Invest Like the Best with Patrick O'Shaughnessy
· Patrick O'Shaughnessy, Greg Stewart
[00:00:00] S0: And just to orient in the history of the business, how much revenue or whatever was there at the start of this S-curve? And how quickly did it accelerate? [00:00:00] S1: $4 or $5 million of ARR. We were getting some success, but like the beginning of the TikTok journey, it started at $3 million, but $5 when we started to put money into the machine. [00:00:00] S0: And it sort of exploded since there. [00:00:00] S1: It exploded. But one of the things we learned that was critical to TikTok is you have to own the creative. And this was like not typical for brands in our space. They would hire an agency. The agency would make creative. But we're learning all this stuff on the organic. And we're learning the iteration cycles are so fast. You can't just hand it off to an agency and hope that it comes back correctly. So we started investing in creators full-time. We had JDs on the website in 2023. It said full-time TikTok creator. People were like, what the hell is this job? But it's no different than social media jobs 10 years ago. That's not a job. Well, it is a job. It just wasn't a job yet. And it was the same dynamic. So complete control over the creative. We had these coaches on our team give us this edge on compounding learnings, this mini agency that was figuring it out across all of these different creators that we controlled, that we weren't just waiting and hoping that somebody on the other side of the fence would throw us the right thing. [00:00:00] S0: If that was the frontier then, what is the frontier now?
· Patrick O'Shaughnessy, Greg Stewart, Tom Digan
[00:00:00] S0: If that was the frontier then, what is the frontier now? [00:00:00] S1: What we're thinking about now is the short-form video strategy will always be a core part of our strategy. That's not going away. But I think what we learned – [00:00:00] S2: It's expanded well beyond TikTok at this stage. [00:00:00] S1: Exactly. I think what we learned last year, though, is that we certainly don't have a product problem. We have a very special product. Our customers love us and they're asking us to go deeper with them. But most people still don't know who Ladder is. We're consistently top three or four in our category in the App Store, and yet the awareness is very low. I think that's largely a function of the short-form video strategy that we had that was speaking with creators in these winning formats to a specific persona that wasn't really leading with the Ladder brand. Now we're excited to go and think about celebrity partnerships and out-of-home and TV, and we're already making these campaigns. Now we're just going to go and put them in these other channels. So that's certainly a big focus of next year is just telling a wider story that frankly is just going to amplify what we're doing on short-form video. [00:00:00] S0: How are you going to be empirical about that in the same way that you've been about product and marketing so far? It seems like a very different kind of harder-to-be-empirical kind of market.
· Greg Stewart
[00:00:00] S1: It is, but it's small controlled bets. Big on scale, but limited on bets that we're making. So if it's a celebrity partner, we need to know exactly who that audience is. Is this someone that resonates with our user? Are they going to amplify the right message that represents Ladder? To date, we had no leeway to spend money that didn't turn into results. It was like, here's the money in the bank, turn into users, keep doing it again. And this is a little bit different. What we've realized very quickly is we do have an awareness problem. People haven't heard of Ladder. We're getting big. We're the number one grossing fitness app in the app store. We're top 100 in the U.S. of all U.S. apps. It's big. So we need to go invest in really concentrated bets that speak very specifically to our user that leverages the creative horsepower in our team. We have really special people in our team that can create stuff that no one in the world can promote from a brand perspective. So it's not as perfect of a science. And I kind of bucket it in two different paths. But my thesis over time, it's going to make the short-form engine a lot more efficient. If people are not aware of Ladder, we have like one video we're trying to convert you. You're learning about Ladder in that video. If you've seen and build trust with someone who's endorsing it or you have consciousness a nugget, yeah, there's a higher likelihood that that person is going to take the first step. So I think the two play together. And you asked like, what was the super charge over the last couple of years? We did a deal with General Catalyst that changed the game for us and their customer value fund. And essentially, what we realized is the capital markets aren't funding CAC in consumer companies. We can't just go raise a bunch of money just to put it into TikTok. The appetite's not there, no matter how good the product is. And General Catalyst has solved that where they're financing our investment and growth every month. So the payback happens over time. It's not as much of a cash hit. But it lets me think about half the house is very performance, very controlled. You can underwrite it, which General Catalyst did. And now we're going to go invest in some squishy stuff that should be proven downstream that it has an impact and makes things more efficient.
· Greg Stewart, Patrick O'Shaughnessy
But it'll be iteration. Nothing else. It'll be a game of figuring out what works, what doesn't. [00:00:00] S0: If you think about the experience of, you said you'd built some enterprise companies before this versus consumer. It seems like in the last five years, for a long time, no one invested in consumer because actually really up until, I guess, very recently, AI is, of course, unlocking things in interesting ways. If you were to pitch a young entrepreneur, a teenager, or a young college student on building a consumer business rather than the much more traditional B2B thing that's dominated the startup world for a long time, what would your pitch be? Why is it fun and different to build this kind of business?
· Greg Stewart
[00:00:00] S1: The fun part is you get to see it every day and it's impacting people. That's real. We're providing real value. We're changing lives. I read these stories every day coming in to our team of like what happened to this person because of Ladder. What else could inspire you more than that? We're not selling their attention to advertisers. We're helping their lives. That's really fun. And the feedback loop is fast. You make something, you know exactly what happened. That's exhilarating. And you have a report card that's your users. And no one user is the right answer, but collectively they are. I'd say what people don't realize in consumer is how freaking hard it is. And there is no quick fixes. There is no growth hacks are not a real thing. You have to be black belt at building products for the consumer and growth. You have to have both those things within your own team to survive and then be able to raise money to go fund that, which is its own mission. So in my mind, if you want to get a consumer, you've got to love talking to people. You've got to love extracting information from human beings to go create solutions for them. It's not like, I think it should be. That's how consumer companies die, because they just freaking guess. And it doesn't match what the consumer is looking for. So it's really hard and you have to be excellent at both sides of the house. Half our team worked on workout completion. Half of them works on trials off TikTok. That's the business. Very simple. But we are equal weight in black belt on both of those skills. And without either one of them, there would be no Ladder at this stage. Great product, no growth. Doesn't work, doesn't get funded. Great growth engine, no product. Leaky bucket, doesn't become a big company. Both those things have to be true to be able to build a company that's durable and last. And just be ready for 10 years. It's not going to be six months or a year. It's going to be a slog and constantly problem solving along the way. So it's splashy. It's fun. But it's really fucking hard to do. I'd probably say don't do it. There's probably easier things to get funded to do.
· Tom Digan, Greg Stewart, Patrick O'Shaughnessy
[00:00:00] S2: But listening to the stories, as Greg said, when you hear from one of your members about how Ladder has changed their life in some way. And it's easy to, when you're looking at the charts and everything, that gets lost on you sometimes, but you're constantly pulled back by these stories. And I think our creative team does a great job of telling those member stories. And that's something we'll continue to do. Our customers, as Greg said, they literally tell us what to do. I mean, we sent our annual survey out this year. We had 5,000 responses that take an hour on average is what people are spending. We already have 5,000 responses in the last two days. And they're answering 230 of our most burning questions about what to build from here, what companies to partner with. Would you be interested in supplements coming from Ladder? Everything as it relates to all the different surface area that we could explore. So that's really exciting to us is just continue to listen to them. They're huge advocates for us. So we're going to continue to do that. [00:00:00] S1: If you want to be by yourself with headphones on working on a consumer, it's a losing strategy. [00:00:00] S2: I see that all the time where it's like, you're just building shit. You got to be talking deeply to the user. [00:00:00] S0: If I think about the two big world things happening that probably most impact your business, they're out of your control, it's AI and GLP-1s. And I'm really curious how you think about both of those things as creators of opportunity, as potentially risks.