What would you do if you sold a revolutionary new product that prevents skin cancer, but you can't actually talk about it?
That's the dilemma Chris Tolles and his co-founder encountered as they launched their dietary supplement brand, SunDaily. In this episode, you'll learn how Chris had to pivot the business in the early days to overcome FDA constraints, how he battled against a market known for its shady marketing practices, and how (and why) he and his co-founder sold the business to Grove Collaborative earlier this year - all during the peak of the coronavirus pandemic.
"The internet makes it really easy to have the illusion of community but people who are actually sold to belonging as part of a brand interaction that's deeper than just really loving the product - that’s legitimate community." [Tweet this]
"If you can get people to show up for the story and the meaning and the purpose, I think just to put it very frankly, like there's a heck of a lot easier to sell product to them." [Tweet this]
"The cycle time, especially in direct e-commerce, is so unbelievable that the window of arbitrage for a given 'growth hack' is small to begin with and also shrinking over time." [Tweet this]
"The barriers to entry in DTC are just zero, which is a wonderful thing if you're trying to get into it, but man, is that hard to square with any kind of defensible market position." [Tweet this]
"If you want outside returns, by definition, you have to behave differently from the market. Everybody doing the same stuff in DTC is just so visible that it's very, very difficult to see what's a novel way of going about it." [Tweet this]
"If you want to know how to have a successful DTC eCommerce business, don't read DTC, Twitter." [Tweet this]
[00:00:34] Jess: On today's podcast. I'm talking to Chris Tolles, former CEO of SunDaily, a skincare supplement brand, which was recently acquired by Grove Collaborative.
[00:00:47]Now, when you think of the dietary supplement market, it's hard to have a positive reaction. It's an industry rife with gross marketing tactics, such as spammy content and false claims of products that promise results yet leave consumers feeling duped, but Sunday, Ellie is a different kind of brand.
[00:01:06] Their marketing is lovable and their product actually works, but marketing their products in a highly regulated industry and in a category known for deceptive marketing provided several challenges and failures for Chris and his team, which we'll explore.
[00:01:23]Yet, despite all that Chris went against the grain to build a remarkable brand, which resulted in an astonishing 70 to 80% repeat purchase rate and a successful exit earlier this year, all during the coronavirus crisis, no less. So how did Chris pull it off? This is his story.
[00:01:47] Chris: So we actually started as Sun Dots and ultimately the. The initial premise of what Sundance was going to be. And the eventual premise of what sun daily became, as happens in early stage companies, right? Changed moderately. Number one, the name changed. We had a potential trademark dispute with a Tootsie roll industries, which owns the trademark two dots.
[00:02:16] Jess: Yeah, at least they were direct about it.
[00:02:18] Chris: Yes. So they are very direct about it. And by they, I mean their counsel, it's also funny in retrospect, like at the time that was like, Oh my gosh, we're screwed. This is such a big deal. And we were so not screwed. It did not matter at all. So changed the name and then more importantly, in spring 2019, pivoted the whole business from being a sun protection brand to being a skincare brand. And that's for a few reasons, number one, that first product we shipped the sun protection, gummy,
[00:02:50] But if you like held a gun to my head and said, ship three more sun protection, Products that are like legitimately differentiated. I would have really struggled. Like there [00:03:00] is not a lot of other opportunity there. Two too. We understood that Mo two of our early customer base was primarily excited about sun protection.
[00:03:09] And so far as it's, it's a part of a broader skincare goal. Sun protection is like the only thing that matters for beauty goals, long term. Even if you don't care about the health angle, if all you care about is what you look like, sun is responsible for 90% avoidable skin aging. And what that means is that like every other product on the shelf in a Sephora is ultimately.
[00:03:30] Treating symptoms rather than the underlying problem. And so we could really see a lot of affinity with early customers who were saying like, Hey, I love this product, but just so you know, like the reason I love this product is because of all these other skin goals I have. And the third reason was that our ability to market, first product explicitly for sun protection was pretty limited.
[00:03:52] You know, in the U S we have a sort of awkward binary market of drugs versus dietary supplements in terms of like products that are there making, we're not making health claims. And because our active ingredient was naturally occurring, we were unable to patent it. Um, and if you're not able to patent it, then the business model of getting approved.
[00:04:13] Yeah. As a drug, to be able to make drug claims like sunscreen is not viable. But as a dietary supplement, you technically, we can't make any health claims. So that's why, we had, and we never compared ourselves to sunscreen. We never talked about avoiding sunburn. That's absolutely what the product does, but because FDA, um, we, we weren't able to solve that.
[00:04:33] And as a consumer, that's actually like hugely a good thing. Like the dietary supplement industry in America is super messed up and Very poorly aligned to like legitimate consumer benefit. But of course, like we're the exception to the rule and we're like, damn it, this stuff is real, why won't you let us talk about it.
[00:04:49]Jess: And so on that, because I think you're totally right. That especially a lot of the dietary supplement market. To be very spammy, right? A lot of false claims, just like you think of infomercials, et cetera. How did that change? Like your branding strategy, your content strategy, because you probably couldn't rely on a lot of the things that those other companies were doing. So how did you approach doing that differently?
[00:05:15]Chris: Honestly, we probably could have relied on a lot of them, same things, but we just didn't want to, I think, just to be very Frank, like, and this is, you hear this all the time, but it's so true. This is where like alignment with a cofounder is really essential. Amelia and I like really wanted to legitimately help people.
[00:05:30] And I'm sure there's a bunch of dietary supplement people out there who like actually want to do that too. But man, is it hard to conclude that from the way those products are marketed or from the scientific legitimacy of them? So it was mostly just a values choice to say, we don't want to go that route.
[00:06:07] We happen to be a dietary supplement, but that's like our business with FDA. We weren't going to be in a GNC. If we were ever going to do a whole foods, we weren't going to be on that giant wall of bottles. We'd be in the light. Beauty section the skincare section and the topical skincare section.
[00:06:22] And that influenced how we talked about ourselves as a company that influenced our copy hugely, that also was profoundly impactful on our retail strategy. We were in Goop, we were in Credo Beauty, which is, probably the most influential clean beauty retailer in the world. Eventually, yeah, there would have been opportunities in other kinds of channels, but until we were like deeply established as we are skincare, you happen to put it in your mouth, but like we are a skincare brand.
[00:06:50] That's really what we led with. and that also, was really important from a regulatory perspective because semi arbitrarily, FDA, in my opinion, of course, FDA has decided that skincare and beauty claims are not health claims. So you can basically talk about what you make somebody look like.
[00:07:07] All day long biologically that's of course like absurd, cause like skin health and skin appearance are two sides of the same coin ran. Like every skin appearance problem we have is ultimately reflecting an underlying skin health dysfunction, minor or major. But nonetheless, like that's, that's why we have skin appearance problems is because of a biology, health concern.
[00:07:30] Um, so, you know, Amelia and I were both like, this is silly, but thankfully it's exactly the kind of space we, we needed to be able to talk about what the product did even given the constraints of what we couldn't talk about, namely, being very direct about the sun production angle.
[00:07:45] And that's ultimately because sunscreen, if you turn sunscreen over, it's actually a drug, it's an over the counter drug, but it says drug facts. And so we couldn't go anywhere near much of the same language that they used.
[00:07:55] Jess: Is there anything that surprised you or the last few years that maybe you weren't expecting starting this type of company?
[00:08:04]Chris: It feels a little silly to say in retrospect, but one is that, basically whatever you read about in the news as being effective, by the time you get around to it, It's not a very likely to be effective anymore. I like the cycle time, especially in direct e-commerce is so unbelievable that the window of arbitrage for a given, you know, especially quote unquote growth hack is small to begin with and also like shrinking over time. So much of the hype, you know, like Hubble Contacts was like five years ago, I guess, by now. And I'm sure they still run Facebook ads, but, um, many of the strategies that were kind of broadly visible, as a young and growing e-commerce brand because everybody else just like me was jumping on board we're way less effective than we had hoped.
[00:09:05] Jess: Do you have some specific examples?
[00:09:07] Chris: Yeah. I mean, it's pretty like basic, but just like the cost of paid social is high. Yeah. And higher. And it would always annoy me and it still does annoy me when people point that out because what matters is not the absolute cost.
[00:09:21] It matters. What are the underlying customer unit economics of your business? So it's fine,
[00:09:45] We had really strong subscription take like 70% of new customers chose the subscription option. Um, but nonetheless, like all things equal, which they never are, the cost of those ads and therefore the cost of those customers is, in some cases, multiple times what it was, a few years ago and, when your customer acquisition costs triples, like the businesses totally changed, not for the better. And there are some brands that like have figured out how to stay ahead of that because that's really their channel, for better or worse. Like we didn't raise a ton of money. So we weren't going to go
[00:10:45] You know, I read an article about Hubble Contacts, like what's going on and that is I think broadly true about a lot of different things. You know, you could say the same thing about referral. You could say the same thing about influencer. Basically as soon as a given channel strategy slash specific growth strategy is highly visible, it's too late,
[00:11:07] Jess: And so for sun daily, specifically, I recall that the company sold a few different products. And so if you think about CAC increasing, paid, increasing, there's not a whole lot of probably flexibility and increasing your, the price of your…
[00:11:23] Chris: Not a lot of cross selling possible with two skews, right?
[00:11:26]Jess:…how do you adjust for that? Like what, how did your strategy change to say, Hey, we need to be a more effective business term in terms of unit economics, but the CAC is increasing. So how did you balance that?
[00:11:36] Chris: A few different things. So number one, have a great product in the first place. And it sounds dumb, but it's amazing how many products just like really aren't that high quality or differentiated. So we had like 80% month over month repeat purchase rate. And that's ultimately for a few things, like number one, the products worked, often you couldn't tell for them right through to that's, that's kind of part of the challenge, especially with our sun protection product was it's a negative proof, right?
[00:12:00] Like when it works something doesn't and happen and that's a, that's a challenging marketing scenario, but number one, the products worked number two, like they were delicious. And there's, tens of billions of dollars of dietary supplement spend in America every year, the overwhelming majority of which like don't literally do anything.
[00:12:16] So the fact that like our product was delicious itself was hugely part of our stickiness and ultimately what drove the first, point, which is efficacy, you know? So we would often talk about how. The, the actual, just inherent pleasure of taking the product is what kept you loyal through month one.
[00:12:34] And then it's the efficacy of the products that, kept you loyal through future months. So yeah, number one, effective product, number two, like the actual behavior you're of an enjoyment of it was, number three, we had a vote, very channeled, diverse approach and that was by necessity.
[00:13:28] The retailers we won were really high profile. The goal of those was less gross margin although we could sell profitably into retail. But it was more about like credentializing the business to drive direct traffic for, for subscription. We got a bit into professional. We had a few like celebrity dermatologists in Manhattan that, we talked to the press about the product just because they loved the science base and they love the format.
[00:13:50] Um, those are the three things. Well, and then the fourth thing I think is just like, I don't spend a ton of money elsewhere. Like we were at our max three people full time. W2's with another three or four like substantial 1099’s, kept it lean means if you have strong underlying customer unit economics, it means we're not, 10 X in revenue year over year, but the revenue we do have is as much higher quality.
[00:14:17]Jess: When you see stories in the news of brands raising a shit ton of money and like throwing so much cash at all the different things, do you think that a lot of other eCommerce companies are looking to that as an example of that's what success looks like?
[00:14:34] Chris: Of course, cause that's, what's on tech crunch. And the problem is like, some of them will be successful, right? There's a huge survivor bias here where the ones that do go well or what go well enough that they can prop up the next round
[00:14:51] And man, that's that's easy. It's easy to fall in love with that. Ultimately though, I think what doesn't get nearly enough talk is like, what do you want as a founder? What do you want your life to be what are you actually trying to build? And why, who do you want to be your boss or not?
[00:15:34] Those things like happen when you over promise and under deliver. And again, like I'm, I am as much seducible by many of those headlines as, as the next guy or gal, but thankfully I've had really good friends and mentors in my life that have done things different ways or did things that way.
[00:15:55] And then told me about it before I made the same mistake. At the very least have made a different decision for sun daily. So I won't begrudge someone who says
[00:16:21] But that's not what I wanted, so we definitely didn't do it that way. And my suspicion is that's disappointing way more frequently than it's not. So I am hugely skeptical of direct e-commerce as a category. I think there is an enormous amount of disappointment that's on its way. I personally know a lot of really desperate founders that I took the money cause it was available.
[00:17:12] Had, and for all of the mistakes we made, I'm taking money, we didn't need. And therefore getting on a flywheel that ends poorly was not one of them. And I am enormously thankful for that.
[00:17:25] Jess: One thing that you said earlier, you said that you're skeptical at DTC as a category. What do you mean by that?
[00:17:32]Chris: Barriers to entry are just zero, which is a wonderful thing if you're trying to get into it. But man, is that. Is that hard to square with any kind of defensible market position? So the reason why I'm suspicious of DTC as a category is like very well aligned to this article called Shopify and the hard things about easy things, which is the not boring is the newsletter.
[00:17:58] Jess: Great blog. Great newsletter.
[00:18:00] Chris: Amazing. And it's basically like if literally everyone has access to the same stuff, and barriers to entry are zero. All the value accrues to the service providers. Like not the actual, brands are especially consumer eCommerce brands is that is the specific context of this.
[00:18:39] So I'll be the first to acknowledge that all that differentiation came at a profound cost when we had to explain to people what the hell this thing's does without using the phrase sun protection like we, we really tried to strike out in a different piece of the market. And all of the things this article describes around like, It's so easy to spin up XYZ is exactly why it was even for you usable for us to start this business in three or four months, which is, with $16,000, I think we spent, um, before actually launching the crowdfunding campaign, that makes it really, really hard to.
[00:19:13] To see a world in which this is as transformational of a thing as many people believe it to be, his conclusions or her conclusions. I don't remember the author, are very wise in terms of the way one can stand out. Community is another big piece of it. Sunday. They never really had meaningful community.
[00:19:32] We had, of course, like early adopters who were passionate and we had a relationship with them, but we never really built anything. That I could, uh, fairly describe as community, you know, brand. I, we're a skincare product, like a quote unquote, great brand is like table stakes. So I'm proud of what we had, but I don't think it's nearly as powerful, especially in the eCommerce skincare world is as one might think.
[00:19:54] And again, I really just come back to like how many other brands I know. There are a lot more. That are struggling that are just like going gangbusters. And that's the name of the game, right? When you're a founder, with, with exceptions whom I have never really met, it's always struggle.
[00:20:33] And the ship has largely sailed.
[00:20:36] Jess: And because of that, where do you see the future for this industry? What do you think has to change. In order for DTC brands to break out, uh, from, I, I guess there's this viral loop happening right now in terms of like acquire customer, spend a lot of money back to square one again. What do you think has to be different for their future?
[00:20:57] Chris: Yeah. So I think there are a few options and some of which are articulated well in that article one is like legitimate technology. If your product is just like, actually way better. Um, it's silly when you say it out loud, but like that actually is really valuable. So in contrast to like the Judy's of the world, like, you know, they're the like, emergency preparedness bag and I'm not dragging on them.
[00:21:19] Like, I think they did knowledge it themselves. Like the whole point is like they just pulled together a few products and put it in a bag. There's nothing in the actual. Technical performance dimension of the product that is novel in any way
[00:21:35] That's probably because they buy those things from anyway. But if your product is legitimately different, and I think I put some daily in that category, like we often had to work hard to explain to people why the product was valuable, but we rarely had to like, explain why you should buy our version of X instead of like competitors version of X.
[00:21:53] Um, so that's one thing. The second is definitely community. And by that I'd say like legitimate community. The internet makes it really easy to have the illusion of community but people who are actually sold out to belonging as part of a brand interaction that's deeper than just like really loving the product.
[00:22:33] Cause they're already bought into to that other stuff.
[00:23:26] Like I wouldn't write if I were Sephora, I'd be like, how about we sell it at 29, the same price as your website, which has profound implications for our business. If you know, directly commerce subscription is the golden goose, both from a revenue and a margin perspective. But I do see some examples of businesses who have really, designed that well, ahead of time.
[00:23:48] So that retail is not a concession to being tapped out of direct e-commerce to be tapped out of good Facebook LTV to CAC, but is actually unified. And again, you don't read any e-commerce theorists. Like nothing I just said is controversial. It's just actually extremely difficult to do well.
[00:24:07]Jess: I like the way that you're thinking about unifying the channels versus, Oh, I've maxed out on my DTC channel and now I have to look at retail and wholesale and like all of these other things, which. I could also argue is not necessarily a bad thing where you get really good at one channel first.
[00:24:24] And then you look at how to scale, but I like the way that you're thinking about, preventing those upcoming potholes to making sure that retail can even work for you in the
[00:24:31] Chris: It's having the optionality. Yeah. Yeah. I'm definitely not saying oh, go do them all at the same time out of the gate. I think that the sequencing is a whole separate conversation. That's really brand and product specific, but not being screwed when you, when you are trying to go explore something else I think is really essential because I don't know, again, back to the like, Spoiler alert, Facebook is tapped out. I don't know many brands who are like, don't worry. We're all [00:25:00] good with this one channel. And like I'm confident and it'll help us go the distance.
[00:25:04] Jess: Do you think it's possible for a brand to grow without having to spend a single cent on Facebook advertising?
[00:25:13] Chris: Of course. Yeah. It's just a question of like, of what product for what audience and how quickly. I think it's exceedingly the exception rather than the rule, but that has as much to do with the size of the denominator. Right? Like everybody and their mother has piled on to the direct e-commerce bandwagon, which means, the kind of relative portion of folks that pursue a bootstrapped or like low paid acquisition strategy are gonna look small by comparison. And thankfully I know a few of those as well. And what they've largely focused on is like a lot of discipline around unit economics, really worshiping the problem, which I don't think we did well enough in the
[00:26:31] Like they don't roll in that world. Or, it was literally accidental in that. Like, they didn't intend to do it. They just happened to love, like growing, micro greens at home kits and three years later they're doing 8 million in revenue. And they realized that like, this is their job now.
[00:27:10] It's destined to be like my ability as an entrepreneur to actually like lead it into completely different, but also successful outcomes, I think is very modest.
[00:27:20] And similarly with a startup not every company can pursue that as an option, but I believe it is woefully under-explored as an option and hugely avoids a lot of the nonsense that pervades VC high growth e-commerce, you know, corner don't bother a DTC.
[00:27:40]Jess: I love that you positioned. Positioned it as a choice because I think a lot of us are told we have to do this email. We have to do this SMS. We have to do this paid advertising. And I think there are all things that we can experiment with and explore, but I don't think it's necessarily, we all have to follow the same playbook.
[00:27:59] Chris: No, and by definition, like if we do, but not many of them are going to be all that happy. Uh, and there's, there's some really fascinating sort of like behavioral economics stuff here. That reminds me a lot of what I've read around, like publications he's investing like stock marketing investing, which is sort of oversimplified too.
[00:28:20] If you want outside returns, like by definition, you have to behave differently if you want to beat the market, You have to behave differently from the market and everybody doing the same crap in DTC land is just so visible that it's very, very difficult to even know what the other options are or to know enough about it as an ecosystem to even see like what's a novel way of going about it.
[00:28:46] And that's why I think. We, we love these like accidental examples of the Glossier’s because, you know, she wasn't trying to start a skincare brand. Right. She was just like sharing content with community, who knows whether those stories are actually true, but I think they're very true in the principle they illustrate, which is, if you want to know how to have a successful DTC eCommerce business, don't read DTC, Twitter.
[00:29:10] Jess: Oh boy. That's like a that's me like all day long. Cause I just love this stuff, but I know hearing you on that.
[00:29:15] Chris: Yes, it's a total echo chamber of nonsense. And the problem is, again, some of it is correct. Like some portion of people that do that will be successful and there'll be very visible and we'll conclude that like the echo chamber works and we'll forget it's survivor bias, it's selection bias. There's like a profound amount of cognitive bias going on. That makes it seem way truer than it actually is.
[00:29:41] Jess: One thing that we have not talked about yet is Sundaily was acquired by Grove collaborative. Was that a successful outcome for you and what made the decision to sell the company?
[00:29:55] Chris: Yeah. So part of, I already talked about that pivot from being a sun [00:30:00] protection company, to being a skincare company and that was done with eyes wide open, and that was done enthusiastically in terms of the right decision for the business, but that decision actually pivoted the business out of a lot of my passion and my cofounder Amelia's passion.
[00:30:18] I think in this example, I can speak for her, we were super thankful that the product we had already got created was absolutely adaptable to this new reality. That's actually one of the best things about the pivot is we didn't do anything to the product. We put it in a different bottle. It's in different colors, gave it a different name. The product itself was totally, still, still relevant.
[00:30:37]But the broader purpose of the company, at least the customer facing purpose was significantly less exciting from a career and a, an impact you want to have in the world perspective and that's just, cause I don't care about school care. The way I had come to care about sun protection.
[00:30:54] So that was a difficult series of decisions for she and I to [00:31:00] acknowledge, wow, this is definitely the right choice for the company and. I don't really want to make it, I want to run a sun protection company but we already knew that we were going to be moving into territory. That was a different kind of alignment with our longterm goals.
[00:31:17] We had one foot in each of the two worlds of dietary supplements and beauty products, both of which are like almost category, like bullshit, like just don't like move the needle for people.
[00:31:29] And so we loved the idea. That we could be this sort of like rebel voice saying like dietary supplements are nonsense, but look at what we're doing and like how we're doing it right. And different, or, topical skincare products. Like I don't really do much, but like here we are proudly as a skincare company, uh, standing upon the quality of evidence behind our products.
[00:31:52] Then in December of 2019, we got some unsolicited inbound acquisition interest from a retailer.
[00:32:02] And we're like, huh,I don't know. I mean, we're, we're gravy. Like I don't, I'm not sure anybody wants to buy this do they? But sort of where there's smoke, there's fire. We figured, Hey, if they're interested, like we should probably hit the street and like figure out whether other people are as well.
[00:32:39] Cause when, when you're CEO, the founding team is like, not in love with your problem, that's a liability, and we, we would be the first to acknowledge that, there's a few different ways to solve that problem, which. We can go into detail, if you want, but the, one of the ones that was most compelling was, this signal from the market that maybe there was appetite for an acquisition earlier than we expected.
[00:33:00] Jess: Yeah. And I think one thing that's important to point out is you started the business with a purpose of helping people prevent like skin cancer versus. Starting a company with the goal of trying to get acquired. And I see that especially a lot in dropshipping, providers where it's like, how do I get rich as quick as possible?
[00:33:20] But that wasn't your intent from the beginning, which helped you build the brand. And it became.
[00:33:24] Chris: I don't want to like over, uh, I, I don't want to sound more upright than I actually am. Like, heck yeah, we still want it to be acquired. But I think I can safely say without like exaggeration or like self puffery that. It's absolutely right. That like our goal was to help people solve that specific problem. So we started a sun production company.
[00:33:47] Jess: So one, one last final question for you. Do you have any other words of wisdom or final thoughts that you would like to share?
[00:33:55]Chris: Know thyself and have friends that will [00:34:00] help thyself if I do not. So many things in my life, Sundaily super-duper included have gone way better for me than they could have, because I at least had a shred of what I actually wanted. I don't want to overstate that. There's a whole bunch of crap I don't know about myself or what I want. And I spent a lot of my time in Sunday daily, really trying to figure that out. What do I want? Is this what I want? But I was definitely asking the questions and it paid off very well with Sundaily. And I can see lots of scenarios where I think I really would have struggled even more. I would have been way less happy. I would have been way less successful and a whole bunch of different measures. And that's not a thing you can read on DTC, Twitter, again, like that's the thing that comes from a totally different place.
[00:35:00] Jess: Now I'm going to have to do some reflections tonight. I think a very good advice, Chris. Thank you so much for dropping your wisdom today and being a guest on the show. This was awesome. I appreciate it.