green: Yeah. We did nearly 200 million in sales last year. The business is growing dramatically. We have over half a million members on the platform, and those are paid members on the platform. Another half a million that have gotten free memberships. I think we estimated last year that we shipped out something like 25 million healthy products. Fifty percent of our membership base is in the Mid West and the South East. So, we’re targeting the whole country, not just the coastal leads. The average household income for our members is about $75,000, so we’re really having an impact that way. The truth is, we’re just getting started. The demand is not going to be a problem. Organic groceries are growing at 4-times the rate of conventional. The shift to e-commerce everyone is seeing is more and more people want to order these things online. For us, we feel like it’s our game to lose. When Amazon bought Whole Foods, I think it was the end of an era in the natural organic space. Now Whole Foods carries Honey Nut Cheerios and is not doing as much innovation on the product side as Amazon echoes on the shelf. It’s really opened up an opportunity, I think, for us to step into the leadership space in this world and be the trusted platform for healthy living. We’re really happy with the growth we’ve had to date, but also, we see this as the first out of the first inning in many ways. We want to build “the” leading platform and “the” trusted platform for healthy living.
Alejandro: You were talking about Amazon. They’ve had tremendous growth, and you were alluding as well with the acquisition how this space is changing. How do you see e-commerce as a whole? Where do you see it going?
Nick Green: I think we’re still in the early stages of e-commerce for consumer package goods and for foods specifically. You can see other verticals where for various reasons, it’s been easier for e-commerce to grow. I think food is a little bit more complicated, especially perishable food, but even nonperishable food which is what we do. I think it’s been delayed relative to other categories like books, electronics, even fashion to some extent. But I think everything’s going to move online. I think the problems that have delayed the shift are going to be solved. I think they’re already being solved. I think the future will still be some hybrid of order online, pick up in store, or delivery, or our fully commerce kind of model. We don’t feel like we have to solve the whole problem. Like 45% of what people buy in the grocery store today is non-perishable products. You may want to touch and feel the avocado before you buy it, and with fresh food, you kind of have to have local distribution, but for the 45% that’s nonperishable, it really should not be coming from a grocery store. A much more efficient model that takes out steps on the supply chain is exactly what we’re doing. So, I think the future of nonperishable grocery is going to be something like what Thrive is doing. Then I think the megatrend that is going to really revolutionize a lot of aspects of retail in general, but e-commerce especially is conscious consumers, and that’s the real bet that we’re making is that people want healthier food for themselves, healthier products for themselves, cleaner products with less toxic ingredients with more ethical supply chains, and they want to be part of a community that is aligned in their values. That’s no longer just health for their family, it’s also sustainability for the environment and fair trade for workers and for labor, and real transparency in supply chains. I think as people look at what’s happening with climate change, and they look at some of the political volatility in our world, I think a lot of people are just waking up. So, that phenomenon of conscious consumption, I think is going to transform the way food retail especially works, but also other industries like fashion. We feel like we’re really positioned to be that platform for conscious consumers when it comes to their grocery.
Alejandro: Got it. Nick, this is a question that I always ask the guests. The experience that you have is remarkable. So, knowing what you know now, let’s say if you could go back to the past and give yourself one piece of advice before you were launching a business, what would that be and why?
Nick Green: I would give myself so much advice. The truth is my earlier self wouldn’t have listened to it. A lot of this stuff you just have to learn. I think the biggest advice I would have given to myself is to be gentle with one’s self. Like the path of success is filled with failure. Each of those failures helps you build the next step. Be humble, and don’t be hard on yourself. Take those failures as learning opportunities, and know that if you keep going, if you’re resilient, and you’re headed in the right direction, you can do some really, really big things. I think that has been the key to my success. I would say I’d give one more piece of advice which would be don’t try to do it all yourself either. Having co-founders has been the gamechanger in this business. Having great investors and partners has been the gamechanger in this business. Having mission-aligned leaders and team members has been a gamechanger in this business. Like I said, I feel like my job now is Chief Facilitator. So, I’ve learned a lot. I’ve gotten a ton of opportunity, and it’s been super fun, but also super challenging. Now, I really feel like the business is at a stage where it’s no longer me driving the value. It’s really this amazing team that we put together that’s driving toward the mission.
Alejandro: I agree. It’s like the saying: you can go faster alone, but you can go farther when you can go together. I absolutely agree.
Nick Green: Absolutely.
Alejandro: So, Nick what is the best way for folks that are listening to reach out and say hi?
Nick Green: I’m not on any social media. That’s another secret to staying focused. But, if people want to shot me an email, it’s email@example.com. If you’re interested in learning about opportunities at Thrive Market, we have a jobs page. We’re hiring quickly, especially for talented engineers. If you’re interested in becoming a member, go online, signup for a trial. You can do 30 days free to see what it’s like. We have the best natural and organic products on the market, and they’re at 25% to 50% off.
Alejandro: Really cool. Well, Nick, thank you so much for being on the DealMakers show.
Nick Green: Thanks for having me. I really enjoyed it.