Invest Like the Best with Patrick O'Shaughnessy
· Greg Stewart, Patrick O'Shaughnessy
And when I was at Goldman, I would interact with traders. It was just magic to me. All the screens and the attention span. Just like, how does this happen? But it felt like that for me, like I'm moving money around, driving growth for the business. And it became a video game. It's like, how do we beat the video game today? And I had this amazing creative partner in Edsel. I can figure out the ugly of how to be an ads manager person as my job. And those two things together unlocked that channel to just keep going, keep pushing on. [00:00:00] S0: I feel like the rewards for doing this in a consumer business are extremely high. And so lots have probably tried, but not lots have succeeded. What do you think it was that let you start to win the video game? Was it the knowledge of how to cut a video together? Was it topics? [00:00:00] S1: No, the creative side, what we learned is the For You page is making a decision on your content of who your content is for, and then shoving it to that person. So the first game on the creative side was, can we create content that gets to the right person for this coach? This is a CrossFit modality. Can we get to CrossFit people using content? And that was just iteration. We would do something. [00:00:00] S0: And so you'd say like, what does a CrossFit person care about?
· Patrick O'Shaughnessy, Greg Stewart
[00:00:00] S0: And so you'd say like, what does a CrossFit person care about? [00:00:00] S1: What do they care about? What's their problem solution statement? What should a coach say to get you in? We learned about hooks, what you say in the beginning, the first three sentences. It matters. What should a hook look like? What do I need to say? It gets a billboard that I need to get your attention very quickly. And we had a lot of bad content that didn't work. And then we had stuff that started to work. And we have these whiteboards where we dissect every inch. It's like, what is she wearing? What word was first? What was the setting of the gym? What was the movement? What did we say? And all of the insights of that come from knowing your customer. It's not, hey, we magically figured out TikTok. We did, but our edge was we know our customer inside and out. I had dissected these App Store reviews so deeply that we knew the words that were coming out of the mouth for people in CrossFit coming into the app. And we use that as our ammunition on how to speak to them and create compelling content, hooks that got to that person and told the story very fast that got them to keep going to follow it and come into the app. [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?
· 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?