Today we're here at BAM ventures with Brian Lee. Hi Brian. Hi. How are you.

Good. So this is a venture which implies we're going to talk about venture capital but I really think of you as like the preeminent entrepreneur in L.A. much more so than I think of you as a VC. But I was listening to your interview with I think she's the dean of the UCLA Law School.

Mm hmm. And she said today we have one of our most accomplished and interesting alumni alumni here with us today.

So that was a good introduction. You're suddenly very interesting on that. Thank you so much for coming on this.

Well thank you so much for having me. This is so exciting to be here with you many here with you David. So thank you so much.

Thank you. It's great to see you.

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So we start by talking about the adventures which is. Let's do that arm or I know that's an adventure I'm sure. What would you do here.

Sure so venture started about five years ago. We're now on funding number two. So we sort of fund one about five years ago. Very very small fund we wrote very small check sizes into the earliest stages of companies. So entrepreneur with an idea is the stage we like so really not a lot of diligence there except for kind of vetting the entrepreneur. And we've gotten pretty good at it you know so fund one has performed quite nicely in fund two is off to a good start. And so we're very excited about what we're doing behind ventures.

And are those your ideas or the Founders ideas. No. The Founders ideas. Yeah. So bam ventures we invest in outside companies.

Right now we have something called BAM labs here as well where we do kind of incubate and start companies that are my ideas. Mm hmm.

Right. So I focus on the introduction which is your ideas by the way. You have co-founded Legal Zoom Shoe Dazzle an honest company like many other things as well.

Now there's of course at all. Yeah yeah.

I love starting companies. I think that's first and foremost. I don't think I'll ever stop because that's just my joy is coming up with ideas and kind of getting them started building teams getting them traction and launched and so forth and and so I think I'll continue doing that. But at the same time I love investing too because I love meeting these entrepreneurs with such great ideas and so they're so inspiring in so many ways and so and I want to give back to this community right and grow this ecosystem even further because a growing ecosystem is good for all of us and we all know that and that's why I'm even doing this podcast.

I mean I rarely ever do a podcast podcast as you know but but I really want to do this with you guys.

You're so kind. Thank you. So when you're doing sort of more traditional investing rather than incubating these or no is not innovating. Welcome back.

But when you're doing the investing do you think that you're able to identify great nor his great ideas or do you think a lot of it is also in the support that you can give these ideas or some combination of all those.

I think it's a combination of a lot of it. Although we have really one simple rule at band ventures it's we have to like the idea but we have to love the entrepreneur basically. That's one of the simple rules out there. But the other thing is we only invest in companies that we feel that we can run ourselves. I love that right. So if we don't have the expertise in that arena or the idea that then we won't invest. So we shy away from a lot because we don't really know that much.

So for. Entrepreneurs you might want to come to you what kind of companies fit that.

Well we're we're very consumer focused but we define consumer pretty broadly. We'll do everything from brand.

So think apparel beauty food beverage so any consumer kind of related brands. But then we'll also invest in consumer tech right. So anything that touches upon the consumer and then we'll also invest into SaaS software plays that that enable commerce because we're pretty familiar with that arena as well. So it's kind of across the board but all consumer related and on the brand side.

Does there need to be some tech involved or would you do it pure CPG.

Well do you pure CPG. Yeah we have quite a few of those actually.

What is sort of a normal road map like Will you help someone get on the sounds will you help them get into Amazon. Yeah well we did all that a little bit.

So we do all that. So typical road map is entrepreneur will come up with an idea for this a new beverage. Right. And if we love the entrepreneur and like the idea for the beverage then we will help. We will invest we'll help them raise that seed round. Actually we're pretty good at that in terms of passing the bucket and trying to get our friends involved as well.

And so once the capital is raised then we basically come up with some strategic roadmaps with the founder and getting them on shelves is definitely on that road map. And so we have tremendous relationships with a lot of retailers in the space and with the right buyers and the right teams and the right brokers and and everything else so. So everything from manufacturing the product we have relationships with a lot of manufacturing facilities and through appeals for fulfillment and so forth and so we kind of help them all the way through.

And you said you're writing pretty small checks. You talk about helping people with their seed rounds.

Are you a precede fund and it's all commingled now isn't there no one place your side like what size checks do you write 250000 to five hundred thousand dollars.

And do you think there are a lot of mistakes that people are making in that process that you're you see it over and over and someone is thinking about how did they work with brokers and they should be going direct to the buyers or are there things like that help people.

So if we see someone you know trying to sell on Amazon and they just they're not doing it right then we will actually go in there and spend half a day with them and teach them how to sell on Amazon.

Right. So we do that a lot actually because Amazon as a whole is the Wild Wild West.

What is it. What are some common mistakes of selling on Amazon.

Well number one you should be on FBA Fulfilled by Amazon. You should not try to fulfill those yourself. You should also try to be fully aware of the value of reviews.

Right and understand how to collect those reviews and drive up to four or five stars.

There's there's there's a lot there is don't use vine right which is an Amazon product. To try to get these reviews because it doesn't work. This is a waste of money.

I hope ABC was not listening like I should have said that mark against Brian these exact companies.

Was it for Amazon. It's what I think it is which is like every time you do a sale you ask your customer feedback that sort of stuff.

Yeah absolutely. And just driving up those reviews.

Okay great. And you really highly focus area.

We are. I would say on the BAM venture side about 60 percent of our companies are based here in Los Angeles in southern California.

We also have some investments in Austin Texas Chicago New York is a big city for us. Not a lot of deals in the Bay Area because most consumer brands are not coming out of that region.

But it's interesting. So the consumer brand side of things. So obviously there's a lot going on in L.A..

There's also a lot of you know unprofitable e-commerce nowadays.

How do you think about the importance of building something profitable or you know we've seen some big exits here that have not been profitable right.

I know this is gonna sound a little I don't want to sound flippant but it it all depends on the tide. Interesting right. It really does. I mean there there are certain periods in time where no growth is everything. And I think as investors we all kind of see these tides churning. And today that's not necessarily the case.

The rule of thumb for unit economics on consumer goods rule of thumb for unit economics margins. However you want to pay.

It depends on the actual HIV. Right. The actual value of the sale but overall the way that I like to look at it is really on an LTV to kak basis.

So the lifetime value cost per acquisition and the NSA is a net LTV a net LTV not a revenue LTV yet. Right. The net LTV. So if you're in the range of call it 3 or 4 x LTV to crack it's a pretty healthy ratio. That's on a on a blended calc. So that's including the organic. Okay. And do you think about time in that equation as well. The payback period. Yeah. Within within one year within one year. Well yeah absolutely within a year. Any time.

And that's the thing that's that's where you start getting yourself into trouble as an e-commerce company is when you start modeling out these two three four year LTV is and who the hell really knows that that's ever going to happen. Right. But one year you can see that you can see have some some visibility into a one year payback a sub one year payback and you think that there are trends that are helping or hurting either that cack or or that cost of the brands you're seeing. Yeah absolutely. So. So it really it really depends on channels and channel marketing and what's next.

So there are certain periods in time where you will see an explosion of new brands that again a lot of traction very quickly. To me it all relates to the channel. Right. So for example like when I started legal zoom was my my friends are Brian Lu and Evy Hartman and Robert Shapiro.

We were one of their earliest advertisers in the world to pay for a click. Now a lot of people know this but we were like I think they were the eighth advertiser in the world to pay for click.

And we really ramped with paid search. Right. And once you've had a certain threshold and paid search I think you all know this is too hard for others to come in and compete because you've already tested and got the best flow the best conversion. You're not going to for paying eight dollars for this click. No one knew this space is going to come in and outbid us efficiently. Right. Unless they're going to go raise American dollars do it inefficiently.

Right exactly. So. So that's that was paid search and then and then you sort of saw the rise of you know call it social media right. With Facebook that was shut down. That's my second company. We got lucky like that bizarre Shoe Dazzle right at the right time when Facebook first started opening up their marketing channel. And we really ramped Shoe Dazzle quick on it on the on the Facebook channel and then Instagram right. And then and then now you've got some other new channels. Tick tock looks interesting if it keeps growing.

It's not quite at scale yet but if it hits so you see that these old windows right social media influencers was another thing that kind of happened with the Honest Company The Honest Company really grew with the bloggers. Right. I mean with these social media influencers and on top that just cab Of course. Right. But it was really the social media influencers that that really drove a lot of the traction for promised company as well.

How do you figure out when these channels are going to top out. How do you evaluate that early on to see well how much headway do I have with this channel.

You definitely start seeing your cack start going up. Oh so you have to wait till it starts to hurt. You have to you wait till it hurts. That's that's a really good way to avoid it actually. You wait. You track it. You wait till it hurts and then you say OK it's not working anymore.

And you think that brands need to be multi-channel or can they just be young ones. When do they expand.

Well you know like I've really changed my position on this by the way over the years there was a period with even the Honest Company where I was adamantly against Amazon right. I was like No we're going to control our own channel. We're going to go direct to the consumer. We control the data. We control that customer. And I was a fervent believer in that. I'm not anymore. I'm definitely more of the omni channel omni presence approach to brand building because for me at the end of the day what matters is that you get products into people's homes and their hands.

And. Yes a lot of people shop on online but still 80 percent still go to a retail store or grocery store or wherever they're shopping and I just kind of want to be where they are. That's number one but number two is also that in the last call it five to seven years I would say Amazon has reached a point where you can't you can't compete without them or you can't compete against them per say you want to kind of play with them. Right. Is cross over this threshold right. I don't know a single friend who is not an Amazon prime member.

I just don't.

I don't know. I don't know why that is. But everyone I know is an Amazon prime member right and that's where they shop. It depends on that category as well.

Yeah I would imagine luxury the higher end it is the less you need them. Absolutely. The less you would need Amazon fit for this company.

Mm hmm. So you ended up deciding you wouldn't sell on Amazon. Right. And you have a way of thinking about how to then leverage Amazon like how big if you can share how big of a channel is Amazon then and then how do you still maintain the brand and the user connection that you wanted to keep.

Yeah. I don't I don't think you can keep the user connection and that's that. Yes I think you give up is site you want a strong enough channel that you control to get enough data from that. Right. And enough resonance with with the user base. Because even when you're going to target and you're going to offline it's the same issue.

Right. I don't have the type of data that I have from a Target shopper. Right. So it's the same thing. Amazon is simply another retailer in that in that sense.

Yeah except they could give you the data they could get no it couldn't.

That's right.

You know that they're giving you less and less. But by the way Amazon actually used to give you a little bit more information and now it's like slowly every year they're giving you just less. I'm not sure if you knew that.

I didn't know that. Now I know that I. About with influencers as it as a channel if you will.

I think influencers are number one they're here to stay. And number two they're growing in strength and popularity.

I think influencers are always a good thing. You don't want to overpay again. You want to make sure that you're not paying more than what you could afford on a on a calc to LTV basis. But at the same time I think they're incredibly important to any brand to have that many people talking about you and to raise awareness.

And how do you get to them these days is it.

Is it direct contact or they all have intermediaries like agents the biggest ones have agents but there's there's a lot of influencers that you could just reach out to directly assess. It takes a lot of hustle a lot of hard work. But yeah you can definitely reach out to them directly.

So maybe it's a good transition. Actually it's more about being less sure which I think at the top of this a guy called you know you're incubating things but I think here you've called the new productions it is it's a production which I love because it makes me think of certain Hollywood production where you're bringing all pieces together.

But tell me a little bit about the model here and then maybe we can also talk about the influences are really celebrities that you are currently working with.

Yeah. So bam lambs.

It's it was a concept that I've always had that I wanted to do and and so basically I'll come up with an idea of the vision or strategy and kind of build a team that I know can execute that idea and then supply capital I say on as chairman I help CEO and founder get the company launched get it traction and get it going. And then I'll roll off at some point. So that's kind of the model. It's it's really it's not an incubator it's not a it's not necessarily like you know it's not an accelerator.

We don't have shared resources. We're literally launching companies like fully you know with full teams and so forth. So it's just like any other startup is just the court.

The only common thread is is me as chairman but an incubator you'd have a finance person who stand for different.

Right now we don't we don't we don't have that yeah

Let's talk about what you've got going on here right now. I know you've moved into a bigger office because I believe one of the companies that started labs is expanding that store.

Right. Right Brian.

Yeah. So our sport has been a really fun one. It's a consumer brand high performance body care products for athletes and those that live an active lifestyle mightiest Metro Nick is the CEO and co-founder and he's absolutely terrific. And love him to death. He's he's doing an amazing job growing this business. I was I was looking for sunscreen all things. And I walked over to a CBS and was looking at the sunscreen and sunscreen on a mass level is dominated by three brands.

It's Coppertone banana boat and Neutrogena. These are the three big brands. But interestingly the number one SKU for each one of them says sport on it. Okay. And the sport is in bigger font than the actual brand logo. Right. So to me I was I think to myself like my buying sport or my buying banana boat right. What am I buying. And so it was just interesting to me. So so I walked around the corner I was looking at the deodorants and it was kind of the same thing about 30 40 percent of the deodorants were sport related.

They either had sport terminology some like sport Blaster or something. Oh. Those lines are or even it or some like called like extreme something with a guy on a bicycle you know like whatever it was and I was like That's interesting too. Yeah.

And then I want to say in the body what section even in that section there is like you know X sport blasts and you know old spice sport you know whatever it was. And so for me I was just thinking myself like when I think sport and I think you know athletes and active lifestyle. I actually think Nike right.

I think Adidas and Under Armour and the wearable catalog are categories. And even in the consumable category I think Gatorade I think Powerade or California power bars. Right. But when it came to personal care which is a huge category I just looked at them as all pretenders. None of them were started for sport material just old spice was started in nineteen twenty six I think or 28 and now their sport brand.

See all those other CBS choppers didn't realize they just saw dude shopping. They didn't realize that there was the genesis of a company.

Yeah. Did you want to go to CBS or any other store. Yeah.

So that was that was the genesis of ATA sport was it was you know why did we create an actual authentic brand for athletes from the get go. And so that's that was our sport and we started it with Kobe Bryant and James Harden JuJu Smith heavier buyers in baseball right. Schachter In skateboarding.

Yeah it's been terrific and what role do those athletes celebrities play.

Usually when I don't want to. Leslie but he is as well. But what role do the celebrities bring and are they just bringing the distribution and the sort of visibility or are they actually influencing the product.

Kobe's definitely influencing it. So Cubby helps us create the scent profiles as well as naming of the actual products themselves.

So we're in constant strategy discussions with Kobe the other athletes are involved they will definitely give us their opinions but then also all of them are helping promote the brand. So this is an interesting case study for Atlas. So you have this idea you've put together a team. What's next and sort of what's your roadmap for the next six months for our sport.

Mm hmm. The road map is basically we're going to continue selling on Amazon which we're doing now. We're going to start focusing more on our own direct to consumer channel which we haven't done so late recently. So we're going to focus on that as well as offline retail. Mm hmm.

And I were talking about this before our show today. It feels to us software investors like you might not be able to iterate as well for a consumer packaged good. Is that true or are you iterating the product as you're out there. I was we're definitely iterating.

It's constant is constant.

It's I mean there's a reason why you walk into a store and a CPG brand will have new and improved on their packaging. You might never want it. It helps sell the product even further by bit by bit. But it also is these companies are constantly constantly iterating and coming up with better products and formulations and so forth.

So now how do you know to make it new and improved.

Well the new improved is definitely you're trying to get as much feedback as you can from your own customers. Right. So you're like I said you're not going to get that much data from the offline shopper. But in terms of you know velocity of sales and I mean you get these reports you know every month from the retailers that you're in and it actually shows the benchmarks that you're trying to hit and so forth. And you know this is really interesting it would read offline retailers will look at the margin profile of the product versus velocity as well.

Right. So you know if you're selling laundry detergent let's say right. If you're tired you're selling a lot of tide. Right. But the margins are are not that high. But if you're selling an all natural organic laundry detergent the margins that you know offline retailers making is higher so the velocity they would expect to be lower at all kind of works out at the end. So long as you're in this band that they're looking for then you're fine if you're outside of that band on the low end then you're gonna have to drop your price and start doing some other testing and couponing or whatever it takes to just stay in store so I have some sport at home but then I haven't done all sporty lately and I go have some lotion really nice.

Yeah I was going to say Your skin looks great.

I take like money or time to get a product and idea to its first.

You know in channels or it's first Chandler first customers.

Again it depends on the product of a beverage beverages aren't that much truthfully because you can you find some some pretty good OEM manufacturers that could do small batch runs. Can you start a beverage company for one hundred thousand dollars two hundred thousand dollars. Probably you're not going to get much right. And you can just have to kind of hustle it because I know that JT Dave can butcher. Yeah he's right. With almost nothing. Yeah. Like literally making the stuff in his garage. So you could you could do it.

Yeah. Any company could get started with almost nothing. If you put enough. Yeah. If you put enough willpower into it.

I think you also said something that really stuck with me I heard it a while ago where you said you almost might as well go for something that will scale because it's as much effort to get a non scalable feel your example was not as it was in frozen yogurt.

It was frozen yogurt. You go Wow you're good. But you have frozen yogurt. I did. I did. I did.

I had a frozen yogurt store called cantaloupe frozen yogurt. And it's still around believe or not it's on a Hollywood and La Brea. Right. Hi Jane. No no. We just opened it ourselves because that was when the legal zoom office was across the street and this is when Pinkberry was really hot and this little location opened up so I called Pinkberry and I said you know what. I think you should open a Pinkberry on this corner selfishly. Right. And I said no we're not interested in that location so I'm like fine I'll just build my own.

And so I opened this Pinkberry frozen yogurt and it was like one of the worst business mistakes ever made. It's so hard it's so hard it to run a frozen yogurt shop and I had no idea that it took that much effort and energy and it was like every month I was just losing money. Right. The management that we had in place was was poor. Truthfully you know the employee base wasn't that great that the product needed work. Everything was like so much effort. And that's when I realized it's like I'm putting in just as much effort into building cantaloupe frozen yogurt as I am legal zoom back home.

Right. It's like I might as well put my energy into it's a good decision.

Do you have other funds that often tend to co-invest with or I know lightspeed is a man who is a partner in some form for you.



Yeah. So we're lightspeed is our partner in band lambs. Jeremy Lu has been my partner for a very long time and I love him to death. Truthfully great great partner in terms of other venture firms that we work with here we work with a lot of them. Almost all of them.

I think I think especially at the scenes that we invest in is very friendly and that's why I like it actually does Tesla. Yeah. It's it's you know like I say you pass a bucket and you share deals and you talk about deals with friends need three space for entrepreneurs.

That should really make sure we touch on entrepreneurs who are approaching perhaps and want to get to know you better in relation to that.

Yeah. It for us it's pretty easy just just reach out to us Brian and bam Da Vinci. I'll throw it out there. All right. Yeah. Awesome. Thanks so much. Thank you. Thanks so much. Thank you David. Thank you.

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