How to beef up your business, with ButcherBox CEO Mike Salguero

After his first VC-backed business flopped, ButcherBox CEO and founder Mike Salguero turned lessons learned the hard way into the fuel that built his subscription meat delivery business. Salguero joined host Jeff Berman to reveal how a blend of clean ingredients, clever marketing, and hiring for grit helped him scale into a business that’s now making more than $600M a year and expanding into retail nationwide. Subscribe to the Masters of Scale weekly newsletter: https://mastersofscale.com/subscribe See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:01Jeff Berman?

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• 0:48Jeff Berman?

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• 1:32Jeff Berman?

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• 1:41Speaker 01

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• 2:06Speaker 02

  Startups are like hacking through a jungle with a machete. At the very beginning, what you need are people who are willing to hack aimlessly because you don't know where you're going, but just like work night and day and just keep hacking until we find a path. And then you're just like, oh, okay, here's a path, like, let's take the path. And then you start needing like some people with a little bit more experience. Maybe they know how to use a compass. And then eventually you get to a road. When you get on a road, you kind of need people who know how to drive cars. If you just go for the car drivers, then you lose the hacking culture. Like you're willing to do whatever it takes to get this thing off the ground.

• 2:43Jeff Berman?

  This is Masters of Scale. I'm Jeff Berman, your host. This week on the show, Mike Salguero.

• 2:55Jeff Berman?

  Mike Salguero is the founder and CEO of ButcherBox, which he has bootstrapped into a $600 million revenue business. Do I have that right?

• 3:05Speaker 02

  Yeah, we're hoping to do 650 this year.

• 3:06Jeff Berman?

  Okay, 650, has been D to C and is now in target stores nationwide. Mike, welcome to Masters of Scale.

• 3:12Speaker 02

  Thank you. Longtime listener, thrilled to be here.

• 3:15Jeff Berman?

  We're thrilled to have you. Let's start at the beginning. Where did your entrepreneurial journey begin, Mike?

• 3:20Speaker 02

  Well, I had a paper route when I was 10 years old, which wasn't quite entrepreneurial, but.

• 3:25Jeff Berman?

  Should we explain what paper routes are to the younger?

• 3:28Speaker 02

  Paper routes are where you pick up a stack of newspapers, 35 of them, and deliver them every day, six days a week, rain or shine.

• 3:36Jeff Berman?

  So you had the bug early, you were out hustling.

• 3:39Speaker 02

  Out hustling early. I went to school in Boston and I did a bunch of sales jobs. And I got out of school and started doing real estate rentals, which was a very entrepreneurial, sales-focused thing. And on the side, I started a little t-shirt company. And my first t-shirt was a shamrock and it said Boston on it and sold it during St. Patrick's Day. And I had like 100 shirts that I paid $5 a shirt for, and I sold them for $10 and made $500, like the fastest I'd ever made money.

• 4:11Jeff Berman?

  Well, you knew your market pretty well.

• 4:13Speaker 02

  Yeah, Bostonians love St. Patrick's Day. And then I did another t-shirt. This was in 2004 during the George Bush, John Kerry election. The t-shirt said Buck Fush on it. And we sold 17,000 t-shirts over the course of like a two-month period.

• 4:33Jeff Berman?

  Wow. And so, I mean, this is, this is still pretty early days of e-commerce.

• 4:37Speaker 02

  Yes.

• 4:37Jeff Berman?

  So were you selling this through Amazon, through your own website?

• 4:40Speaker 02

  Mostly like at festivals, door-to-door, set up a booth. I had salespeople, I was in a few stores and had sold all these t-shirts, but I didn't have, I didn't have any money. I was like, where did all the money go? What happened here?

• 4:55Jeff Berman?

  Where'd all the money gone?

• 4:57Speaker 02

  I think it went to like, you know, we'd go out at night with the backpacks full of t-shirts and go to the bar and sell them or, you know, and then use that money to buy drinks. And that's where the money went. And so I ended up like having this realization that I didn't know what I was doing and I wanted to go get a real job. So I worked as a real estate developer for three years, got my MBA at night at Babson, which is known for entrepreneurship. And then left that and started my first company. Ran that for eight years.

• 5:27Jeff Berman?

  What was the first business?

• 5:28Speaker 02

  First business was called customade.com. And we bought this listing service from a woodworker who had built this. He built it in 1996, we bought it in 2008. And he had 350 of the best woodworkers in the country on this website. And when you talk to them, they're like, I get all my business from that website and I pay $35 a year for a subscription. And so my co-founder and I decided that we were going to try to buy the website, make it better, because this was 2008 and the website, you couldn't log in and manage your own profile. So easy things like that, like, oh, we'll just make this, it'll be super easy. And then expand it out of woodworking into other things custom.

• 6:07Speaker 02

  We raised venture capital and we moved from focusing on a listing service to focusing on a marketplace where we took a marketplace fee for everything that went through, which wasn't really a good idea.

• 6:20Jeff Berman?

  Why not? I mean, it's eBay, Etsy, right?

• 6:23Speaker 02

  The challenge with the idea was a custom transaction. Like if you're going to get a custom dining room table, you want to do a tremendous amount of back and forth with the maker. And you think about these makers, they're not necessarily tech savvy. This is like 2011, not necessarily tech savvy, might not even have a cellphone yet. And we're asking them to interface with a consumer on our platform so we can keep the platform fee. It didn't work.

• 6:49Jeff Berman?

  They were just going around the platform at that point?

• 6:51Speaker 02

  They were going around the platform. They were complaining that they had to be on the platform. They didn't want to pay the platform fee once it was, once the transaction had happened. They thought it was unfair since they had to do so much work. But we had raised money on that idea. So in 2011, we went out and we raised money from Google and First Round Capital and a few other top shelf VCs. And they bought into the marketplace concept. And it became pretty clear that the marketplace wasn't going to work. But we couldn't, like, we couldn't go back because we had already chosen the train of marketplace, VC capital.

• 7:32Jeff Berman?

  And it wasn't going to work because on Etsy, for example, the product choices are limited. There's only so much customization. Or even on Airbnb, like, you know, you may need to communicate with the host about, can we get an early check-in or whatever it might be. But it was the level of the customization that made it hard?

• 7:47Speaker 02

  Yeah. If you think about what most people think about with custom, it's like you can monogram the thing. That's it.

• 7:55Jeff Berman?

  Yeah.

• 7:56Speaker 02

  My co-founder actually still runs Custom Aid. It's now a jewelry website and you can fully customize things, but just in jewelry. And they now do all of it themselves. That's a much easier, better way to do it.

• 8:07Jeff Berman?

  Sure.

• 8:07Speaker 02

  We had 60 people at our height. We were burning like half a million dollars a month and just, you know, flooring it towards a wall that we kind of all saw.

• 8:17Jeff Berman?

  Why was there not a pivot available? Like, I mean, if they pivoted the business or evolved the business since, what was happening when you were, you were accelerating toward that wall and you could see you were going to slam into it where you couldn't hit the brakes or,

• 8:30Speaker 02

  Yeah.

• 8:30Jeff Berman?

  you know, jam the steering wheel to the left?

• 8:32Speaker 02

  It was so attractive, this idea that you could be a marketplace for custom stuff. And that's what we sold our venture capitalists on. And we raised about $30 million. Because at the time, Airbnb, Uber, there are all these like third-party marketplaces that had sprung up and they were doing really well. So when we wanted to go back to a listing service or some sort of other model, we got a lot of pushback, a lot of like, that's not what I invested in. I didn't invest in a listing service, I invested in a marketplace. If I had been older and wiser and better, I probably would have said, I don't care. I'm doing what's best for the business.

• 9:05Jeff Berman?

  Yeah.

• 9:05Speaker 02

  But that's not how it, that's not how it happens.

• 9:08Jeff Berman?

  If an entrepreneur were coming to you today, under these circumstances, it sounds like your advice would be like slam the brakes or like grab that steering wheel and twist it if you know it's going to fail.

• 9:19Speaker 02

  Yes, but it's very hard. So what they don't talk about is the. You know, the phone calls where if you guys don't do what we say, you probably can be blackballed, you probably won't be able to raise money again, you know, is a you're dealing with these powerful venture capitalists and they can get in your head.

• 9:38Jeff Berman?

  I just want to spend one more minute on this because I think that this is an under discussed challenge for founders where they go sell investors on a vision and a dream. That's what the investors buy into. You're operating and as you're operating, whether it's a design problem or a product problem or a business model problem, you realize that something material to what the investors bought into actually isn't going to work. And so how, how does a founder stay in integrity with themselves? How do they fulfill their responsibilities to their stakeholders, to their team members, to their customers and partners while also dealing with potentially some of the most powerful VCs in the world saying, you do it our way, or basically you'll never work in this town again?

• 10:23Speaker 02

  Yeah, I mean, I think that that's really hard. I would say that I lost my integrity. I knew what was, well, I thought I knew what was better for the business. But when you have, you know, top VCs telling you, it wasn't always a threat, but it was just like, no, this is the way you should do it. You know, as somebody who was young, was my first company, I was like, okay, well, they must know better than me. I talked to lots of people who are trying to raise money these days, and I try to tell them that there is a path of bootstrapping, which I'm happy to talk about. But you go out, you try to raise money. We went on about 75 different pitches, and then we got a check, right? And when there's that dynamic, you

• 11:04Speaker 02

  don't really think about the person that you're going to be locked to for 10 years. But you don't, you don't go through the whole, you don't really go through the dating process. It's like, oh, they'll give me a check. Okay, great. Like, I'm tired. I should take that check. I need the money.

• 11:18Jeff Berman?

  Put a ring on it.

• 11:19Speaker 02

  Yeah. And so you don't really necessarily think about what happens if this goes sideways.

• 11:25Jeff Berman?

  Yeah.

• 11:25Speaker 02

  And we had a lot of, we had negotiated really well. We had a lot of like rights, like they couldn't overthrow us, they couldn't outvote us. But even still, a lot of pressure for us to kind of do what the original plan was, even if it didn't seem like that was going to work out.

• 11:40Jeff Berman?

  What happens to, to end your time at Custom Made?

• 11:43Speaker 02

  We ended up doing a transaction with Wayfair, which was another business in Boston. All of our employees were able to get a job at Wayfair, which was nice, except for me. And yeah, we, we had a party and closed the gate. It was this big iron gate and put the lock on it. And that was it. That was the end of it. And that was right before Memorial Day weekend of 2015.

• 12:10Jeff Berman?

  Okay.

• 12:11Speaker 02

  And I had been buying a lot of grass-fed beef because my wife and I were trying to clean up our diets. And so then I just started asking the question, like, how would you deliver meat to someone's house? And Omaha Steaks had been doing it for a long time. So I knew there was like a way to do it, just couldn't figure it out. When Custom Made closed, I took the weekend off and then decided that I was going to start, I was going to spend the summer trying to spin up this concept of delivering meat to your door.

• 12:37Jeff Berman?

  So you gave yourself a whole weekend of a break?

• 12:40Speaker 02

  Yeah.

• 12:40Jeff Berman?

  Between?

• 12:40Speaker 02

  It was a long weekend.

• 12:41Jeff Berman?

  Yeah. Okay, fair. All right. Three day weekend. Right. Memorial Day. Here we go.

• 12:44Speaker 02

  Yes. It just felt like that opportunity was like, I needed to like move on immediately.

• 12:49Jeff Berman?

  What was telling you? Was this head? Was this heart? Was this gut? Was this, what was animating you to say, F it, I'm going to get going?

• 12:58Speaker 02

  I think it was heart and gut because rationally I was burned out and that was probably a bad idea. I really wanted to like, keep doing business, but I wanted to do it differently. I wanted to do it my way. And so even when I started ButcherBox, and to this day, my Fridays, I stayed at home. I was like, I'm not working on Fridays. I'm just going to like hang out with my daughter. And so I tried to build in the breathing time in the space of starting the company. When you start a company, in my, in my experience at least, there's, there's not that much to do right out of the gate. During that time, during that summer, I was working out twice a day. I was spending a ton of time with my family. I was.

• 13:41Jeff Berman?

  And this was completely counter to most people's idea. And I think a lot of people's experience in starting a company.

• 13:46Speaker 02

  Yes.

• 13:47Jeff Berman?

  Because it's not like you were pre-product, right? I mean, you, you at least had, like, you had some of your supply chain teed up.

• 13:53Speaker 02

  The big unlock for the business was I met the former head of operations of Omaha Steaks.

• 13:58Jeff Berman?

  Okay.

• 13:59Speaker 02

  Who was like, I can introduce you to some people. And he introduced me to one place in Wisconsin, which cut meat and also shipped it out. So it was like a one-stop-shop.

• 14:08Jeff Berman?

  Okay.

• 14:08Speaker 02

  In the summer, we spent trying to figure out what a Kickstarter campaign would look like. So we launched on Kickstarter. My idea was I'll put $10,000 into this business for, for everything. And if it doesn't work, it doesn't work. And the Kickstarter will tell us if this is something that customers want.

• 14:25Jeff Berman?

  Right. We'll get, we'll get some product market fit signal very quickly.

• 14:29Speaker 02

  Yes. Yeah. Yeah. And when we launched, you know, fast forward to September, we launched in September, we went out to raise 25,000. And I think at the first day, we raised 50,000 and did 210,000 within 30 days. So it was like, whoa, there's a, there's a there, there.

• 14:44Jeff Berman?

  Looking back on it, can you see what, what hit? Why did, why did the Kickstarter community leap on this?

• 14:50Speaker 02

  For one, our timing was incredible. I think that's an oftentimes not talked about thing in entrepreneurship is like, timing is, is a big component of your success. Two days before we launched Kickstarter, Consumer Reports, the cover story was the case for grass-fed beef. So it was like.

• 15:07Jeff Berman?

  Pretty good timing.

• 15:07Speaker 02

  Yeah, pretty good timing.

• 15:09Jeff Berman?

  Yeah. So you launch on Kickstarter, you have this like, pretty exceptional momentum. What had you learned from Custom Made, aside from the investors piece, which I want to, I want to come back to next, that informed how you, you built culture and team at ButcherBox?

• 15:28Speaker 02

  Yeah. So I mean, the first thing that I did that I think was really important was I hired an intern. So on that Tuesday after Memorial Day weekend, I had a, a college freshman knocking on my door at 8:30 in the morning saying, okay, what are we doing? And he was going to work all summer for me for $10 an hour.

• 15:52Jeff Berman?

  Okay.

• 15:53Speaker 02

  It turns out that Bobby has now tells the story that the only reason why he applied was I was the only job that didn't need, didn't require a cover letter. So he's like, perfect. Sent in a resume. I think it was like, I might have been the only resume I got. But I met him. I was like, this will work. And we just, we started working together. And I think it's important because I oftentimes meet founders who they, they believe they have to do everything. And if you believe you have to do everything and you aren't willing to outsource anything to anybody else, you will work 24/7.

• 16:25Jeff Berman?

  Yeah.

• 16:26Speaker 02

  The trick, I believe, even when you're starting out, is to bring people around you. Know what you're good at and bring people around you. So I had the benefit of, I had been the CEO of a 60-person company. I kind of knew what that was like. I knew what I didn't want to repeat this time, certainly culturally. But also, I knew myself well enough that if I had to like, just start working on Tuesday myself, I don't think I would have like, launched this thing. I needed energy and people around me to like, kind of push me through the doubt and the failure and all the, all the things I was carrying with me.

• 17:00Jeff Berman?

  If the ButcherBox story were starting today, would a Bobby GPT be as valuable for you as Bobby the Babson student was?

• 17:09Speaker 02

  One of Bobby's biggest ahas for the business was, so as I said, we were going to ship grass-fed beef in the mail. And I was like, why don't you stand outside of Whole Foods, pretend you're a student, and just ask people, would they ever get this delivered to their door? And he, he came back and was like, yeah, no, like, no one's going to spend, the, the price was $129. No one's going to spend $129 a month on beef. But if you offer chicken or pork or seafood, they will. And so all of a sudden, we went from like, we're doing grass-fed beef to actually, we're doing everything and we're going to compete against the butcher. I don't think Bobby GPT would have gotten that.

• 17:51Jeff Berman?

  Yeah.

• 17:52Speaker 02

  I think you needed a human being to, to figure that one out.

• 17:57Jeff Berman?

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• 18:33Jeff Berman?

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• 19:16Jeff Berman?

  When you've built substantial wealth through your business, it's often tied up in a single equity position. The upside is real, but so is the risk, and knowing when to act isn't always obvious. Creative Planning works with business owners to build a strategy around concentrated equity, when to diversify, how to manage tax risk, and how to protect what you've spent years building. Creative Planning, where wealth works together. Learn more at creativeplanning.com/mastersofscale. You said that you started building with culture principles that included what you learned from Custom Made. What was key in terms of what was different there?

• 19:56Speaker 02

  There's this idea that startups are like hacking through a jungle with a machete. At the very beginning, what you need are people who are willing to hack aimlessly because you don't know where you're going, but just like work night and day and just keep hacking until we find a path. And then you're just like, oh, okay, here's a path. Like, let's take the path. And then you start needing like some people with a little bit more experience. Maybe they know how to use a compass, or they know, you know, and then eventually you get to a road. And when you get on a road, you kind of need people who know how to drive cars. If you just go for the car drivers, then you lose the hacking culture. And not hacking like computer, like coding, hacking like you're willing to do whatever it takes

• 20:40Speaker 02

  to get this thing off the ground. My first company with Custom Made, when we raised venture capital, we essentially turned around to our team and we're like, none of you know how to drive a car, do you? We have to leave you here in the jungle. And so all these people who had worked for your, for three, four years to help us build something really great and fundable, we left them.

• 21:04Jeff Berman?

  Yeah.

• 21:04Speaker 02

  And we went and hired people who had worked at AOL and had big, really fancy resumes. And, and, and the reality is you need a mixture of the two. That's the, the big lesson that I learned at ButcherBox is you don't want to just have people who have a lot of grit and no experience, but you also don't want just people with a lot of experience because they kind of forget the grit as they go along.

• 21:26Jeff Berman?

  Well, particularly if they've, if it's big company experience and they're used to like, oh, I did one thing this week.

• 21:32Speaker 02

  Right, right.

• 21:33Jeff Berman?

  Hierarchy, meetings.

• 21:35Speaker 02

  Process.

• 21:35Jeff Berman?

  Process.

• 21:36Speaker 02

  Yeah. And it's like, we hired people as if we had product market fit and we didn't have product market fit. And so this time around, I was like very focused on taking the people, like taking risks on people. I, the, the group of people who started with me, like had, no one had any experience. We had no experience with meat. We were just like, let's do this. And for whatever reason, I sniffed out grit in each of them, whether it was they were a D1 athlete, or they had some sort of like, some sort of chip on their shoulder. Hired my first meat person a year into the business, and he was 65.

• 22:12Jeff Berman?

  Wow.

• 22:13Speaker 02

  And had retired. He had worked at BJ's for 27 years. And he represented this like, kind of like, a ton of experience. But what I found with, with older people is, which I, I still think this is a great way to run a business. What I found with older people is like, there's really no ego. They're not, he's not trying to build his career. He's just like trying to do something meaningful and fun. And so to pair him with somebody with no experience and a lot of grit was like magical. I called it the barbell strategy. So there's like, you know, you have two ends of the barbell and really like nothing in between. There was very few people who were like mid-career at the beginning. It was either early career or end career.

• 22:56Jeff Berman?

  It sounds like my, the, the initial thesis, none of this is easy, but it is more of a straight line to say, we're, we're doing grass-fed beef. That's what we're doing.

• 23:05Speaker 02

  Yep.

• 23:06Jeff Berman?

  Bobby comes back from his Whole Foods, you know, survey trip and is like, Mike, like, we kind of got a problem here, right? Like, we need to do chicken, we need to do fish. We got like, that's what people are saying they'll buy.

• 23:17Speaker 02

  Yeah.

• 23:18Jeff Berman?

  That it feels like that is orders of magnitude, if not exponentially more complicated. How did you approach that expansion? It doesn't sound easy.

• 23:28Speaker 02

  Yeah. So the, the question around what's the equivalent to grass-fed beef in other species, there's a better way to raise an animal. So people were looking for that back then. We actually didn't start with seafood. We, we launched seafood maybe a year later because it was too complicated. It was pretty clear what claims people were looking for. But the, the facility in Wisconsin that was doing all of our product was able to do all three of those species.

• 23:53Jeff Berman?

  Oh, okay.

• 23:54Speaker 02

  And so when we launched, launched with Kickstarter, it was you could pre-buy a box, and we had some other goodies and prizes as well. But you could pre-buy a box and, and you would choose your species. So it would be either all beef, or beef and chicken, or beef, chicken, and pork. Those are the three options. And because we didn't raise any money, the idea was we were just going to send you whatever we wanted to. We were just going to send you what we felt was a great value for your, your subscription. But really, the reason why I did that, and I believe that you need to constrain yourself, like constraining yourself is really important in entrepreneurship. I didn't want to have, hey, you can just choose whatever you want, because then you have to have inventory. And

• 24:37Speaker 02

  so we had seen Blue Apron, we had seen the Hello Freshes and the Blue Apron look-alikes that were all just shipping whatever they wanted to. And I thought that could, that could work. And so we, yeah, we launched with a curated box, the butcher selections, and all people chose was the species.

• 24:55Jeff Berman?

  Right, right. But it's ultimately, you get what you get and you don't get upset, kind of like.

• 24:59Speaker 02

  And if you do get upset, then we'll do better next time. Because for us, as a subscription business, subscription businesses are great because if you delight the customer, you keep them, and then you get that revenue next month. And so all we were trying to do was build the best boxes possible so that people stayed.

• 25:16Jeff Berman?

  Yeah. I mean, committed monthly recurring revenue is a really beautiful business model.

• 25:20Speaker 02

  It sure is. Yeah. It's tough. It's a, it's a tough, it's tough to delight your customer, but it certainly puts your focus on the exact same thing the customer wants.

• 25:29Jeff Berman?

  Yeah. Well, and, and it's not truly committed, right? I mean, you have to earn it every month.

• 25:33Speaker 02

  Right. That's right.

• 25:34Jeff Berman?

  What happens next? You, you have this successful, successful Kickstarter campaign. You've got money in the bank. You've got a facility in Wisconsin that's able to fulfill. Now you gotta build and run a business.

• 25:47Speaker 02

  Yep.

• 25:47Jeff Berman?

  So what, what, what happens next?

• 25:49Speaker 02

  Yeah. So we, we, the Kickstarter was a 30-day campaign, and then we immediately launched our website. And it just kind of started working right away. I mean, the first week, we probably had, I don't know, 30 people who signed up, and then it was 50, and then it was a couple hundred. And, and we shipped out our boxes early to all of our Kickstarter people, and then called them all up, which I didn't do, because again, I wouldn't have done that. But I found some guy who made 400 phone calls, or whatever it was. And he's like, just checking in, do you need any recipes? By the way, we're a subscription

• 26:30Speaker 02

  business. Do you want another subscription? And so he was able to, he was able to convert 30, 30% of them. Took, I don't know, four or five months to get 1,000 subscribers. And 1,000 subscribers, when you're doing $129 a box is, you know, that's a, you're already over a million dollar business.

• 26:48Jeff Berman?

  Yeah. And so at that moment, I have to imagine you've got some investors who are going, well, like, you know, there's, there's some early signs of product market fit here. You got a million dollar run rate and, and growing. Are, are venture capitalists starting to, to reach out?

• 27:04Speaker 02

  Yes, for sure. Including the ones that I had just lost their money. You know, like, actually, that was like a really, really important moment for me, and I think for people to really understand is. You talk to these venture capitalists afterwards and they're like, no, don't worry about it. Like, most of these go to zero anyway. Like, they didn't care at all. Like, all this, like, guilt I felt about how I was losing everyone's money. And they're like, yeah, it happens. Can I invest in your next thing? Yeah, it was like, literally that easy. Um, yes, there was a lot of external interest in the early years of ButcherBox.

• 27:41Jeff Berman?

  So this money, did you take?

• 27:43Speaker 02

  I didn't take any money.

• 27:43Jeff Berman?

  Oh, you didn't take anyone's money?

• 27:45Speaker 02

  No, no.

• 27:45Jeff Berman?

  Why not?

• 27:45Speaker 02

  Unfunded. At the very beginning, I had had such a bad experience. I had felt like I got so burned and I lost myself. As you said, I like, lost my integrity. I didn't want to introduce that. Um, and then as time went on, we figured out how to build a positive cash cycle, cash conversion cycle. So we didn't need a lot of cash. We were growing well. We were having a great time. And so it just kind of became like, well, maybe, maybe this is what we're supposed to do.

• 28:16Jeff Berman?

  Yeah.

• 28:17Speaker 02

  And then you fast forward a few years after that, and Blue Apron went public. And then they proceeded to, in 2017, so this is two years after I, I launched, they went public, and then their stock crashed. And so any money that was like, available for box subscription food companies?

• 28:35Jeff Berman?

  Disappeared.

• 28:35Speaker 02

  Disappeared.

• 28:36Jeff Berman?

  Yeah.

• 28:36Speaker 02

  And so I actually, I, I don't think I'd be around right now if I had raised money.

• 28:40Jeff Berman?

  Why?

• 28:41Speaker 02

  Well, I would have raised money in 2015, and I would have been on like, an 18 to 24 month, like, you know, runway where I'm supposed to spend all that money.

• 28:48Jeff Berman?

  Right.

• 28:48Speaker 02

  And so I would have been out looking, right when Blue Apron went under.

• 28:52Jeff Berman?

  What would you have done with the money such that you would have been in such a hole and not have been profitable two years later?

• 28:58Speaker 02

  Marketing. That's where most of these, most of the money goes to in these businesses. And so at the time, there was Blue Apron, and there was like, 100 Blue Apron look-alikes. And they were all spending gobs and gobs of money on Facebook. And so if I had raised money, it'd be like, where should we advertise? Facebook. And we would have just plowed money in to Facebook. Instead, what we did, again, the constraint helps, um, we said, okay, we're making like, $20 on every box we're shipping. Uh, so we need to be box one profitable. Meaning the first box that leaves the facility, like, I need to have marketed it for less than $20. And so that forced us to find very different acquisition channels.

• 29:40Jeff Berman?

  What did you find?

• 29:40Speaker 02

  Influencers. Um, so we went out to all of these nutritionists and paleo enthusiasts, the people whose blogs I was reading when my wife and I were trying to clean up our diets. And we said, hey, like, I started this company because I read your blog, and then I couldn't find a source for grass-fed beef. Would you send an email to your audience and tell them about this, uh, about this product and hear all the attributes and here's why we're doing, we're doing. And, uh, by the way, we can't pay you upfront, uh, but we can pay your residual.

• 30:11Jeff Berman?

  So like, an affiliate fee, basically?

• 30:13Speaker 02

  Yeah, but like, instead of an upfront one, it was like, every month that that customer stays, you get a check.

• 30:19Jeff Berman?

  Okay, so it was an affiliate fee with a tail. So basically, you, you acquire as a customer who's a three, four-year lifetime customer or longer.

• 30:27Speaker 02

  Yep.

• 30:27Jeff Berman?

  The money's just gonna keep coming.

• 30:28Speaker 02

  You're getting $10 a month.

• 30:30Jeff Berman?

  Yeah.

• 30:30Speaker 02

  And lots of people said yes to that. First year, we did 5 million. The second year, we did 35 million, and then 100 million. Pretty much up to 50 million. That was our only marketing. And, you know, the constraint of not having money, uh, forced a discipline, both on the acquisition side, but also on the operational side, where it's like, if we're only making $20, well, how do we make $21? Well, I just negotiated a new box price, and it's a dollar cheaper. Or I just negotiated new dry ice, or I just negotiated the price of, uh, the tape that like, fixes the box. And so we, we just, um, that's one of the things I still love about the business is it's like, there's a lot of creative marketing

• 31:13Speaker 02

  stuff. And then there's a lot of like hardcore operational, where all the money's made, where you, you, you just need to be ruthless about negotiating and dropping costs that don't hurt the customer at the end of the day. The best moves are ones that like, you can get the same product for cheaper, and you don't hurt the customer.

• 31:33Jeff Berman?

  Yeah.

• 31:33Speaker 02

  Really, ultimately, what we've built over the past 11 years is, um, a brand that people trust. We, we've never cut a corner, and we always are like, uh, transparent with our customer. We're just constantly, um, trying, trying to do something different than the meat industry has done. The meat industry is pretty broken in this country. Um, a lot of the labels are just confusing, and people don't understand what they're eating. And, um, really, the industry has been built since the 1950s on cheap, food-safe protein. And don't ask a lot of questions about how it's been, what's, what's actually happening behind the scenes. And with a more educated customer, a more health-conscious customer, that doesn't

• 32:17Speaker 02

  work anymore. Customers want, um, first of all, they want something that they feel meets their ethics and their integrity. And secondly, um, they want more information than just, uh, just like, trust us, it's, it's good.

• 32:32Jeff Berman?

  Mike, as you're scaling to $650 million in revenue and beyond, how are you ensuring that this, we don't cut corners, these are core values for us, stays in an organization?

• 32:45Speaker 02

  Yeah, I think it's easier if I'm in charge still. Um, but if I was to step down, or if I was to get hit by a bus, um, that's where I started to get concerned. And so in 2020, we, uh, became B Corp certified, which is a rigorous, uh, third-party audit of your business, of what you do, of what you stand for, who your partners are, uh, what your impact on the environment and community, like, a whole bunch of different, um, questions. And that is the thing that I, um, fall back on now. So, uh, part of the B Corp certification, you can change your corporate bylaws to specifically state that you are not making decisions just

• 33:26Speaker 02

  for shareholders. I don't see how a company can be built, a company that wants to do the right thing can be built in the right way, if you are just supposed to make decisions to make people more money.

• 33:37Jeff Berman?

  Is going public an option?

• 33:40Speaker 02

  Uh, it, it is, but, uh, no.

• 33:43Jeff Berman?

  Why not?

• 33:44Speaker 02

  There are very few publicly traded companies that are like, B Corp, or take, take that path. Uh, I think it's a hard path to take, where you are not gonna just care about your shareholders. Um, if we did it, it would be, really be like, a non, a very small piece. But then I, I, I come to the question of like, why? Like, why would you, like, why would you sell the company? Why would you go public? Generally, either you're sick of the business, like, you're like, get me out of this thing. Um, or you need liquidity.

• 34:15Jeff Berman?

  I just finished reading Eric Ries's, uh, new book, um, which will be out by the time this episode, uh, drops. Um, and he, um, in, in one section of the book, he talks about companies like Patagonia and Costco, um, that because of their high standards and their sourcing, their ethical sourcing, um, they've changed entire industries. Um, to your point about the meat industry being not, not the cleanest in the world, um, how are you seeing the impact in the overall ecosystem because you all are now generating hundreds of millions of dollars, um, of, of better-raised beef?

• 34:57Speaker 02

  Yeah, it's great. Um, the industry is changing. Um, the large companies are paying attention. Um, like I said earlier, uh, when, when we started, people couldn't find pasture-raised grass-fed beef in their local grocery store. It's actually become easier for people to find that. Um, we still think ours is higher quality. Uh, but the, the, the industry has responded. Um, there's a meat conference every year, uh, which is a fun conference to go to. And

• 35:28Jeff Berman?

  High stakes, high stakes.

• 35:29Speaker 02

  High stakes.

• 35:30Jeff Berman?

  Sorry.

• 35:31Speaker 02

  That's good. Um, the first, I don't know, three or five years that we went to the meat conference, people like, had no idea who we were. Now, we're being asked to be on committees, we're being asked to speak, we're being asked to talk about like, claims-based, why this is important, both important, as well as, it turns out, like, a better, more resilient customer. Um, and so a lot of, like, the industry is changing.

• 35:57Jeff Berman?

  Yeah.

• 35:58Speaker 02

  We like to say that we, we, we want to help small family farmers, like, help them grow their business, and also guide large companies. And we're willing to work with everybody, as long as they're willing to do the right thing. And we can help, we can help smaller people scale up their businesses, and we can help larger people do the right thing.

• 36:17Jeff Berman?

  The expansion into retail from DTC, what drove that decision, and how has that experience been for you?

• 36:23Speaker 02

  Yeah, so retail, um, reality is, so lots of people get groceries online, it's about 14 to 20% of the market, depending how you look at it. The reality is, even our customers go to the grocery store two times a week. The grocery stores are where people go to buy meat and, uh, and produce and all the other things they're buying. Um, so if we want to be a brand, like, an iconic, beloved brand, um, we need to be in retail. That's, that's been the, kind of, the party line for several years. Um, we, uh, we found an amazing partner in Target. Um, Target was, is really focused on bringing, like, well-known brands into the store and highlighting them. Um, and so that was a great kind of

• 37:05Speaker 02

  first step into retail. And, and now we're talking to lots of other retailers who are interested in carrying our product. Um, we actually represent something pretty interesting to the retailer, which is, um, most, most meat companies they deal with sell, like, chicken. For us, we are a wide assortment of different species and different products, uh, all under one label. So that's pretty interesting. Um, and the, the thinking is, and is turning out to be correct, is, um, hey, we spend all this money on advertising, we, we do a lot of things to get the word out about ButcherBox. Um, I wonder if that would resonate with somebody who goes to their local store and is like, oh, ButcherBox, I've heard of this, let me try it. Turns out, it's, that's working really well. So

• 37:50Speaker 02

  we already have the marketing dollars in the market. Uh, we just need to be closer to where the customer is shopping.

• 37:56Jeff Berman?

  Are you seeing an uptick in your subscriptions since you started launching in, in Target and Costco?

• 38:02Speaker 02

  Yeah, hard to track, especially when you go nationwide. Like, if we had started in a region, that would have been easier to track, but because we went nationwide, it's harder to track.

• 38:10Jeff Berman?

  Good problem.

• 38:11Speaker 02

  Good problem. Markers that would suggest that people are trying our product and then purchasing are all up.

• 38:16Jeff Berman?

  Yeah, awesome. Um, Mike, thanks for being a master of skill.

• 38:19Speaker 02

  Yeah, thanks for having me.

• 38:21Jeff Berman?

  Thanks again to Mike Salguero for joining us. It is incredible to see how Mike took the hard-won lessons from his first business and turned them into the fuel and the wisdom it took to build ButcherBox. I'm eager to see how his thoughtful leadership can help ButcherBox continue to grow and help the broader meat industry evolve. I'm Jeff Berman. Thank you for listening.

• 38:45Jeff Berman?

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• 39:26Jeff Berman?

  Before we get to the rest of our conversation today, I want to spend a moment sharing with you about Masters of Scale Summit, which returns to San Francisco this October 20th to 22nd. So many of us feel overwhelmed right now. It feels like so much of the world is careening, and we don't have power. We don't have agency. That's the thing about the Masters of Scale Summit. It's really designed to remind us that we do have agency, agency to lead, agency to design, to build the relationships and the partnerships that empower us and to make the change that we want to see. We program a stage, we curate an audience, we set a schedule that builds in time for these relationships to be made and to grow so that by the time you leave Summit,

• 40:10Jeff Berman?

  you are fired out of a cannon, ready to run through walls to do better in the world with the agency that you actually have. I hope to see you there. Visit mastersofscale.com/summit.

• 40:29Speaker 03

  Hey, listeners, Bob here. If you listen to Rapid Response on Masters of Scale, you may be missing half the show because every Friday we release a second Rapid Response exclusively in the Rapid Response feed. The guests and topics are just as compelling and timely, from Ford CEO to NASA's administrator to the lessons from the devil wears Prada. It takes about 10 seconds to find. Just search Rapid Response wherever you listen to podcasts and hit follow to make sure you never miss an episode. I hope to see you there.

• 41:06Jeff Berman?

  Masters of Scale is a Wait What original. Our executive producer is Eve Tro. Senior supervising producer is Tricia Bobita. Associate producer is Masha Makatana. Video editor is Noah Walstein. Senior talent executive is Stephanie Stern. Mixing and mastering by the audio boys, Aaron Bastinelli and Brian Pugh. Original music by the legendary Ryan Holiday. Our head of podcasts is Lee Tal Malad. Visit mastersofscale.com to find the transcript for this episode and to subscribe to our newsletter. And be sure to check out our YouTube channel.

• 42:01Speaker 04

  Humans will never be more intelligent than AI.

• 42:05Speaker 05

  There's going to be two types of companies. Those are great at AI and those that went out of business because they weren't.

• 42:10Speaker 06

  How do we build a future that is human-centered?

• 42:15Speaker 07

  I'm Rana Elkhawyubi. And on my podcast, Pioneers of AI, we answer that question and so many more. As an AI scientist, entrepreneur, and investor, I know what it takes to build AI that works for everyone. Every week, I sit down with the pioneers shaping our future, and we take you behind the scenes of the AI that's transforming our lives. Find Pioneers of AI wherever you tune in.