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Startist: Lessons from a Serial Entrepreneur

Eric Ryan shares lessons from his startup journey of launching method, OLLY, and most recently, Welly, while diving into the three paramount pillars of design, product and culture. He also dives into his unique approach to leveraging culture design and entrepreneurship to rapidly scale new brands.

Adam Ryan: I’m super honored to introduce our next speaker, Eric Ryan. He is the founder of method, OLLY, and Welly, if you have heard of them. They are gummies, Band-Aids, and various wellness Target categories. They are essentially the prettiest thing in the Target aisle, if you walk down there. Eric is a serial entrepreneur. These three companies are worth over a billion dollars. He’s only raised 30 plus million. It is an incredible return for him and all of his investors. He’s here to share his journey and on his path to his lifelong entrepreneurship. So give it up for Eric.

Eric Ryan: … that we are in the tech capital of the world. You just heard about underwear. Now we’re going to talk about soap, and up next is deodorant. Super sexy day. So as you heard, I’m now realizing, I guess I’m a serial entrepreneur and when we started method back in the turn of the century, in the year 2000, we realized, like any founder story, there’s just a tremendous amount of luck that leads to success. And when we left method, Adam went on to go start Ripple, I went to go start OLLY, a lot of what we were trying to scratch was the itch of, did we get lucky or do we actually know what we’re doing? And then when OLLY has worked, and then we just launched Welly, our third company, I started to realize, okay, maybe we know what we’re doing and wanted to put together for you like how I think about startups.

And if you look at any successful serial entrepreneur, they really aren’t working from a formula and approach. And they’re constantly figuring out how to de-risk it and make what might otherwise look really risky, but behind the scenes is actually a sure bet. And that’s what I want to walk through today. There’s three things I do. One is I find cultural shifts, and I’ll talk about what that means, but I look for big categories that are missing a cultural shift that ultimately we could exploit the brand for decades to come. Two, for me, everything starts with culture. And then I obsess over products. So I fundamentally believe if you get the culture right and you get the products right, sales, marketing, everything else just gets a lot easier. And so first I want to explain a little bit of the method story put into practice.

And I came from an advertising background. So everything I do is very much through the lens of the consumer and really how do you bring to life branding and creativity in a way that creates new experiences. And what’s different about my approach from other entrepreneurs is I don’t start with an idea or something I’m dissatisfied. I literally start with a category, and I started looking at the soap aisle here in San Francisco back in 2000, and it was just so big, but yet it was very much a sea of sameness. So that was a clue to dig here. And coming out of advertising, what I understood about consumer motivations and trends, I figured I would just find, what is this category missing? And Adam and I realized it wasn’t missing one cultural shift. It was actually missing two. So we’re living up at Pine and Gough and kitty corner from whole foods and realized here particularly in San Francisco, there’s this shift towards sustainability and wellness.

Eric Ryan: Yet we pollute when we clean, and we use poison to make our home healthier. And when we looked at the number of childhood poisonings that occur every year from common household products, we realized if we were lucky enough to be successful, we would ultimately leave a legacy of harm. And we saw a second culture shift, which was lifestyling of the home. And you essentially look at a dish soap more than you use it. And nobody was thinking about these products as an extension of your home. And so like all startups, we had an elevator pitch, and it was this idea of Aveda for the home. And we had to look for what was scarce, and consumers will always pay a premium for scarcity. And so our logic was like literally, there’s nothing more scarce than fun when it comes to cleaning. And we always believe that this idea you don’t show, you don’t tell, you show.

And this was our first ad that we ever ran, which besides being a very strategically placed cactus and we have matured a bit more since we did this in our twenties, we wanted to prove the point that with other cleaning products you put on your rubber gloves and your team building exercise sweatshirt from 1999, and with method actually, because it is so safe, you could actually clean naked if you wanted. So we had this idea of Aveda for the home, and you’ll see in everything I do, I like to steal. So what we did is we stole from the personal care category, and we just brought it to home care. So we brought a lot of the emotion of personal care, the great fragrances, the design, and we put that into these other low interest products. And this became our pitch.

So February 28, 2001, we launched here in San Francisco. It was a very awkward start. Adam and I knew nothing about how to make a product, sell a product. So what we did is we went to the 30 local grocery store, independent grocery stores where the manager can make a buying decision. You go find the store manager at 6:00 AM who’s really grumpy, eventually realizes they say yes because you’re just going to keep coming back. And this was our first sale, which is the last time I saw Adam wear a tie. We didn’t have marketing dollars, so I would just agree to do store demos where I would have people try the product I was using as research. I’m still not sure why I was standing in the liquor aisle. I think I realized anybody shopping for wine was way more interesting to talk to than shopping for a cleaning product.

And we did the very classic entrepreneur approach. We just started delivering ourselves. We had these 30 stores. We go in, we see how many we counted and ultimately started building proof of concept and de-risking it along the way. From there, we started going to regional grocery stores, but really to make this business work, remember we’re going up against not only some of the biggest multinationals, but actually the world’s first multinationals, companies like Clorox, Unilever, P&G, who I like to call P and the motherfucking G. And they got a 150 year head start, when soap was actually really cool and innovative. We were just a hundred years too late. So we really needed economies of scale, and we needed a national retailer. So we raised our series a, and we pitched it to Target and when we were raising our series a, I was like, “Oh yeah, we’ll have no problem getting Target. They’re about design. We’re about design. We’re a great fit with their customer base.”

Eric Ryan: The first meeting went okay. They at first said they didn’t like the name. I’m like, you’re Target. How do you not like the name method? They didn’t like the colors, and finally the buyer just looks at me. He’s like, “Guys,” he’s like, “I hate to say it, but it’s a snowball’s chance in hell.” So we’re like Dumb and Dumber. We’re like, “So you’re saying there’s a chance?” And with any entrepreneur who’s taken money from big scary people, you know the road forward is always much better than failure and the road backwards. And so we believed industrial design was going to be a really important part of how we were going to separate ourselves. And we hired Karim Rashid, who is one of the most famous industrial designers. We used him as a carrot to get a meeting with Target marketing who then invited the buyers. Rule number one, never go over the buyer’s head. And this was like our last chance. I had already started filling out my business school applications thinking this thing was going to fail.

And we presented to them our first Karim product, which was an inverted dish soap. And we pass it around the room, which I suddenly realized we were now pitching a sex toy as a dish soap. We barely had time to test it. The buyer who said “snowball’s chance in hell” squeezed it. And he goes, “Oh my God.” He’s like, “Even I would use this.” So Target, out of a peace offering, gave us a 60 store test in Chicago, Northern California. We thought we were great merchants. We put this on the top shelf of our end cap. The fragrances were novel. Nobody really understood how to smell them. So they would take the cap off, and we would find our entire displays raining dish soap, which is a hard way to sell product. But ultimately we got through it and method will do about 150 million at just Target alone this year. And it’s been an amazing partnership ever since.

And what I’ve done with all of these is the same model, which is, I look for a big category, and I was working with a project with Target, and we were looking for these millennial mom brands. And it was for a wellness project, and we couldn’t find anybody from the vitamin aisle that really made that connection.

Eric Ryan: So I started sniffing around the aisle and realized again, big categories, sea of sameness, and people were literally trying to stress out to choose something that was healthy for them. And so started thinking about it, like what’s the cultural shift? And we realized it was millennials entering into wellness, and every generation has a different relationship to health, and millennials think of wellness very much as part of their lifestyle. And we looked at the way that this was applied by other categories, and it became simply like that. How do we create a lifestyle-driven vitamin brand in the aisle?

Earlier this year we launched Welly. It was very much the same thing. We started looking at the first aid category, big $4 billion space dominated by one player who will celebrate their hundredth birthday next year when we celebrate our first birthday. And it was always a category that was very much clinical from the hospital to your home. And we started thinking about like what is the cultural shift? And thanks to Instagram, we live in a world today where you know what, like an injury really is a trophy of a well-lived life. So how do we connect that aspiration to this place of first aid, where actually getting hurt is a great thing and making it more of a lifestyle accessory. And kind of going back to the model of what I shared, I fundamentally believe everything starts with culture, and I obsess over getting the culture right. And if you walk into the method office in San Francisco, you feel like you’re walking into the brand, and everything we do from how we designed the office to who we hire, everything is thought about through that lens of culture and constantly reinforcing to everybody that this really is our only sustainable competitive advantage.

Eric Ryan: And we set up with OLLY, our office is actually called Camp OLLY. We’re in the Presidio, and where method was more design and we wanted it downtown, with OLLY, we wanted it closer to the lifestyle of wellness that we’re all aspiring to live. And so many companies use consumer research to really obsess over their customer and understand it, I fundamentally believe if you’re going to lead the consumer, you actually kind of have to be the consumer, and you want to have such a small distance between who you are and who you create and who you serve for. And I think the most innovative companies in the world really create for themselves. And at the end of the day, if we don’t want to use our own products or our friends or our family, who is? So we selfishly really create products in a culture that lives the lifestyle that we want for ourselves.

And the biggest test we’ve ever had with culture was a few years ago with method, we built our first plant. We finally got big enough we could build our own facility. And as you know, in most companies what would be called the front office culture and the factory culture, they’re very, very different. And we wanted to create the first company that we fundamentally believed it was one culture across very different workforces. And we also wanted our plant to be an expression of our mission and our values and really a reflection of who we are. So the first thing we did is we had a no cornfields rule. The plant called the method soapbox behind me, it looks like it’s in a very rural area, and a lot of companies like to build on old farmland because it’s cheap. But we wanted to go to where the jobs were needed.

Eric Ryan:  And we built the first plant in 35 years in the inner city of Chicago, in South Chicago. So the first thing we did is we went to where the jobs were really, really needed. And then what we did is we created the most sustainable manufacturing facility ever created, rated by Lead. So we have our own wind turbines and solar trees. Now we can’t ship on cloudy days, but that’s okay. That’s the price you pay. Everything we thought through, even to the roof, and we partnered with Gotham Greens to build the world’s largest rooftop greenhouse that every day has a harvest delivering fresh food both to the community as well as the area around it within Chicago. But the thing we were most proud of is you walk in, the culture feels no different than anywhere else. And again, this is a really difficult neighborhood where we built the plant, and you’ve got people who are second chance who’ve been incarcerated, working alongside Harvard MBAs.

And the proudest moment for me is, we did our prom in Chicago, and yes, we have a prom. And if you had walked in, you would not have realized what diverse backgrounds everybody came through. It really was one culture and really one community. And we are so proud of that. And it’s really the only factory where one, you’ll see men driving pink forklifts, but also a place where you walk in and everybody hugs. And if I had to boil down the culture of what we do to a single idea, it’s this: it’s bringing together artists and operators. And all three companies we want to create an organization that is incredibly innovative and creative, but yet runs a really predictable, profitable business. And I think you’ll find a lot of companies that err on one side or the other. And there’s few that do this well.

And so we make sure the entire company has this artist and operator mindset. So it’s things like our creative director is a peer to our CFO. The people who actually create things we bring in house as much as possible. The way I would work as a CEO with our COO, and what I found is, when you run a really great business that’s predictable, it gives so much more time and freedom to actually innovating and being creative.

Eric Ryan: And then again going from this idea that everything starts with culture, the products really are just a souvenir of our culture. And we launched method before Instagram and really before social media. But we fundamentally believed that a great visual language would cut through. So I always say, product is our version of marketing. And when you really get the product right, not only did it work well for us in being able to get great displays and getting support, in a physical world, but in an Instagram world of Instagrammable packaging, it really pays benefits.

Eric Ryan: And you’ll see with everything we do, we try to come up with one iconic stroke within the product. So for method, we kind of take this houseware vases. So everything method creates, it almost looks like a vase with really strong color story. And that’s our signature look. And we try to create these iconic shapes, like our teardrop hand-wash was one of the first ones. And then once it becomes iconic, we constantly keep it fresh with stories. And I think people forget, too, that aesthetic innovation is actually really meaningful ways to innovate within a category. And this is from our creative growth collection.

Eric Ryan: So there’s a studio here called Creative Growth in Oakland that was founded in the mid 1970s, and it’s a studio for a disabled artist. And these are people who would really struggle to have any form of livelihood, and their career artists. And art’s about seeing the world differently. So because their brains are wired differently, they’re actually amazing artists, like Dan Miller, who’s got work in the MoMA. So we’ve done three collections with them now where we create… They design the line, we sell it exclusively at Target, and it not only gives obviously some great financial contribution back to them, but it gives them the one thing that most successful artists can do for themselves that these artists can’t. And that’s to be out there hustling and self-promoting. You’ve got to be talented, but you obviously have to be able to self-promote yourself as an artist to be truly successful. And that’s part of what we’ve been doing with Target is really raising their profile as artists. Or with whole foods, we partnered to create a ocean plastic to help bring awareness to the problem of plastic in our oceans. And it’s very disappointing. Unfortunately, when you’re done with the bottle, if you hold it to your ear, you cannot hear the ocean, but we’re still working on that.

Eric Ryan: But we’re very proud. We partnered with these communities in Hawaii where we’re able to get this plastic cleaned up off the beaches and then turned back into a bottle, and it comes out this really beautiful natural gray. And same thing with OLLY. We really work hard to win on a product experience. So everybody was in a round jar. So we went square. It merchandises really well, and going back to that theme of stealing, with method where we stole from the personal care aisle and we brought it to the beauty aisle, with OLLY, we stole from beauty, and we brought it to the nutrition. So we tried to design it so it really looked like a beauty product, and ultimately too when you would display it together going from this sea of absolute circus to creating merchandising that not only like is something you want to buy versus you have to buy, but the other thing we did was because everybody feels so confused in this aisle, we ladder things up to benefits. So instead of selling biotin, we sell beauty with a unique blend. We sell sleep. We sell energy. We sell stress. And really simplifying that entire experience and great flavors.

Eric Ryan:  And that’s very much the model of what we do. If you try to win on a single product attribute or idea, it’s very easy for people to copy you. But ultimately if you try to win on an experience, you’re much more likely to be able to emotionally engage a consumer. But it’s much more defendable. And we went to do the same thing with Welly. There’s not a lot of people walking around looking for a better Band-Aid, or we have to say bandage by law. We can’t say Band-Aids. It’s its own trademark. What we wanted to do is look for where is the dissatisfaction? And again, people aren’t looking for a better Band-Aid. Most of the time you can’t remember where you put the Band-Aids or find the right one. Nobody bleeds slowly. So it’s usually an urgent situation when you need one of these things, especially when you have a screaming kid yelling at you, looking for it. Or it’s embarrassing when you’re entertaining guests, and somebody cuts themselves and you can’t find it.

Eric Ryan: So we looked at the space. I loved how, and you guys probably all had grandparents who would keep their old tin Band-Aids from the fifties, and they’d have buttons and safety pins in them. So we brought back the tin. And we merchandised everything in these really beautiful tins in different colors and shapes, but that also stack at home really neatly. So it’s easy to understand exactly where it is and what you need. And then inside it, too, we really organized in a way that’s much easier to find. But I think one of the things that’s most scary as an entrepreneur is figuring out what rules can you break and what rules can’t you break? And one of the rules we were really nervous about breaking is that ubiquitous skin color tone that Band-Aids come in that nobody actually has that skin color tone. And if we went out and created 25 products, none of them coming in that skin tone, ultimately would we fail? And we found just the opposite. People applauded us for finally getting away from that horrible skin tone bandage and actually making it something that’s more of a statement than what you try to hide away.

Eric Ryan:  And what I’ll close with, again, I think especially for many of you who are either entrepreneurs or going through it, you realize being an entrepreneur, it’s not so much the financial risk, it’s so much more of the personal reputation risk you put at stake, right? You could always recover from losing money, but your reputation is different. And I think the hardest part of being an entrepreneur is overcoming the mental games in your own head of what will failure look like? What my friends and family think of me if I fail? And for me I’ve always found that the hardest part.

Eric Ryan:  And so as an entrepreneur over the last 20 years, I’m really actually incredibly risk averse, and I’m constantly de-risking what we’re doing and really trying to make sure that we always line things up in bite size little stages. We do the right amount of capital for what we need to prove on that stage, and we stay very disciplined and think about what rules we break and what rules don’t we break. So my parting thought with you too as entrepreneurs is, look for ways to continually de-risk, de-risk, de-risk. So ultimately what you do, which the outside world looks incredibly risky, to you truly feels like a sure bet and helps you overcome the constant mental challenges of putting yourself out there to launch a company or start anything in this world. And with that I think we’ll roll into Q&A.

Q&A

Adam Ryan:      All right, thank you, Eric. We have quite a few questions coming in. The first one we’ll take from the top. How did you view D2C given your success with retailers, and are some products better sold digitally or verse in physical retail?

Eric Ryan:  Oh my God, that’s such a great question. And I really struggled with this, particularly with OLLY. So when we launched OLLY, the business plan for year one was super simple. It was get proof of concept at Target, understand the potential D2C, and at the end of the year I told the team, “All right, we got two choices. We could go heavy in wholesale. We’re going to be instantly profitable. We’re going to scale really fast. We don’t have to raise more capital. Or we could go heavy in D2C, we’re going to bleed red, but if we go to raise capital, ironically our valuation will be higher.” And I just fundamentally like to go to bed at night knowing we’re not burning capital. So we chose to really focus on the wholesale. But the other thing with our team, we could not answer the question, why would you go to OLLY.com versus one-click purchase at Amazon, and without having a really compelling reason, that was why we steered away from it. But I think we’re seeing the dirty little secret is it’s really hard to build profitable D2C brands, and there’s definitely companies doing it, but the majority of them are really struggling to find that path to profitability.

Adam Ryan: You prioritized your P&L from the get go.

Eric Ryan: We did. The other to watch out is like all the D2C brands are starting to look the same. And so if anybody’s in that space, really try to get away from how that whole world is starting to look very, very similar.

Adam Ryan:  On a lighter note, didn’t you drink your own product at a pitch?

Eric Ryan: Thank God it was non-toxic. So we were in London doing what… Often you’ll go to a market, and you’ll do a press day where different journalists will come in when you’re launching the brand there. And I love the British press because they’re so skeptical. And I always talk about how our toilet bowl cleaner was non-toxic. And she said, “Well, what would happen if you drink it?” And I said, “You’d be fine.” And she challenged me to it, which was okay. But what scared me more is she also drank it, which is like, oh God, killing a journalist does not look good. So as soon as she left, I text Adam back here, 12 hours behind, said, “Hey, just drank toilet bowl cleaner. So did a journalist. We’re okay. Dot Dot. Dot. Right?” He woke up a few hours later, said, “Yeah, you’ll be fine. But that would not have been my first choice.” I was like, “Thank you, Captain Obvious.” And yes, we were. We both lived.

Adam Ryan: Ah, the proof of concept right there in the pitch. This is a good one for everybody who’s always doing not only multiple tasks, managing multiple people, but you’ve been able to do this with multiple companies. How do you have time? How do you kind of prioritize your time to be able to do that?

Eric Ryan: Well, I’d love to take a nap right now. That’s how I feel all the time. Particularly with three kids, and we just got a puppy this weekend so we’re a little overloaded. So method I’m out of as far as an operating role. Still a good friend of the business. Method was acquired by SC Johnson, and OLLY was acquired this year by Unilever. So I’m working with Unilever. And Welly, I structured as a co-founder, but I don’t have a day-to-day operating role there. And really I’m incredibly rigorous about making sure we have process and we use an OKR system, and I’m a big believer too of putting predictability in a business where everybody can see the same movie, and we do that by creating a really clear rhythm for a business and the way we do all of our planning using OKRs really as a table of contents for the company. So I’m just incredibly efficient of how we structure things, and that in turn again creates a lot of opportunity to be innovative and creative and kind of keep the wheels on with multiple projects.

Adam Ryan: Digging into that a bit, you are obviously a creative mind with great brand, also process. You don’t hear both of those things in the same sentence. How have you been able to balance those?

Eric Ryan: Yeah, it took me a while to appreciate it. In method, if I was up here in my early method years, I would not have prioritized. I definitely would’ve talked artists and operator, that slide is from like 2003, and the idea of design thinking and business thinking, but it’s something I really learned to appreciate later in my time with method. And I always thought process was a dirty word and would get in the way of it, and I think it was like when Adam and I started method, we were in our twenties. You’d find at the Mauna Loa up at the bar on Union Street, and we had time. And with OLLY, having kids and a family, I just had to be way more structured in my time, but I learned to really appreciate the importance of running great rigor in a company to enable great creativity.

Adam Ryan: Awesome. Last question, we’re going to go with the second one here. What is your best advice for getting retail distribution? We have a ton of people in the audience having physical products. This is a huge part of the success. You’ve done it multiple times.

Eric Ryan: It’s never been easier. Again, we started method. That was a hail Mary pass. It was unheard of for a big national retailer to take a leap on a startup. Today between D2C, Amazon eCommerce, and you’ve got so much physical retail that the lines are blurred of how they compete against each other today that there’s such a desire for differentiation among retailers. And I think a real belief among retailers to now take bets on entrepreneur companies. So I don’t know if I have any great advice other than really break it down. And I think in those early years, again, it’s about de-risking, de-risking, de-risking. So in the beginning it’s all about proof of concept. It’s about not winning. It’s about learning how to win. And I would really focus on one or two test retailers. We can get that first concept, learn how to optimize what you’re doing, and then scale it up to the next and just keep scaling from there. But just kind of one step at a time.

Adam Ryan: All right, well that is time. Thank you so much, Eric.

Eric Ryan: Thank you all so much.

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