"A Larger Boat in Choppy Waters”

Phillip: [00:01:05] Hello and welcome to Future Commerce, the podcast about the next generation of commerce. I'm Phillip and I am here with Nick Ling who's back for the second time. And Nick, of course, is the CEO and Co-Founder of Pattern. This is I think Pattern's fourth appearance on Future Commerce as a podcast. Welcome back to the show, Nick.

Nick: [00:01:22] Yeah, thanks very much, Phillip. We've been around for four years, so I think four appearances is a good rhythm to have and so we're very happy to be here.

Phillip: [00:01:30] I mean, it's the customer lifetime value. We're getting repeat customers out of Pattern. It's really awesome to have you. I didn't realize the last time we had you on that you have a master's in physics. We're going to have to get into some of that a little bit. But I'm just reading through your bio here. You've been up to a bunch of things. You have an announcement to make. We're really pumped to hear about the work that you're doing, what's new in your world?

Nick: [00:01:51] Thanks for being here. I hope we can dive into some stuff that's like interesting beyond just our announcement as well. But yeah, the thing we're excited to share today is that we've added another brand to the Pattern family of brands called Onsen. Onsen is a soft goods brand known for their premium waffle towels, just to give you a bit of background, and was originally founded by two amazing people based in Salt Lake City, Shane and Conner, who founded the brand in 2017. And we'll dive into that brand a bit more later. But I think we're excited with Pattern is that we're starting to see kind of our portfolio expand now, this family of brands. So there are seven brands in our family. Two others beyond Onsen joined recently, Yield and Poketo. Kind of this mission we have of helping people enjoy their daily life at home is expanding further into more parts of their day-to-day life and kind of extending what we're doing at Pattern itself.

Phillip: [00:02:50] That's awesome. It seems like things are really ramped up in the last year as you raised a new round to reposition towards direct to consumer acquisition. You're bringing brands into the fold. You're bringing stellar founders into the fold. What are some of the channels in which you're looking to continue to be able to acquire? I saw it looks like you guys have an application process on the website. Is there a little bit of momentum building in seeing Pattern as a home for brands that are looking for their next phase of growth?

Nick: [00:03:28] Yeah, you mentioned us now acquiring brands. As we're building Pattern, and when you're building a business itself, it's always nice to have some type of tailwind with you. And I kind of reflect it... I've been kind of working in this area of like consumer eCommerce for around a decade now. And Gin Lane, which was the brand building agency we ran pre Pattern kind of a decade ago, there were 20,000 brands platformed on Shopify then. And at that time you used to have like a team, an expensive team, from Gin Lane where we chose, I think charged ludicrous fees for what we were doing at the time to be able to get a brand off the ground. And I think most incredible now is that there are 2 million brands just on Shopify that people have been able to start. And that's kind of the thing that has got us really excited about what's going on is kind of how the consumer market has developed in that time and when you're building a portfolio, if there are 2 million brands out there, then it's a really interesting place to be. And I think what I also kind of have realized is that building brands is never easy. Getting your product right, optimizing your supply chains, managing Facebook, all of these types of things... And I think what we're able to do is for some successful brands who've got some momentum, we're able to really reward founders for those outcomes and what they've been able to do and put real money into their pockets. So it's kind of cool that over the past around 18 months, we've made five sets of founders millionaires. And I don't think you can see that many people have managed to attain that level in consumer in the last ten years. And I think it speaks to, number one, what they've built. But number two, the value that still sits in brands when they're constructed in the right ways.

Phillip: [00:05:34] Hmm. And you yourself are a product of some of that early on as well. I couldn't help but sort of feel like it was a celebrate as a community when some months ago watching Sweetgreen go public and realizing the early Gin Lane team probably had to celebrate a win on their own, seeing one of your babies basically grow up and come into their own in the world. And so it's really amazing to sort of watch. The time horizons are long. Yeah, it takes a decade to get to where we are. How long was Onsen in that building phase before you met them?

Nick: [00:06:11] So Onsen was founded in 2017, so five years. And I think that's still pretty young. So Poketo, which is another brand we recently acquired, has been around for 20 years. And I think the one thing that's really interesting is [00:06:26] good brands aren't built overnight, [00:06:28] which I'm sure is something that a lot of people listening to this agree with.  [00:06:33]It takes time to build a loyal audience and a really great product. [00:06:37] And the Sweetgreen example, that business has been through its ups and downs like everyone has. I'm sure COVID when people were staying inside wasn't easy, but they have built a real community that loved their product. And I see that in the brands that we buy. Real communities who really love the product that those founders have created. And I think that's the foundation of what makes a good brand now, it's also the foundation of what made a good brand 50 years ago. Like Heinz ketchup or Tide. People love the product. That's why they go back and buy those brands. And I think part of the reason that we thought that Onsen as a brand made a lot of sense is because the founders, Connor and Shane, had just spent a lot of time iterating on what could make a really great towel. And we were able to see kind of the proof point both in the kind of art and science of that through stuff like a Wirecutter review as the best towel on the internet, all the way to like how consumers were behaving towards it. It gave us real conviction that it was good to buy.

Phillip: [00:07:51] Do we discount sometimes certainly the amount of work that it takes to build a brand, no matter how narrow the category or sort of the discipline that it takes to be a founder to really focus in on one or two products that are your heroes and requirement of the team that it takes to get to a scale for an exit? Those things don't happen overnight. It's certainly fashionable to bang on on social media about you have to be in it for the long haul. But certainly, your portfolio, your growing portfolio, isn't necessarily filled with folks that get the most love or praise or the most publicly praised thought leaders on the Internet.

Nick: [00:08:36] Right. That's what's cool. Right? Again, go back to the start of 2 million. Two million brands out there. And I think the ones that you're able to see maybe from New York or San Francisco are just a small amount of those. And I'd say as we've thought about acquiring brands, I've had the wonderful opportunity to talk to thousands of entrepreneurs across America over the past 18 months. And I think what's particularly excited me is that people have found so many interesting ways to grow their brands that are very different than this idea of like, "We're just going to spend more money on Facebook." Or "We're going to optimize a Google funnel." And I think that brand building is getting to like a Law of N, you know, where so many data points that you start to see which ones are the most interesting. And I actually think it's like for me, I know a lot of people are like "DTC is dead. eCommerce doesn't make sense." Right? It's like a popular thing I see. I actually think [00:09:43] when you look on a broader horizon, it's never been more exciting to be an entrepreneur and consumer in general. Right. There's so much more happening. There's a much bigger community out there and there are a lot more interesting ideas that are kind of bubbling to the top, but maybe in different ways than before. [00:10:00]

Phillip: [00:10:01] So there's a big community out there. I'm certain there are a number of those folks who are looking to take that next step in their stage of growth. What led the team at Onsen to reach out to you or how did you get to know each other? And what was that early conversation like in the acquisition?

Nick: [00:10:22] Yeah. We reach out to a lot of brands that we think are really exciting. And the wonderful thing about the Internet is the data and information is there to say, "Hey, this brand might be really exciting." And we first got in contact with the founders of Onsen. I think Emmett sent them a cold email saying, "Hey, do you want to chat?" around 18 months ago. And the first chat we had was just introducing each other. But I think and what I've heard from Connor and Shane, what we were able to represent already was a good home for their brand because I think when people build brands and I'm sure, Phillip, you have this with your business yourself, with Future Commerce, it almost is like somewhere between a pet and a baby in how emotionally attached you are to it. And I have a dog. I have no desire to give my dog away to just to anyone or at all. But if I'm going to, I really want to have a high level of trust. And I think for good brands with great founders, whoever they sell that business to, hey, the money has to make sense, obviously. But I actually think the trust thing is massive. And I think that we have worked very hard over the past ten years to build trust in this brand ecosystem with Gin Lane and with Pattern. And if you talk to any of the founders who sold their businesses to us, what you'll hear I think is the same themes of, "Hey, I wanted to make sure they had a really good home post me. It was the right time for me to end my full-time working with this and Pattern represented that." And look, it's backbreaking work building a business. If you're doing it for five, seven, ten years, you just get tired, but you still love the brand. And so I don't want to put words in Connor and Shane's mouths, but generally what I've heard from founders is like, "Hey, I put a lot of hard work into this. There are other things I maybe want to do in my life, but I really want to have a high trust that it's going to go to a good home." And I think for those folks, we make a lot of sense as an acquirer.

Phillip: [00:12:50] In the pre-show, you and I were sort of commiserating around running. I like to run long distances but I run very slowly. You're training for a marathon?

Nick: [00:13:02] Yes, that's correct.

Phillip: [00:13:03] You're putting in the work. And you had said there's something magical about getting out on a Saturday or Sunday and you're running and you are ostensibly alone, but you're with other people. The founder journey kind of feels a lot like that sometimes. You're going it alone. You're in the thick of it like everybody else. It's really easy to look around at everyone else in the midst of that run and say, "Well, they look like they have a lot easier than me. Why am I struggling so much?" How much of that do you believe to be true as folks that are looking to partner up are saying, "I don't really want to be alone in this journey anymore. I'm looking for folks that can help me as a peer group to take me to the next level." Because honestly, building something like Onsen does feel like it's really tremendously hard work. You're in the work every day. Do you really have time to build community and engage with other folks? Only if they're really helping you build the thing you're working on, perhaps.

Nick: [00:14:03] Plus, you have kids, a family, and everything else going on in your life. With the stress of work. And you've got to look at people as a whole. And I can say for me personally the entrepreneurial journey has been tough and I think most people who have really been in it would say that as well. And I put a lot of credit to my two co-founders for us being on our journey together and being able to provide stability to each other. And I do think the impact of the last two or three years has really impacted people personally and professionally and their ability to keep on building. And if you look over the past year, I think that the past year is probably the hardest year to operate an eCommerce company ever. It's been like a winter of eCommerce, so if we rewound nine months, everyone was worried about whether their products were going to be able to come into the country through Los Angeles. And then suddenly that got better. But at the same time, the impacts of iOS 14, and consumer sentiment kind of hit people from a marketing angle. And all at the same time is like, you've just been like slogging away for the last couple of years. And I do think that as a family of brands, we do have this benefit of being a slightly larger boat in choppy waters. And for anyone who's been on a dinghy versus a cruise ship, you don't feel the waves so much when you're on a big ship, but you do get buffeted around a lot when you're on a smaller boat. And I don't think that's the only reason people sell, but I think most decisions you make in your life are very emotional. And I think that feeling of safety is a nice thing. And community. And when I talk to other people who may be thinking about selling their brands to us what I say is, "This has got to feel like the right time for you." We can't force anyone to sell their brand. It's got to feel like the right time for you. And I've got to feel like the right person for you to trust to continue building your brand. I think that the events right now are maybe making it slightly more the right time for people to sell their brand in the current kind of market environment.

Phillip: [00:17:38] You've mentioned a couple of times these founders are coming to you. They're coming to a team. They're bringing their own lived experience and their own playbook into the fold. And that's additive to the culture, certainly in the family of Pattern Brands. How much of that do you feel has its own sort of dynamic internally, as you're adding to the culture, it helps grow the other brands by virtue of the fact that there's something Onsen might be doing that is new or exciting. How much of that can you anticipate versus how much do you try to encourage?

Nick: [00:18:15] So a few things. I go back to that Law of N. There are all these experiments happening out there. And I would always rather have... This is my physics background, so I did a physics degree when I was at college and I always liked this idea that you can run like 100,000 experiments and you're going to learn a lot from it. But if I, as an individual, however smart or not smart I am, run one experiment, I'm probably going to do worse. I think [00:18:41] as a company what we're trying to do is keep an open mind towards how you really can grow brands in the evolved environment that we have today. [00:18:51] Like Phillip, you imagine we made our names with Gin Lane, and Gin Lane was all about these beautiful brands that built mass awareness when you spend a lot of money on Facebook and Instagram. And they really blew up very quickly. What we've tried to do over time is now say, "Hey, the world changed in a good way, in our opinion. And how can we embrace all the ways that you can grow brands omnichannel today? But let's not say we have the right answer. Let's learn from all these brands that we're bringing on board." And [00:19:31] with Onsen, there's stuff we've learned before buying them. The brand's only just come on board. So I expect if we sit back down in the fifth year of Pattern, you can ask me a question of kind of "What did you learn from Onsen?" And I expect we'll have a ton of stuff for you. But I also think we don't try and pretend to know everything as we're going through this journey. And I think that's important for anyone an entrepreneur is like "Strong views, weakly held," I think is a nice expression to keep on going back to as you're going through that journey. [00:20:05]

Phillip: [00:20:07] This might be a vulnerable question to ask you, but do you feel the weight of responsibility of having to have answers for this growing portfolio? Or do you feel like it's more of a forum where people are on equal footing and you're all supporting each other?

Nick: [00:20:27] Yeah. Look, we operate Pattern as one team, so everything isn't towards an individual brand. It's towards the one team of Pattern. How do we get a portfolio and a family working together? So that's the jigsaw puzzle we're trying to figure out. Not one individual piece, but how does this all come together? And I think your job as CEO is just to give clear, simple alignment to people. I don't know the answer for like a paid marketing strategy that we should do. I don't know the answer for which tech platform we should be using, but what I can do is give people clear alignment on what we're building and what we're building towards. And I think someone wrote this idea of like, what's the role of a CEO versus founder in a startup? It's to give clear strategy and direction, recruit incredible people and keep them happy, and make sure you've got enough cash. And so when I focus on what I'm doing. There are my three things. The nice thing about where we are as a company now in our growth is that incredible people are able to come on board and kind of deliver within that environment in a powerful way.

Phillip: [00:21:47] So. Recruit incredible people and keep them happy. Provide clear vision, direction, and strategy. Plenty of cash on hand. Yeah, you missed write banger Twitter threads and start a rolling fund.

Nick: [00:21:59] Yeah, exactly.

Phillip: [00:22:00] {laughter} You missed the other part.

Nick: [00:22:03] You know, Phillip, I wish I could do this, but I'm an obsessive over one thing. Like, I can't think about... You know some people are able to flick between like, "Oh, this is what's happening in Web3 and crypto and all these types of things." My brain just thinks about what we're trying to do at Pattern and obsesses over it. And I kind of enjoy personally the depth that you have to spend with something to figure it out. My Co-Founder Emmett is much better at the banger Twitter threads and making small angel investments than I am, so I'll leave that stuff to his expertise.

Phillip: [00:22:39] No, of course. Of course. I'm sort of hinting at there was a moment when startup culture and consumer brands became sort of the hot topic on social media. And you sort of had this perfect storm of folks who in venture and capital allocation, sexy sort of consumer design being at the forefront, enigmatic founders, Shark Tank sort of fetishizing entrepreneurship... You had all of these things sort of converge with Gin Lane sort of at the center. And it seemed like a really powerful time to be able to build that brand and maybe a little bit of celebrity that came with it. The excitement around that seems to have faded a bit. And now you're left to build. Is this a less distracting time to be putting in the work? I just ask you sort of personally. Was that era sort of a distraction? And now it's now you can sort of get down to business. What do you think's changed?

Nick: [00:23:41] In the moment with Gin Lane, Phillip, it didn't feel like that. It felt like we were scrambling to figure stuff out there as well. And I always think about these two types of experiences. One type of experience is in the moment you're enjoying it, so like watching a really great movie. Like watching the new Top Gun movie. In the moment I'm loving it. But it disappears. And then I don't think about it much more. The second type of experience is like in the moment might not be enjoyable, but afterwards you get like a lot of intrinsic satisfaction from it. And that's why I think Gin Lane sat for us because I think we were at a stage of our career figuring stuff out. A lot. And I think with Pattern what we're trying to build is something really foundational. And I think what we've realized is to build something really foundational takes time and you need a ton of alignment to make that happen, so I'll keep on saying I think the most exciting consumer companies, and this is beyond Pattern, are being built right now. I don't think it was the ones that we necessarily supported at Gin Lane. I think they're being built right now because I think people are getting to the really interesting problems.

Phillip: [00:24:57] There is a lot of discipline that you've exercised in building the portfolio. I'm sure you get all sorts of folks ringing your phone asking if there is a new home for their brand at Pattern. What does that take other than sort of having a mission statement and being committed to it? But what does it take to sort of really be disciplined? Is it easy? You seem like a disciplined person. Is that easy to sort of reinforce or do you feel like there are temptations to sort of look abroad beyond home? Because you've really focused on building a core set of brands and bringing brands into the fold that really make life at home better. That feels very missional. That's how you started.

Nick: [00:25:38] My goal is like from an external point of view that you look at our portfolio and make sense. That reaction makes sense. And I think we're doing okay at that. Not every product fully makes sense, but that's fine. But I think it makes sense, number one. I think we're trying to build, Phillip, if I'm being honest, the business that we believe has the biggest potential and can be the most impactful. At least what I've seen and I don't think we're building a business, which is we're developing a piece of technology that's going to change the world. It's not like airports where that technology is way better than what existed before. We're having to build a business that operationally works really well. And I think an operational business needs a lot of discipline to be able to succeed as you grow. Some things we probably don't talk about so much publicly that are important for us, for example, are that we are obsessed with profitable growth. So every brand we have bought when we bought it had a profit margin of above 20%. And there are always people in the world telling me when I look at Twitter that there are no profitable brands out there. And I'm like, bull shit. We found six right now. There's more, but like it's true. But the reason we're doing that, Phillip, is I just don't believe in building a business based on continued losses in the long term. I don't think it's saying that has the right to exist. Another example of why we believe this is important is that I actually fundamentally think that [00:27:17] brands are more valuable as brands than just products because you're buying into a way of life and you build trust. And [00:27:28] I know I saw you writing about you've had some bad experiences with some direct consumer brands, which we don't need to go into as individuals where you're like, "I didn't like the products." It was like a sucky experience. And we just have a lot of discipline that we're just trying to buy brands and our own brands where people love the products because that means you'll come back and buy again and we build trust with you. And so in my mind, the discipline we're showing is building the really powerful company at the end. When I look at like companies I really admire, when I think about companies like LVMH, it's very different. It's a luxury company, but those products are expensive, but people love them. They stand for something. They're really high quality. They transcend years and generations. You're not just like going there because there's one good ad. If I think about Pattern in the future, in our own way, we want to build that real brand value over time in a very disciplined way. It isn't easy because when you have investors, you have short-term needs and results you need to show. When retail is a cyclical market, so this year was harder than the last year. We don't know what next year is going to be like, but that's kind of how we want to operate. If we stay true to who we are, even if it doesn't work, we can look back on this and will have learned a lot during that process at a very minimum. And that's kind of why I tell our team let's try and make it successful, but that's also a really valuable personal experience during that time as well.

Phillip: [00:29:13] On the subject of team, and thank you for spending so much time here talking. We're getting deep. I like it. I like the deep. I think you all have created a platform around you of folks I think over the full course of your career who went on to go do other things. What's your take on sort of building up that capability in folks around you? In some ways, it feels like [00:29:45] you're an incubator on a few levels. It's not just that you're building brands, it's that you're building brand operators, and you're building people with aspirations who seem to want to go build things for themselves. [00:29:55] I think that that's pretty rare to find in the world these days.

Nick: [00:30:00] I think part of that's just being around for a while, chipping away. The number one goal for us is that people have an incredible experience when they work at our company. We hope we've succeeded most of the time. I'm sure there are people out there who didn't have an incredible experience for a hundred different reasons. I think that what my Co-Founder Emmett has done very well is that no matter what your experience, you are a part of our community for life. And he is still in touch very actively with people who he worked with 15 years ago. Right now, he's helping people who may be left Pattern a couple of months ago, for whatever reason, discover their entrepreneurial opportunity. But I think it all comes back to that kind of desire we have of when you're at Pattern we're going to do everything we can for you to have an incredible experience. I don't think that's something you can always be fully successful at, but you can try your hardest as you go through that. And I think it's also tough work in a startup environment. Because as leaders, you're constantly tested against the kind of demands of your business, and your customers, but also trying to support your employees. I think one good rule in life is that you've always going to make sure the last conversation you have with someone is a really positive one. In every sense, in every instance. And not leave on a bad note with anyone who you work with. And I think that's something that we've tried to do as much as we can.

Phillip: [00:31:30] Are you a startup? Would you characterize it as a startup?

Nick: [00:31:34] I think we're a startup, but we're still figuring stuff out. Everything seems to go wrong every day. But they're just new problems that are going wrong.

Phillip: [00:31:41] Isn't that always the case?

Nick: [00:31:44] Gin Lane was different. At Gin Lane, we just had the same problems. We just kept on doing it again and again and again. [00:31:51] Pattern is like a new set of problems every time because we're growing and developing in a different way. [00:31:56]

Phillip: [00:31:57] I see. I see. Well, yeah, there's something that comes with sort of the repetition and being in, I don't want to be reductive and call it agency work. But sure, agency work, you sort of start over and you get to relive the experience again and you get to try to do it better next time. 

Nick: [00:32:14] Yeah.

Phillip: [00:32:14] Yeah. When you have to live with decisions that you're making in the ownership of a brand long-term, hindsight's 20/20. 

Nick: [00:32:26] Yup. 

Phillip: [00:32:26] You're more mature now and you have mature operators and you're bringing in more mature operators, it seems, every few months. There's something to be said about, you know, I think a start-up has a couple of hallmarks. Sure. The age of the business is young, but you have mature people at the helm. Being capital constrained and having very lofty growth targets are also hallmarks of a startup. Are all of those true today?

Nick: [00:32:57] There are ways they're true. I always feel like every time... This is how it emotionally feels and with more scale, and more capital, it does feel like risk just keeps increasing. You're going back to your proverbial roulette table every time because, with more capital, your goals increase. And look, here's what I say to people. Venture funding is both at the same time incredible and awful. And you've got to be able to take it for what it is, knowing what the incredible and awful side is. And the incredible side is there are great investors who are willing to support very unlikely outcomes with large amounts of money. The bad side is that most founders don't get to those outcomes, and it's a very tough career experience for them. I think you go into this, whether you're an employee, a founder, or anyone involved in a startup with your eyes open. That's great. But the challenge is if you go into this only thinking that it's incredible, and it's right for your business. And we are very excited. I think one of the things we're excited about is like we feel like our investors, our team, the brands we're bringing on board, and how we're operating all line up really nicely right now. But Phillip, I could be coming back to you in three years' time and you'd be asking, like, "Nick, what happened?" And I'll be like, "Well, we didn't see this coming." And so we still feel we're in the middle of the journey. We're somewhere in the mountains, but we've had some great experiences which will help us for the rest of our journey. That's kind of, I think, how we feel right now and where Pattern is and kind of where it will go.

Phillip: [00:34:49] Well, it's inspiring to hear you all, everyone on your team who has ever participated in Future Commerce with us, whether that's in writing or whether that's been on the show or at an event. Everyone's very even-keeled. There's no hyperbole. You definitely feel from your team, especially your founding team, that there's a willingness to learn and to approach everything with a sort of "Well, it depends. There's nuance. Everybody has a little bit of a different experience." Like you seem you seem very in that way you come across as being very real and very authentic people. And it's always a pleasure to have that on the show because we certainly get a whole lot of the best practices sort of mindset. What can we do next? Onsen... They're coming into the family. They're coming into the fold. Where can people get lusciously dry Japanese towels?

Nick: [00:35:45] {laughter} They can go to the Onsen website or the Pattern Brand's website. Hopefully it's exciting for everyone to see over the next year or two. We can talk about all our plans but like how that brand develops, and I always believe the proof is in the action, and we think that Onsen has something really incredible foundationally around their great products, around these towels. And we'd love it if you try them. I'm sure there will be some sort of promotion around Black Friday as well. So that might be a good time if you want to lean in and buy that.

Phillip: [00:36:22] I love that. I will be twisting the arm to see if we can't pair up for a Black Friday offering with the Pattern Brands family. There's no one that I feel is more emotionally or philosophically aligned with how we view the world than you guys. So maybe let's keep an eye out for that. I don't want to put you on the spot. Our goal here really is just to bring more stories like this to the fore, especially as you're learning along the way. I feel like we accomplished our goal here today. Is there anything I should have covered that I didn't, Nick?

Nick: [00:36:54] No, I think you did an awesome job, mate. You're very kind.

Phillip: [00:36:57] Hey.

Nick: [00:36:58] You've got a very good podcast, mic, as well. So I'll give you those two compliments.

Phillip: [00:37:03] {laughter} Maybe one of these days I'll get you set up with one of these. Hey, Nick Ling of Pattern Brands, always a pleasure to have you on the show. Thank you so much for coming on.

Nick: [00:37:12] Thank you, mate.