Episode #230: Ryan Lupberger, Cleancult “There’s No Other Brand On The Market That Can Sit On Shelves And Be Zero Waste”
Guest: Ryan Lupberger is Co-Founder and CEO of Cleancult, a startup delivering effective, natural cleaning products in sustainable packaging through a revolutionary refill model.
Date Recorded: 6/10/2020 | Run-Time: 48:26
Summary: In today’s episode, we’re talking cleaning. Sustainable cleaning products to be exact. We talk about Cleancult’s origin story, zero waste packaging, and products that actually work. We discuss getting involved with Parallel 18, a Puerto Rican accelerator that was essential to network building, and tapping into the strong pharma, science, and the R&D community that Puerto Rico has to offer.
We dig into the journey of iterations on product and packaging, and the ‘aha’ moment and decision to offer soap refills in milk cartons, the challenge that idea posed, and the custom machinery and technology that helped make that a reality.
Comments or suggestions? Email us Feedback@TheMebFaberShow.com or call us to leave a voicemail at 323 834 9159
Interested in sponsoring an episode? Email Justin at jb@cambriainvestments.com
Links from the Episode:
- 0:40 – Intro (Cleancult.com/meb)
- 1:43 – Welcome Ryan to the show and his origin story
- 5:38 – Early prototypes for selling the products
- 7:44 – Developing the products
- 10:09 – Moving to Puerto Rico
- 11:48 – Moving off the island after the hurricane
- 14:40 – Getting into consumer brands
- 16:00 – Challenge of putting soap in a milk carton
- 19:37 – Increasing sales and growing the market
- 25:24 – The tinkering process
- 29:27 – Ideal customer segment
- 32:23 – Mix of direct to consumer and in-store sales
- 33:57 – Stores that are ideal for distribution
- 35:05 – How COVID has impacted the business
- 36:33 – Status of the company today
- 38:16 – Future of the company and optimal product roadmap
- 41:16 – International market interest and strategy
- 43:37 – Most memorable part of this journey
- 45:44 – Most memorable investment
- 47:03 – Learn more at Cleancult.com hello@cleancult.com and ryan@cleancult.com, discount at cleancult.com/meb
Transcript of Episode 230:
Welcome Message: Welcome to the ”Meb Faber Show” where the focus is on helping you grow and preserve your wealth. Join us as we discuss the craft of investing and uncover new and profitable ideas, all to help you grow wealthier and wiser. Better investing starts here.
Disclaimer: Meb Faber is the co-founder and chief investment officer at Cambria Investment Management. Due to industry regulations, he will not discuss any of Cambria’s funds on this podcast. All opinions expressed by podcast participants are solely their own opinions and do not reflect the opinion of Cambria Investment Management or its affiliates. For more information, visit cambriainvestments.com.
Meb: Howdy podcast listeners, another fun show for you today. Our guest is co-founder and CEO of Cleancult, a startup delivering effective natural cleaning products in sustainable packaging through a revolutionary refill model. In today’s episode, we’re talking cleaning, sustainable cleaning products to be exact. We talk about Cleancult’s origin story, zero-waste packaging, and products that actually work. We discuss getting involved with Parallel 18, a Puerto Rican accelerator, and then tapping into the strong pharma science and R&D community that Puerto Rico has to offer. We dig into the journey of iterations on the product and packaging and the aha moment in decision to offer soap refills in milk cartons, the challenge that idea posted and the custom machinery and tech that helped make that a reality. Listen in on this great tale of a classic entrepreneur’s journey. PS, if you go to cleancult.com/meb, they’ll even give you 25% off your first order. Please enjoy this episode with Cleancult’s, Ryan Lupberger. Ryan, welcome to the show.
Ryan: Thanks for having me.
Meb: So coronavirus-related, where are we talking to you from?
Ryan: Talking from Boulder, Colorado, where I was born and raised.
Meb: I’m a fellow Colorado native. I grew up partially in Littleton and even did a summer in Boulder. I think I took one class. I lived with three girls. I took flying lessons and worked as a carpenter and otherwise had probably the best summer of my life.
Ryan: I love it. Yeah. Most people that come for a summer never leave. So impressive that you left.
Meb: I think it was up on Pleasant Street right on the Hill.
Ryan: Yep. I used to play soccer there all the time. Small world
Meb: Went to many a Buffalo game. One of my brothers was a Buff’s grad. My dad was a Buff’s grad. My whole crew is in Colorado now. All right. So let’s talk all things cleaning. You are the founder of Cleancult of which I am an investor and customer, but let’s take a step back. I wanna hear the origin story. You studied at Babson. Is that right?
Ryan: Yeah. So born and raised Boulder, I’ve always been a nature guy, always loved kind of the world. So eventually I actually found my way and lived on The Hill actually for a summer. I was 18, worked for a company called The Unreasonable Institute and also had probably the best summer of my life, you know, live with 22 entrepreneurs literally next to Pleasant View Street. So we fell in love with kind of this world of social entrepreneurship, what was it like to combine impact and also making a highly profitable business. So I kind of fell in love with that space, ended up at Babson.
People went there to take over family businesses, went there to build really game-changing consumer goods, really every facet of entrepreneurship and continue to fall in love with it. Saw kind of every spectrum at Babson, again from the biggest family businesses of the world, all the way to some really talented finance folks and kind of fell into cleaning. So sophomore year…and again, feel free to stop me whenever here. About sophomore year, I looked at the back of my bottle of laundry detergent and didn’t see any ingredients listed. So I was like, “Why is this the case?” Did all this research and there was just a ton of issues. There’s really no regulatory body currently in the U.S. that actually regulates what goes in our household cleaning products. So you have the EPA, you have the FDA, and no rules to relate it to any household product.
So you could have oil, you could have carcinogenic chemicals, you could have literally anything, and there were in quite a bit of formulas on the market. And again, no regulation, so a pretty dirty space. So I was like, okay, great. I’m finally doing my clothes in my dorm room kind of place there. I was like, I’m gonna look for the natural cleaning products in the market and try them. So I tried Method, Seventh Generation, Meyer’s, you name it, I tried it. And I didn’t think they worked that well, didn’t really understand their ingredients. And then the last thing it’s like, I never got why better-for-the-world brands had plastic. They claimed that they were sustainable, they claim that they were plastic-free and you just go down the list, but yet they used a massive amount of petroleum-based plastic packaging.
So there was always this major disconnect in my mind. Fast forward about a year, and it’s like, look, I think we have a real alternative and a real option here, is what if we could create natural cleaning products that really cleaned, that had ingredients that I could trust and actually understand, and that used zero-waste packaging. So that was about…what 2015, 2016. And it was like, look, I really think we have something here. And then we saw the wave of Casper. We saw the wave of Harry’s the wave of Warby, the wave of Allbirds, and no D2C brands in the household cleaning space. Is that I think partly for unit economics purposes, partly just because no one figured out the way to make it work.
So there was no real brand that was kind of using online world, the D2C world, Instagrams of the world to be able to attract customers. Right. It was simple retail. It was boring, not a lot of innovative branding. And we were just really excited about the space. So I still don’t clean. I didn’t clean back then, but I really fell in love with the opportunity.
Meb: Most people would probably stop there and just go to the store and say, all right, I’m just gonna find whatever is close enough. But I assume at this point you said, all right, I’m gonna go make my own soap, my own what. What was the next step?
Ryan: Full transparency, we were having a party that night and got fairly intoxicated. And I was pretty hungover the next morning. And we had a pitch competition at Babson. So it was about 8:30 in the morning, the pitchers was at 9:15 had said, look, this is what we’re doing, but there’s nothing. There was no structure. I was pretty delayed, to say the least, in making it work. And I was going to Dunkin Donuts right around the corner to get some coffee. And I saw this box of Joe if you’ve ever seen it. So it’s this cardboard box that has like 40 servings in the plastic lining. And we found one and I was like, this light bulb went off in my head, “What if I use this, took off the branding as our prototype? This is a cardboard liquid container with natural ingredients and natural products.” So I bought it and I took off the brand right before we pitched that pitch competition and we won. We won, I think it was like 5, 10 grand. Customers would come up after this pitch to say, “Can we test or smell your laundry detergent?” And I would say, “No,” because it was full of coffee at the time.
Meb: It’s a new coffee flavour.
Ryan: Exactly. I think it was really lucky. That was the impetus. It was like, “This isn’t just in our head, there’s something real and meaningful here.” And it really resonated with the 50 or 60 people in the audience. So after that, we said like, there’s definitely a market here. Can we actually figure it out? It took us about two and a half years. And it was a long winding road to get to where we are right now. Our first take was laundry pods in a very small cardboard box, that was 2016. And we funded the Kickstarter and it was great, but made no sense. It was like 20 pods in a box. It was plastic-free. We nailed the ingredients. We didn’t nail the brand. On our first box, we actually had pretty terrible spelling errors. So we had the word “brightens,” but spelt it B-R-I-G.
Ryan: Half the startups nowadays are spelt with misspellings or weird formations of the name anyway. So that was probably not the worst of the ideas. How you even come up with a formulation? Were you doing this, where you partnering with scientists? How did it even begin?
Ryan: There’s a long evolution. So the first stage, we work with a lab in California and we said, ”Look, we need natural ingredients. We need really effective products. How do we do this?” And they said, ”Look, we think the best first take is gonna be a laundry pod.” The format of that allows blending, which is a lot easier when you don’t have money. Then like a big tank for liquid blending. It’s much more complicated when you get into liquids. So we had our first laundry pod and we spent about six months developing the formula. Some of it was my own research. Most of it was the lab. We engage a couple of basically PhD scientists that early on, just to figure out what was the progress and what was literally the process. And we launched.
So launch with the first product, it was pre-ordered on Kickstarter and it worked. It funded. We have about 300 subscribers at that point. This was 2016, but the sentiment is the pods dried up in the box. We promised a lot more than we could in the products to make because of the natural ingredients, they were about 3X more expensive than we committed to, so we lost all of that very early friends-and-family money in just literally fulfilling the products. And the model didn’t make sense. The price point wasn’t there, the real differentiator still wasn’t there. We were still doing laundry pods. That was slightly better branding you could argue, but still nothing super relevant.
And to some extent we kind of paused. So I actually travelled around the world for about six months thereafter. I went to Russia, India, China, and it was still there. The opportunity was still there. And I was like, I really think we have something, but it was in stall. And actually when I was in India, did this accelerator application for an accelerator called Parallel 18, which is an accelerator in Puerto Rico of all places. Heard of it from friends. And they said, ”Look, we really think you could go with this. Do you wanna move to Puerto Rico?” I was like, ”Like, I don’t know really what Puerto Rico is. I don’t know the history.” Don’t have much context, but I love Latin America. I spent my gap year before school in Chile and just loved the culture. And we applied.
So three months later, I was back in the States and we got a letter to say we were accepted. So basically packed our bags. And this is…at that point, I finally got one of my best friends in the world, Zachary Bedrosian, who’s the co-founder and CTO at Cleancult to get on board. He saw enough traction and progress and he said, ”Look, I can get behind this.” And he is a phenomenal technology and brand builder, so he built the entire site, the brand, everything you see today. He’s a brilliant guy and, again, still my closest friend in the world. And so we moved to Puerto Rico.
So we started an accelerator and this was very opportunistic at the moment. We saw Puerto Rico because of the grant funding, because of the support, very similar to like a tech stars of the world, but didn’t think of it for much more than that, really didn’t have the intention to stay long after. And we fell in love. We fell in love with the Island. We fell in love with ecosystem. And not many people know that over 70% of the world’s pharmaceuticals were actually based on the Island. Then in the early 2000s, when Congress changed this tax loophole, they all had to move.
So you still have a major pharmaceutical presence, but nothing like it was. So you had all these top tier universities, PhDs scientists, R&D talent on this Island with all this grant funding from the government and from the U.S. government, so from both Puerto Rican and U.S., with really out many places to go. So again, we didn’t know anything about this beforehand. We landed and just developed this really phenomenal network. So we hired our PhD chemical engineer, which is still the head of R&D at Cleancult. He is in Puerto Rico still. We received over about 300 grand in grant funding from the National Science Foundation and the Puerto Rico Science and Trust. And it was just like, look, I think we’ve stumbled on this really interesting and alternative place. We launched then that Q4 on Amazon…Q3 I think it was and made it’s number two for non-toxic laundry detergent.
And we actually produced on the Island and we were like, look, there’s real speed and momentum gaining here. We hired our first two people on the Island and then the hurricane hit. So that was what…I think it was like October of 2017. It’s been a while now. So yeah. And then got hit with this hurricane. So struggled to fulfil, struggle to actually ship products off the Island. Our producer was actually fine, but the issue was the trust from investors, the team health, and then just literally getting products off the Island in a cost affordable way. And the thing called the Jones Act that actually taxes ships going from Puerto Rico to the U.S. for whatever reason. And it’s this very odd tax loophole that it’s really expensive to get products out of Puerto Rico, but that’s finally being changed now, which is really exciting.
So at all this excitement, all of this growth, and then this massive natural disaster wipe out a lot of the progress. But looking back, we still didn’t have it. Still, it was effective laundry pods with better branding, but it wasn’t anything truly a game-changing yet. It was a good product, it was a good market, but it wasn’t there yet. So went back to Babson, finished out that year. We did another Indiegogo. It was like 50 grand in sales at that point. It was still very minimal, but it still felt like there was something here. So graduated. We then went to MassChallenge, which is an accelerator in Boston. And at this point, it was this or nothing. If we didn’t close a seed, a pre-seed, whatever that round was, we wouldn’t continue it. And I had a really exciting conversation.
So one day I was on the phone with an advisor and he said, ”Well, you could put soap in a milk carton, but that would be dumb because no one can do that.” And it was like this light bulb went off. So about Q3 of 2018, it was like, this is it. This is the differentiator. This is sustainable. This is affordable. We need to be able to do this. Everything changed. Everything. About two or three weeks after we actually won MassChallenge, got a fair amount of grant funding there. We closed a little bit of pre-seed funding, I think is about 200 grand at that point. And what we did is create macaroni and milk cartons. It was like this light bulb went off and I was like, this is what we’ve been missing. The true differentiator that we haven’t seen in the market that we figured out could completely expand the product suite from all-purpose cleaner dish soap, hand soap, laundry dishwasher, etc. And it’s just a beautiful form factor. And as we were doing more and more research was…it’s beautiful to merchandise.
So if you look at milk card and it has a width of about 2.2 inches for a 16 ounce and 2.75 inches for a 32-ounce refill, and that’s about half the shelf space, it takes for Method gusseted bag or a Method or Meyer’s or a leading natural cleaning refill. So you not only get the zero waste side of it, but you also get this incredible productivity on shelves and retail, better than anyone else in the market. So it was like this aha moment. We ended up putting macaroni in a milk carton and sealing it, making it look real and going to investors. So thankfully the timing was really perfect then. We actually got invited to what’s called the Next Great Consumer Brand and they saw the milk carton and really fell in love with it, but it was all branding. We hadn’t actually produced and or figured out how to put soap in a milk carton at that point. It’s actually wildly complex, which I’m happy to go into.
We’ve got invited to this Next Great Consumer Brands. I met a guy named David Roger, who is the CEO of Felix Gray. And he said, ”I like your shoes.” And I said, ”Thank you. I’m Ryan.” We got to talking and he had a Babson investor. The Babson investor was the name of Dave Heath who’s the CEO of Bombas Socks, so wildly successful D2C sock company, and said, ”Look, I think it would be great if you met Dave. He’s a really good consumer. He’s an investor here. He’s a Babson guy. There’s not too many of you out there. You should absolutely chat.” And I was like, ”Great. I’d love to.” So to kind of fast forward. About two months, we still had started to figure out how to put soap in a milk card, and this is October of 2018. Met with him in Union Square area for lunch. And he said, ”Look, this is it. I’m gonna come in. I wanna invest. And my 60 angels are very active because we’ve done very well as a brand. If this happens, then I think you’re gonna be able to close your round.”
Basically invested and it changed everything. So we closed the round about, I think, like what eight weeks after I had over 100 meetings with hundreds of angels in New York City. And it went from Angel to Angel to Angel to Angel accordingly and all with these little soap in milk cards, but it was macaroni. Again, we hadn’t yet figured out how to do it. And it was really interesting just from like a thought process.
Meb: Did you tell them it was macaroni in there?
Ryan: I would tell them and just say, ”Look, we’re finalizing our machinery. We’re finalizing XYZ, which is true.” But we didn’t realize the level of challenge it is to put soap in a milk carton. It’s one of the reasons no one else has ever done it.
Meb: Yeah, let’s hear it. Why is that so challenging? It doesn’t seem like it’d be challenging at all.
Ryan: Yeah. So it turns out that in the U.S. we have a law that every time you have a non-food product, so soap, mouthwash, sunscreen, etc., every time that hits a food machine, that food machine can never again be used for food period. You can’t clean it and you can’t replace it. Because of the toxins because of the potential, I don’t know. Micro bacteria whatever it is, you can’t. So no contract manufacturer in the U.S. would allow this period. So I literally travelled for like four months to trade shows, contract manufacturers. I did like a U.S. road tour, no one would do it. Not a single contract manufacturer would allow it.
Then I went abroad, no one period. It’s one of the reasons no one else has ever done it is because you literally have to build your own machinery. So this was like November, December. And at the same time we’re fundraising, we closed it. We said, okay, we now have the resources to be able to buy, make, create a machine, but it takes all this seed funding that we thought we could do in marketing, hiring, etc., and puts it to machinery. You’re putting the bet for your Angels on something that’s still not sure if it’s gonna succeed. So we were actually pretty oblique and, like, not very transparent at that point. And I think what we’ve found is like there’s value in transparency up to a point, but also how do you control a narrative?
And to find that balance, yeah, it was a challenging time because it was this whole tech challenge that we didn’t know would ever happen. So finally figured out a machinery manufacturer that would help us create this machine, ran into a host of other issues. So for example, and this is again, widely known. If you use what’s called a piston filler, which is the most standard carton filling technology, it foams soap because you shoot it really fast. How do we create a filler that doesn’t foam our product? Because it doesn’t happen with orange juice or with milk or with anything else that you hear in cartons. Fast forward, six months, we had a machine. We launched our machinery and cartons March 1st of 2019 or February 1st or something.
Meb: By the way, how did it not foam it? Is that like a trade secret? Or is it like spray it in or just go really slow?
Ryan: Yeah. It’s one of the proprietary things that we figured out.
Meb: Good for you guys. That’s gonna end up being your number one IP is Cleancult it’s gonna be irrelevant. You’re gonna have this new beer system that doesn’t have any foam and that’s gonna be a $10 billion idea.
Ryan: Yeah. Well, it’s so funny because we really think this is the value. Yes, it’s cleaning products now. Yes, that’s our main focus. We can go into personal care. We can go into shampoo, body care. You can just keep going down the trend and, like, very much see a possibility of us being $100, $200 million in sales brand in the next two, three, four years. But then it’s asked the question, do you start to expand into other products? We were the only company in the world right now that can put soap in a milk carton and has the technology to do this. So the question is, do we go to all these new places? Do we go to shampoo? Do we go to sunscreen? Do we go to personal care?
And also trying to figure out the balance there. Because if you have, I don’t know, $300 million-plus of sales, it’s really challenging to partner then with a Unilever or with a Procter & Gamble or with Henkel or SC Johnson because you’re too big. And not to say that’s our end goal, but it’s definitely in the back of our minds is partnering with them, for them to scale our distribution, our impact, our production, etc. It’s really hard to do at that big. So it’s a good problem to have at that point. We’re not there yet, but that’s just in the back of our mind, is that to your point, you have this whole technology suite that the products are really just beginning.
Meb: All right. So you figured out how to put soap in a carton, then what?
Ryan: Yeah. So then figured out, okay, we have a full product suite partially with our R&D team in Puerto Rico. We’re about five people now. Hired a growth marketing manager from BarkBox in New York City who’s just a really phenomenal growth marketer. Launched with our first product suite, but it was plastic refillable bottles because we didn’t have resources at that point to do anything more because of all the resources spent on this machinery. And we literally have this massive machine sitting on a floor in a warehouse. It’s, to some extent, ridiculous. And at that point, we didn’t know a lot about a lot of financing options because we were too early to actually take that cashback on our balance sheet, which we’re finally doing now, but that was a huge, huge challenge early on with cashflow with that. So we started to produce products.
So we actually had an early contract with The Container Store that saw our colours and saw our cartons and loved it and said, “We’d love to bring you in.” And they did. Most people don’t know The Container Store it’s actually very small. So it’s about like 50, 54 stores. So, you know, it was a good account. It was another proof point, but it was still…it didn’t really move the needle forward. And we launched on D2C and we started gaining a little bit of momentum. We actually got to launch in Coles soon thereafter, which was very alternative. This is all inbound interest. We didn’t really have a retail strategy at that point. And people loved it. I think that people started to see the milk carton and started to get really excited. The formulas weren’t all that good at that point, to be really honest. I think we focused too much on the packaging side of things because we were so obsessed with this value prop.
It was like, “Soap in a milk carton, this is everything,” and it is, it saves about 90% of plastic. It’s incredibly recyclable, it’s recycled and recyclable paper. It’s a phenomenal increase in betterment in the industry, right? Imagine if you go to a filling place, a filling contract manufacturer, you have to ship with these big plastic bottles. So imagine you’re in a truck, you have 30 pallets of these massive, big plastic bottles, but they’re empty. You’re shipping air. And we don’t have that because our cartons ship flat. So we can have one truck for every 26 trucks, which is a huge win and that saves on, basically, the carbon emissions and shipping and it saves on all these different pieces. But I think the downside is that we didn’t focus on the formulas as much.
So I think our hand soap was superb. I think our dish soap needed work. Our all-purpose cleaner was good but needed a little bit of work. We launched with a lot of products. We had five starter kit products, dish, hand, APC, dishwasher, and laundry. And I think looking back, we could have also probably started with one if we just had an all-purpose cleaner with a refill, that’s just as powerful. And we could have grown the subscriber base little by little, rather than launching with five and then tinkering for the past year and a half now. But look, we gained traction. We started to do Facebook and Instagram ads got invited to a couple of trade shows. We had some good success with a viral video that we launched about our team in Puerto Rico. We had over 20 million views across platforms. That was good. It was paid behind it. So it wasn’t organic, but it was partly organic.
So we put about 10 grand to get the initial momentum and then continued on Facebook and Instagram to push paid, spend behind it. But it was good. And it was at a time in the world that it still worked. And I don’t know if that’s the case anymore, just given all the noise, but look, we gained subscribers. We got closer and closer and I think we continue to develop our brands. So we launched our rebrand Q2 or Q3 of last year in 2019 and looked really nice and got a little bit more subscribers and a little bit more traction hired a couple more people on our teams. So took another person from BarkBox and we closed on our kind of bridge round of another 2 million led by Box Group, which is a really phenomenal team and investor in mostly consumer, but a ton of software now, who did Warby and Harrys, a lot of the leading D2C brands in New York City and continue to grow.
And I think at that point, our Angels was numbered about 70. And I think it’s been a real win for us, but also real negative. I think mostly it’s been beneficial to have so many talented people on the cap table. And what it does is you got a ton of resources. You have a ton of ability to hire. You have a lot of ability to raise additional tranches of capital because you’re not tied to one big investor. Downsides, it’s a lot of cats. You are talking to people a lot. You’re making sure they feel comfortable. You’re making sure they’re informed. You’re creating the structures. So it’s a lot of time, but I think looking back, that’s been a huge, huge benefit for us. But it’s just…it’s a really interesting path because overall you have much more control of your business because you do not have a board control seat to the same extent.
So look, I think it was good. It was the right path to take. Closed about 4 million at that point and continue to grow. There was no silver bullet. We had massive, massive leaking problems in our curtains and finally are just fixing it now. And I think one of our biggest defensibility or defensible aspects of the company is on the startup level you have to invest a massive amount in machinery because you literally have to build it from the ground up. And from a strategic perspective, it’s so much leaking in these cartons because soap, what it’s designed to do is attack the seams. It’s meant to attack dirt and attack grime and do all these different things. So when you put it in a paper product, it’s very challenging to get it right.
So we had like 30% leakage in our all-purpose cleaner in the beginning and then like 30 or 10 on the hand soap and half of our shipments were leaking to customers. It took a long time to fix. And big strategics just can have those issues because it would destroy their supply chain. And to some extent it destroyed ours, but it mattered less because we’re small. We had 10,000 subs at that point. So yeah. So 2019 had a good year.
Meb: It’s a classic entrepreneur story because it’s 3 steps forward, 5 back, 1 forward, 4 back, 10 forward. And it illustrates the agony and ecstasy of building a business. You talked about a couple of things. You mentioned early days, the product wasn’t where you’d wanted to be or where it is now. What were the main things that made that change? Was it R&D? Did you just have to tinker and iterate? Was it mainly the ability to clean? Was it the smell? Was it the aesthetics? Like, what was the main thing that’s on the product that improved so much?
Ryan: Yes. We’re literally still doing it today. So it’s been very much endurance and optimization. I did not come up with that. It’s like a well-known talk. It’s called the messy metal. It’s one of my favourite videos out there on the market. It’s messy. We’ve gone through seven product iterations. We came up with our first product. It was bad, but it got us out there. Our second product was better. It still had some issues. Our third with the full suite of plastic cleaners and the refills was better, it had a defensibility in the market, but they leaked. The brand wasn’t there. Then we had introduced new formulas. And then finally the cartons aren’t linking and the formulas are better, but natural cleaners are really challenging to get, right, because they’re, by their very nature, unstable. And if you throw in essential oils, like, you know, lemonade, which is a really powerful grease cutter that actually messes with our base ingredient, the coconut oil and they fight sometimes. So then you get separations in the formula and then the customer gets it and it’s this really cloudy goopy gunk. It’s like endurance and optimization, and then finally had that right. Let’s say formulas are getting really close. We have great looking cartons, but we still have plastic bottles.
So September of 2019, we had this huge customer. Outrage isn’t the right word. But they were frustrated. Yes, you’re taking out plastic, but then why are you starting with plastic bottles? That just doesn’t make sense. So we spent a lot of resources. And now we have, in our opinion, the most attractive last bottle of soap you’ll ever need. So we have truly gorgeous permanent glass bottles, enhanced soap, dish, all-purpose cleaner, laundry, and dishwasher. That was super difficult because we had to create custom moulds and MOQs on custom glass. We have really beautiful Silicon and glass. It’s basically shatterproof. It’s very shatter-resistant, a similar material that you have in your windshield, in a car. So when you break it, it doesn’t actually break. That took another huge traunch of capital to get right.
And the question is, we’re trying to perfect 10, 12 products. When looking back again, it probably should have been one. It probably should have been one, all-purpose cleaner that was glass and then one refill. And then we slowly introduced, but we didn’t go that route. Huge difficulty from a cashflow basis. When you’re that new, you have to outlay cash before you get the products. So let’s say we order 200,000 glass units, that’s a massive amount of capital for a startup at that stage. So finally, the endurance and optimization. And now that we kind of fast forward a little bit, we’re now nationwide in CVS, we’re nationwide in Coles, we’re going into really more key retail customers across the U.S. in a really big way.
And the biggest feedback from the past six months is that our packaging wasn’t there is that, yes, it’s pretty, but it doesn’t communicate the efficacy in natural ingredients enough. So we’re now relaunching our packaging and that’s coming out in June, July, August. And we’re launching a great new liquid laundry detergent that, in our opinion, is the most effective in the market. And it’s just terrific in the natural market. We never really will or have the ability to compete with the leading petroleum-based alternatives. They’re just, they’re so effective, even if you’re not great for the world. So we’re finally getting there. It’s just been again, time and time again, every single part of this had to be right and it had to be right because customers aren’t willing to sacrifice in cleaning products.
Now you need your shirt to smell right. You need your grease to get out. You need your dishes to be clean. You need your hand to be moisturized. So it’s just been a long time. I’m probably more excited now than I ever have been because it feels like everything is finally coming together. And we’ve created a really beautiful innovation stack. So if there ever another brand out there, they would have to do the glass, they would have to do the refills, they’d have to do the machinery, they’d have to do XYZ. And that’s very difficult to do. So given our IP portfolio, we really think we’ve created something lasting, but it’s been a long ride, not been easy.
Meb: If you look at kind of your ideal customer and you put, kind of, three main categories of there’s the, does it work at doing its job? So cleaning. And I feel like for this category, like you mentioned, it doesn’t have to be the best. It just has to be good as to do the job. Second would be the natural component. Is it healthy for the consumer, as well as the environment? Lastly, being the sustainable part. What do you think is the most important to your consumers? And if you had to rank order or kind of where they fit in that differentiate from the person that’s just going to the store and picking up a handful of tide pods and everything else.
Ryan: Yeah. So another challenge is, how do you rank stack those? It’s that if we know that all three, and you couldn’t have said it better, those exactly three that we need. We need the right ingredients, we need the right sustainability, and we need the right clean. And you have to pitch all three of those. It’s challenging because, which one do you lead with in marketing, which one’s gonna resonate most? And the answer is it depends. So we have a couple of different customers. Our main is called…she’s naturally curious, I would say usually 30 to 60, and what she needs is effective cleaners, period. End of story. And she’s sick of natural cleaners, but she does use a natural purpose cleaner. She probably used conventional laundry because her kids are baseball athletes and they get grass stains, but she’s really worried. She’s worried about what goes in her home.
She’s switched to organic food for most things. She’s pretty careful about what goes on her body, but cleaning products is still probably one of the biggest barriers because she just can’t trust efficacy. We’ve gotten, I think really close to your point, we lead with safety, natural ingredients because, in our opinion, and also if you look in the market, we truly think we have the cleanest ingredients in the industry. You can pronounce them, you know where they come from, they’re highly effective, and they’re really high-quality ingredients. But then it has to clean and they just don’t care about it if it doesn’t clean. So laundry has been the most difficult as one would assume. It’s a really tough category to break into, but we think we’ve gotten there. Some of our efficacy tests show that we’re as effective as some of the leading conventionals and as effective as some of the leading greens, but it’s been challenging.
I think all-purpose cleaner is the biggest proponent of safety. And we’re currently getting certified by the EPA to basically be COVID-safe, COVID-killing as well as a bunch of different disinfectants, antibacterial claims. But I think it’s a really important product. I think hand soap is much for ingredients rather than efficacy. And I think the dish soap is a lot more safety, less efficacy, just because you have to understand that actually keeps your dishes clean. So it depends on the product category. And I think it’s such different value props per product category. It’s again been how do we rank stack these different products? And then all of it supported by the sustainability. So we usually don’t lead with that. That’s usually, yes, our cleaners rock. They have, you know, ingredients you can actually understand that are the cleanest, and guess what, they’re plastic-free.
Meb: And I imagine this changes over time, but if you had to do a pie of direct to consumer and now through the stores, I imagine the stores are becoming a bigger piece, but is direct consumer, a small part, a big part and majority?
Ryan: Yes, we started as a direct to consumer brand. And it’s always gonna be a huge part of that. Right now, I’d say it’s 70, 30 D2C and other channels. I think increasingly, it’s gonna get to be half and half, but there’s a real balance here, is that our product works in retail and there’s no other brand in the market that can sit on shelves and be zero waste. We’re the only company in the world that can do this. And it’s really differentiated and it’s gorgeous and customers love it. And it’s solving the problem of cleaning without asking people to change behaviour. And this has always been something we’ve really pushed, is that you have different concentrates in the market, but the issue is that they’re asking people to do another step, to put it in water, to shake. It’s a big change. You really are asking people to change their behaviour.
And not to say it won’t work, we just don’t ever think it’s gonna be truly mass market. We created this brand for the masses as large as possible. Yeah, we think that retail is gonna be the biggest part of the business eventually, but very much supported by D2C. This year, we’re gonna be an eight-figure plus business. And I think that that’s going to continue to be driven by retail, but our goal is to compliment it. So our subscribers increase the community and have great discounts accordingly. And our retail increases awareness, which increases our subscribers. And then they have the ability to be truly Omnichannel, but an Omnichannel that actually makes sense and works together really nicely.
Meb: I imagine CVS would be a big one for you guys. What other stores are kind of the big distribution channels? Is it grocery?
Ryan: Yeah, so we won’t talk specific retailers, but grocery is huge for us. Mass is gonna be big for us, natural, drug, and home. So most people don’t know that actually Lowe’s sells a lot of cleaning products. Home Depot sells a ton of cleaning products. And again, a lot of our indexing more natural is that when you’re not going to grocery for a very purchase-driven category, you have a little bit ability to be premium because our product is slightly premium even if we’re gonna be close to parody with Method and Meyer’s very soon. You have the ability to push that price up a little bit. And I think they do, and we have a little bit of flexibility there.
So I think we’re gonna have equal opportunities in each of the categories. And again, the beauty is that our brand is X now, but we really see the ability to have this grow rapidly over the next two, three, four years. And I think for us, we’ve had two years of R&D 2017, 2018. We had a launch year, 2019. This year has been a build year, finalizing all of the final product iterations, formulas options, unit economics. And then next year we think it’s just gonna be a phenomenal growth year.
Meb: I was gonna ask you about that because you talk about all the challenges. You survived a hurricane and then 2020 came along and says, “Hey, we gotta throw you one more wrench. We’re gonna have a global pandemic to deal with.” How has the business adjusted, survived, dealt with everything that’s gone on in the last six months? It’s been a long decade already. It’s only six months in.
Ryan: So we provide safe and effective essential products in a time like this. So business has thrived. We’ve seen sales, usually 2X or 3X, depending on the platform, we’ve seen retailers push up their reviews and resets much earlier because they need to fill their shelves, which are stocked out. We have an almost entirely domestic supply chain. So I’ve seen almost no supply restrictions or delays. And we’ve donated close to about 50,000 bar soaps to shelters in New York City to support that.
We’re very blessed to be in a solid operational perspective in a solid market. Cleaning is one of the top 10 growth categories in COVID and we don’t think that’s temporary. We think it’s permanent. So COVID has been very much an impetus for our brand to grow faster, be bigger and at the same time, numerous challenges with that. How do we ensure that our team can work remote? How do we ensure that our team is healthy? We had a couple of team members contract the virus. How do we support them? And they’re thankfully healthy now. But again, we’re just very thankful that this crisis has been a crisis. We’re trying to support it as much as we can. And it’s been a real benefit for our business.
Meb: So we’re midyear 2020. Tell me a little bit about the status of the company now. How many people you got? You mentioned they’re remote. Is it kind of sprinkles of Puerto Rico, Boston, where?
Ryan: Yeah. So we’re about 20 people now, about a third in Puerto Rico, a third in New York City, another third all around the U.S. So we have people in Tulsa, South Carolina, California, we’re fully remote now. So we will be opening up our office, probably come Q3 and have a beautiful office on Fourth & Bowery, which we’re really excited about. It’s actually the previous Village Voice building. So it has all of this history of the magazine and kind of this anti-establishment
Meb: Is that East village? Where is that?
Ryan: It’s right under East village. Yep, right above lower East Side. They even still have the posters and everything in the building. I personally love it, but that’s more of a history buff side of me. Yes, we’re about 20 now. We’re hiring as we speak. So we’re hiring a couple of key roles now. We hired a phenomenal chief sales officer, who’s responsible for building both Method and Babyganics. You know, he really saw the vision. And I think our goal is to change the category.
There never has been a durable, good glass bottle in the cleaning section. There’s never been zero waste products in the cleaning section. There has never been 16-ounce refills in the cleaning section. Some of these are more minuscule, more category-specific that we care about. They’re really trying to bring fundamental change without changing behaviour to this category.
Meb: My favourite part of this interview, why I’m smiling is I’m drinking arguably the least healthy drink of all time, which is what I call my redneck lemonade, which is Diet Mountain Dew, which has 75 ingredients, none of which are healthy or sustainable. But that’s my late afternoon caffeine when I’m podcasting. So all right. If you could design a runway, and we all know there’s gonna be a million potholes on this, the ideal sort of milestones for you guys over the next year or two, what does the future look like? What are kind of the things you’d really like to accomplish as far as either product roadmap or just the growth or any sort of goals in general?
Ryan: Yeah. So look, we got lucky. We closed a really successful Series A in January. We closed about 10 million and that was really good timing in everything that’s happening. I think what success looks like for us is very much growing rapidly. So like I mentioned, we’re a eight-figure plus business now. In the next three years, we hope to be nine figures plus, and basically next year we very much are looking for a successful Series B with evaluation that actually makes sense given our industry. So we’re very concerned and very topical about that.
We have roughly 120 investors in the cap table right now and managing that and making sure everyone’s content happy and structured, but, you know, for us, it’s very much growth, right? It’s finding really marquee customers in grocery, in mass, in drug, in home and in alternative categories with beautiful fixtures that communicate our story. It’s growing our D2C subscriber base, hundreds of thousands, if not millions of subscribers in the next four or five years. Now, obviously, that’s a ramp up and we’re not there yet. It’s creating a truly defensible Amazon product strategy. We are on Amazon and we have chosen to be because so many cleaning products are still purchased there.
You know, you’ve had these waves, which is really interesting, of D2C brands and it was all the rage and retail was before that. And what we found is just a middle, D2C isn’t right, retail isn’t right. It’s just a middle ground. You have these people that swear to D2C, you have these people that swear off D2C that say retail is dead and retail is the only way. Yeah, I think it’s a middle ground. We found really great feedback in D2C, but it does burn money. It’s a challenge to get a profitable D2C business going with a heavy product like cleaning products. One of the reasons it’s not done yet, it’s very challenging.
But we know that when we get there, and we’re really close, that it’s highly defensible and it’s really impressive ability to create a D2C cleaning product that can be profitable. It’s really hard to do. So how do we use the platform and partner with Amazon while also not destroying our brand and undercutting D2C and undercutting retail? And that’s been another challenge. And then retail it’s, how can we then combine this beautiful retail strategy? Because again, no one else can be merchandise in cleaning in the zero waste category. We are literally the only option that retailers have right now and are gaining phenomenal traction. There’s great sell-through. We have really good velocities. And again, there’s no alternative.
So our goal is to hit this so hard and so fast in the market that we become the go-to brand. So we’re launching in numerous 2021, which is gonna be big, more 2022 and we wanna be the household recognized name in the zero-waste household cleaning category.
Meb: Is there an opportunity to expand beyond our shores into other countries?
Ryan: I think we’re gonna expand to Canada. We don’t necessarily see a play unless it’s through the very robust broker network to overseas. I think the answer is maybe. And I think historic natural cleaning brands did it at year 10 year 15. I think it comes with a lot of challenges. So we’ll see.
Meb: Is there a similar culture of demand and interest around the world or is it varied by region?
Ryan: I think that Europe is way more sustainable and actually have much more progress in rules, regulations in the space than we do
Meb: That’s simply because they don’t shower as much.
Ryan: Yeah, exactly.
Meb: I can say that because I shower like every three days now in quarantine. I’m just kidding. Okay. Keep going.
Ryan: You’re half-kidding. Me too.
Meb: We have at least two countries in the top five countries that listen to this show that are in Europe. So I’m joking my friends.
Ryan: Yeah. Well, you Europeans are much more sustainable than us Americans anyway. So we’ll compliment them in combination with the digs. But like Europe is great. I think it’s going to be a really interesting market. Their distribution process is much more complicated than ours is, a lot more regulations to get into it. Canadian customers are also much more sustainable on average than U.S. are, literally per…from data they buy much more sustainable products than we do. So it’s a great market, but D2C is very challenging to do in Canada because of the shipping networks.
Mexico and Latin America, I think they could get there. I don’t think we’re there yet. I do think the demand is there for sustainability, but price point is, obviously, a factor, but not to say that there couldn’t be great alternatives in their grocery chains. And D2C again, I don’t think it exists. I think it’d be retail. And then Asia, I do think it’s time for Asia to go green and there’s really no leading brands in Asia from a natural cleaning perspective. But is this the brand to do it? I don’t know. That really would have to get widespread recognition around the world to make that leap from a U.S. brand startup to be an international brand. So, you know, I don’t know. With the right broker with the right network, with the right groceries, I think it could work.
One of the downsides of cartons is they have a pretty short shelf life because they’re paper-based. So you theoretically would probably have to set up manufacturing overseas, which is another challenge. You know, get more machinery or just get a very efficient freight overseas network. So I don’t know, this is neither here nor there. I don’t know. Maybe one day.
Meb: What’s been the most memorable part of this journey the past number of years? Anything come to mind?
Ryan: I’ve had a blast. It’s been a real joy and honour and privilege to do this. I work with some of the most talented people I’ve ever met. And on a daily basis, it’s a joy. I’d have to say that the most fun I’ve had was probably Puerto Rico. We were part of an accelerator with 100 businesses from around the world and just wonderful times. And we would be out at a bar with 65 people that feel like family. That was memorable.
Meb: Give me some favourites from Puerto Rico. I’ve definitely considered…I love visiting. And if there’s very favourable business structure there now, and trying to go for another visit, we have some friends down there. What are some of your favourite highlights from your time there?
Ryan: Well, we bought a van for $600. It was called a Walla, and we pumped the wheels up with a bike pump. So I had some great memories. We broke down on the top of the highest point in Puerto Rico. And a family came by, they said, come on and eat with us. And we had this lovely meal outside of their car that they somehow set up this really beautiful dining table. And he said, ”Look, my friends at Walla, specifically, your type mechanic is an Astro van.” And he’s like, ”Do you want him to drive six hours to come up?” And I was like, ”Sure, how much will that cost?” He was like 30 bucks. Perfect. So he came up, we all had beers for the afternoon. He fixed the Walla and half of the parts and I’m not exaggerating. There were four major parts that were left on the parking spot and he said, ”You don’t need them. Don’t worry about it.” And it drove great. That was a lovely memory.
Really interesting place too, right? You have the social aspect of fun in Puerto Rico, but there’s just a real talent and joy and commitment. They have a very storied past of revolution, resistance, and I think arguably the wrong legal structure. And depending, again, there’s very complex era and I wanna get political, but there’s just a real joy for the Island. And there’s a commitment is that like I am Puerto Rican. So there’s a real identity there that’s really nice to be a part of. Yeah, I mean, we could go to Rincon, a beautiful surfing spot, have some nice surfing days.
Meb: I’ve been many, many years ago. I’ve stayed at the, I guess there’s a hostel there a while back. We always ask investors who joined us on this podcast., so we’ll ask this. I don’t know if you’re gonna have an answer or not because you’re pretty young. But what’s been your most memorable investment? And you’re not allowed to say your company or domestic partner, anything else is fair game. Anything come to mind?
Ryan: For us, this is just strategically…when recessions happen like this, we look for like, what are the items that are gonna go down in value that are going to bump up? And we found sailboats mostly. So we bought a really beautiful sailboat about six months ago for nothing, right when the crash happened.
Meb: What kind?
Ryan: It a Valiant. So it’s a Spirit Valiant, 37 feet. That was probably my favourite, you know, investment. I’m going on a sailing course next week. And Delta, I’ve gotten pretty long and pretty big into Delta. I think it’s a phenomenal airline. And I think that the values are under-appreciated. So I went pretty big into Delta. I love the airline. It’s my favourite flyer, leather lounges.
Meb: As a former boat owner, there is no better purchase my entire life than the boat I used to own. But dear God, you talked to everyone. It is the world’s biggest money pit I could ever even imagine. But when I lived in Lake Tahoe, we had a boat and friends is so much fun. Well, cool. Look, Ryan has been so much fun. Where do people find out more information and they wanna learn more about what you guys are doing. Buy a bunch of products. Where do they go?
Ran: Yeah, that’s, go to cleancult.com. That’s C-L-E-A-N C-U-L-T. They can find us there. You can also go on Amazon or any CVS store around the country. Yeah, for all the interested investors, we’re closing up our Series A overextension as we speak. We have a little bit more room and then are looking for no value-added people come Q2 of next year for the Series B. You can always reach out through hello@cleancult.com or my name ryan@cleancult.com.
Meb: And we also twisted Ryan’s arm and said for new customers, cleancult.com/meb, nice big fat discount, right? 20%, 25%.
Ryan: 25%. Yeah.
Meb: Right. Well, readers, check it out, cleancult.com/meb to sign up. Send us feedback, we’ll pass along to Ryan and let him know what you think. Ryan, thanks so much for joining us today.
Ryan: Thank you so much for having me. I appreciate it.
Meb: Podcast listeners, we’ll post show notes to today’s conversation at mebfaber.com/podcasts. If you love the show, if you hate it, shoot us feedback@themebfabershow.com. We love to read the reviews. Please review us on iTunes and subscribe the show anywhere good podcasts are found. My current favourite is ”Breaker.” Thanks for listening, friends and good investing.
