Modern Brands Need Waste Innovation

Phillip: [00:00:14] Hello and welcome to Future Commerce podcast about the next generation of commerce. I'm Phillip, and the next generation of commerce is sustainable. That's what we've been saying. And I think that's a loaded term these days. I want to know what it means to our next guest, Matt Bertulli. You and I go back ages and in various parts of the world. These days, you founded a company called Pela. And I want you to tell us a little bit about that and tell us who you are for people who may not be up to date on all the things that you're doing.

Matt: [00:02:47] Yeah, I actually I did not found Pela. I am the first, I guess, the first investor in Pela.

Phillip: [00:02:53] Oh ok.

Matt: [00:02:54] So I met Jeremy years and years and years ago, and he had no revenue and it was just an idea. So I started investing in the company and the idea and eventually like took over as CEO. But we just celebrated our 10 year anniversary and I've only been involved for five.

Phillip: [00:03:11] Ok.

Matt: [00:03:12] So his first five years was like pure R&D, dude in a garage. Yeah, Pela is... How I describe us is we design waste out of the human experience is sort of it. We're this weird combination of commerce, we're direct to consumer, classic DTC commerce business. We also do like a ton of investing in material science, just figuring out how to get waste out of, like, everyday products.

Phillip: [00:03:43] Wow. There's so much that we could talk about today. We go back a little ways. Thanks for the correction there. You know, it's so funny. In the direct to consumer era, there's this conflation of the Founder/operator and direct to consumer Twitter leader of thoughts that I think definitely happens.

Matt: [00:04:06] Totally.

Phillip: [00:04:06] And because so much of DTC is filled with entrepreneurs. Entrepreneurs, entrepreneurship in a prior era wasn't very sexy. And it's very glamorized today. What were you doing before Pela?

Matt: [00:04:22] Well, I mean, this is where you and I know each other from. So my first company, I started with a company called Dmac Media. We were like super early days, at least in Canada, early days eCommerce agency. So we started out in the Magento world like long before Shopify. I think actually like the first time I met Tobi and Harley, Shopify had I want to say like three thousand customers, like two thousand plus. Most of them were Etsy sellers that had like five bars of soap for sale. So, you know, I go way back to my agency days. So I owned agency prior to Pela that I ultimately, I sold Dmac to a company, private equity group that was doing a roll up, which is now known as Bounteous. And that was about three years ago.

Phillip: [00:05:11] I've just gone through an acquisition in the agency space because it was just a lot of M&A. You know, there's the roll up commerce specialization, especially among like digital agencies that have focused on expertise in implementing or integrating commerce is something that is needed for all kinds of traditional digital agency that doesn't have a commerce specialization. It's a very difficult space to build a team around. And you need specific skill sets, you need to be a man of a particular acquired skills. {laughter}

Matt: [00:05:48] Yeah, yeah, I started it because I was a software developer by trade. So, like, getting I mean, Magento is a beast of a platform at the time.

Phillip: [00:05:59] Sure.

Matt: [00:05:59] Like getting into that world you definitely need it to be like super technical. Shopify and Shopify-like software has made commerce so much more approachable now than it was like 15 years ago when I was going at it. When I first got into it everything was custom rolled, like everything.

Phillip: [00:06:18] That's right.

Matt: [00:06:18] You know, I think people forget how big of a leap forward Magento was like compared to what else was out there in enterprise land. Right? And then, like Shopify was another big leap forward. So, yeah, that was my like my past life, which is coming in really handy now.

Phillip: [00:06:36] So let's talk about that. So you started out as an agency operator with an engineering background in software engineering. Now you're sort of a practice group leader and sort of developing and as a specialized agency, you have an exit. You're an early investor in Pela and they needed leadership. And so now you find yourself at a place to lead another company that's creating a platform as well. But a different kind.

Matt: [00:07:08] Yeah.

Phillip: [00:07:09] Tell me a little bit about Pela and sustainability... I know that's sort of a hollow term these days, but when you're talking about reducing waste in the consumer's world, how did you test that in the market or how does Pela sort of prove that out? And where are you going?

Matt: [00:07:29] Yeah, totally. OK, so like we started out with a compostable phone case. When I invested in Pela when I met Jeremy, I was super fascinated by the idea that there were alternative materials out there to plastic. I didn't know a whole lot about it. I still claim that I don't know a whole lot about the science of it. I'm getting better. Like I have a material science team and they're all PhDs and super smart people and all that sh*t. And it is like it's fascinating stuff. So like sustainability to us is like one of our core values is community. And community to us is like is this definition of taking care of the whole. So taking care of yourself, your team, your family, your local community, your regional community, your global community. So we just have this belief that you should leave the campsite better than you found it. And I don't like to complicate that word a whole lot more. I think sustainability like there's a whole bunch of green washing and all this other crap that comes as soon as you wade into those waters, particularly like if you're starting to touch energy or carbon or any of that, any bigger climate change stuff. We try to stay in our lane and just really focus in on waste. The platform we're building now, we started out with a phone case and now we're actually we made a totally new type of kitchen appliance hardware that eats waste. That's what we do. Eats food, eats bioplastics. Like it's a really... It's called Lomi. It's a slick little piece of technology. And [00:09:06] we just think there's a way to rebuild consumerism in a lot of ways without waste. You can just design it out from the start. So like, every single product to me should and could have a graceful end of life. That's the big idea. [00:09:23] We're so far from that reality, though. {laughter} So like right now, it looks like we sell a lot of phone cases and watch straps and sunglasses and personal care products, like anything that we can go after that has plastic in it and then our science will apply. That's where we go play. But I have very big ambitions in and around waste.

Phillip: [00:09:47] I heard this when we had Jack DeFuria from Parade on the show almost a year ago, and this is before the New York Times piece that everybody, you know, everybody's like, oh, well, we've been talking about Parade. No, no, no, sorry. We've been talking about Parade since April of last year. And it's because the yes, customer acquisition. They are doing interesting things. Yes, they're doing a lot of interesting things. But the thing that if you ask Jack what it is that they do, he says in the way that Lululemon created a fabric platform for activewear, Parade is creating a Just-In-Time customer manufacturing fabric platform for interments. And I think that that's a really interesting way to look at a business, as not just around customer acquisition or brand, but around like at its core, what are you innovating on? And you're innovating and product and from not just the products of here's a different kind of a way, one way and a consumer wedge to reduce waste. Which phone cases seems like a really interesting way in. But also how do you then reduce other parts of waste? So how does Pela and Lomi sort of fit together in this narrative and how are you taking that to market with the customer and what are you hearing back from the customer as validation that they want and need this in their life?

Matt: [00:11:16] Yeah. So I think about that a lot. So I think about distribution, reach, go to market positioning. I spent a lot of my time here. So, I mean, if you look at... If you were to go to Pela's... Pela is the company right? There's Pela, Pela Labs, whatever you want to call us. So Pela has a whole bunch of different products. So our site would be like Pela.Earth. That's the main website if you want to learn more about us. So our first product was like mobile accessories and then we built two other brands. So one is called Habitat, which we're actually rebranding very soon the Long Weekend, and the other is a brand called Swway, which is our eyewear brand. Now Lomi's the product that we've actually been working on for three years. So while we've been building out these consumer goods, like call them simple consumer goods. Right? Everyday products. We've been working on Lomi. That's our big R&D investment. It's like thousands and thousands of hours of work. And Lomi is the infrastructure that hooks it all together. So what we've learned, we're definitely a waste innovation platform. We're innovating on waste. That's what I care about. I think there is a huge opportunity and waste, and Lomi is this key that unlocks this type of material science. So globally, there's so many companies working in compostable plastics or biodegradable. There's tons of cool stuff out there. It lacks global scale because most people don't know this, but compostable plastics, they have nowhere to go right now. Recycling facilities don't want them. Compost facilities don't want them. Their economic models don't support them. If they go to landfill, that's not great. It's kind of like sending organic waste to landfill. Produces lots of methane. So they've got nowhere to go. And because of that, big companies don't like to adopt them. So Lomi and the way that we're looking at Lomi, and the way that we're looking at Pela as the greater whole is like how do we enable lots of companies to make products like the Pela Case? How do I make it easy for a Unilever or a Procter & Gamble to switch all their packaging over to compostables? Because the consumer can simply put that thing in Lomi along with their regular food waste, and it'll all turn back to dirt. So the big idea here for Pela is how do we innovate on all parts, all the pieces of waste? From how a product is made to where it goes at the end. And Lomi, is this big missing piece of the equation. How am I figuring out that people want this? We did a, I mean you saw it. Like we did a Crowdfund campaign in April of this year, April/May, and we pre sold twenty thousand units. And it was just like a rocket. It was so fast, faster than we thought it would be. And then since then, usually what happens with Crowdfund is you get like all these early adopter, like Crowdfund bros that back everything. Everything like super cool, they'll back at all. Eighty percent of the people that backed our campaign were women. Oddly enough, we did really well in Minnesota. So like middle American every day mom was like the biggest consumer of Lomi, which is what we expected. We expected this to be the average person. [00:14:51] People don't like waste. Our thesis was that nobody actually likes garbage. But they've just never been offered an alternative on how to deal with it. [00:15:00] Like all your eCommerce packaging. You hate it. I hate it.

Phillip: [00:15:04] Oh, yeah.

Matt: [00:15:04] I love Amazon, but I hate the cardboard that piles up in my garage or the plastic comes in it.

Phillip: [00:15:09] Yep.

Matt: [00:15:10] So like we pre sold a ton of Lomis and we actually continued. So like usually after a Crowdfund campaign, things go down to zero. They pretty much stop until you ship the product. We continue to sell.

Phillip: [00:15:22] Wow.

Matt: [00:15:22] A ton of Lomis. And people are willing to wait six months, seven months for them, happily.

Phillip: [00:15:29] Let me ask a few like specific questions. So Lomi sits on your countertop, paint a visual picture... It eats waste. How does it do that?

Matt: [00:15:38] Yeah. So I mean, if you're listening and you're familiar with the process of composting, it just basically biodegradation. And like oxygen rich environment biodegradation. So like landfills are oxygen starved. Most people would look at a landfill and say like, well, it's a big open pit. How could it possibly be oxygen starved? Well, like the way they run landfills as they layer them up. So when your food, for example, or any organic matter goes to a landfill, ultimately it gets buried and then it gets oxygen starved. And that process of degradation is called anaerobic. And it's what results in methane production. That's why landfills have that smell. That's not good for the planet. That's bad. So what Lomi is doing is and what we've designed is technology that there's a lot of sensors and software that runs Lomi where it's mimicking compost. Composting is aerobic like it uses and wants oxygen. It uses. It uses abrasion. We just even designed custom bacteria that goes in Lomi when you load in your food. So you put your food in, you put in one of our little custom bacteria pods and it's got one button on it. So it's dumb, stupid, easy to use. Like you press the button and it starts. And then you go to bed. The same way that you would probably start... The way I describe it, it's just like a dishwasher.

Phillip: [00:17:00] Like a dishwasher. Yeah.

Matt: [00:17:02] You upload it after dinner and start it. You unload it the next day. And Lomi is the same way. You throw in your food, whatever else is Lomi compatible, start it, go to bed, and the next day you have what is going to look like to everybody just dirt. It's got like 40 to 50 percent humidity, feels like dirt. You can throw it in your garden, you can sprinkle it on your lawn, toss it in the planter. I mean, you can throw it in the garbage. Like if you really had to, you could throw the garbage.

Phillip: [00:19:38] There's so many people who I believe if they're like me, let me impose my own bias here, but the way that I've been introduced into composting is through community initiatives, through the community programs.

Matt: [00:21:45] Totally.

Phillip: [00:21:45] How do we break that? Like is Lomi the way that we create the consumer demand for it instead of like a government or city or town program?

Matt: [00:21:53] Yeah, it's sort of like a hub and spoke.

Phillip: [00:21:55] Yeah.

Matt: [00:21:55] That's definitely the big idea is like distributed waste management was where this all came from. Tesla figured it out with infrastructure for charging cars. Like the big argument against electric cars, at least when I was younger, was there's too many gas stations. Like nobody's going to buy these. There are too many gas stations. It's just inconvenient. And then Tesla started building out tons of his own charging stations. But then also it's so easy to put a charger in your home. So easy. And tons of electricians can do that. So that was where the idea for Lomi came from, was how do we make this bottom up led? Like how do you make innovation and waste be driven from the consumer and consumer demand and consumer interest? And that instead of like government driven.

Phillip: [00:22:47] Yeah.

Matt: [00:22:47] So like most green bin programs would be like the common thing that's rolling out different parts of the USA. Here in Canada too. Even those green bins. People don't like those. They stink. They're gross..

Phillip: [00:23:02] Right.

Matt: [00:23:03] That's not a pleasant experience at all.

Phillip: [00:23:05] It's more sorting than anything else. It's just this goes there. No intentionality of, like, how it works.

Matt: [00:23:12] Yeah, right. You're not invested in it at all.

Phillip: [00:23:15] No.

Matt: [00:23:16] People put that thing under their sink and they hope to never actually have to touch it, except they do have to touch it because like it starts to stink the whole house up, and you don't want to touch it. It's like this really bad part of your life. So, yeah, I think the way that we envision Lomi kind of working is like if you put one of these in every home in America, and you had cities that did have organic waste pick up, what comes out of Lomi can easily go in that curbside green bin or green box. Compost facilities will happily take that kind of input. That's dirt. They love that stuff. They'll throw it in their piles, they'll turn it in, they'll sell it. The nice thing is if every home had a Lomi, 80 percent of their food waste that would otherwise be picked up by a truck, 80 percent of that volume would be reduced. Now, not only are you diverting food waste from landfill in the places that there isn't agreement. Now you're reducing the wait volume of all that food waste by up to 80 percent, and then that means like less trucking is required. Less destination processing.

Phillip: [00:24:26] Wow.

Matt: [00:24:26] So like your carbon footprint from all waste management just dropped dramatically. And that's like the really big idea here is make it so easy on the consumer that they'll do it. It's just convenient instead of asking the consumer to do extra work, which is what recycling is. And that's why recycling sort of sucks is it's identified as work.

Phillip: [00:24:51] Yeah. And what you're talking about sounds like the emergence of a brand new category. Its category innovation.

Matt: [00:25:04] One hundred percent. Right.

Phillip: [00:25:05] And so doesn't that lend itself to be more of a venture scale business to say Lomi in every home industrial versions of Lomi, commercial?

Matt: [00:25:13] I mean, we are venture backed. We absolutely are. And I think that's the... I try personally to stay out of a lot of DTC conversations because people ask, "Hey, you're a DTC company. How many employees you have?" And that's really tough, man, because like, I've got 60 some employees. But if this was just a DTC company, I'd have 20.

Phillip: [00:25:36] Right.

Matt: [00:25:37] You know, I wouldn't have a material science team. I wouldn't have like a massive product development R&D team. We have in-house manufacturing and in-house customer service. We have a lot of stuff in-house that if we were just a DTC company, you probably shouldn't do.

Phillip: [00:25:52] Sure.

Matt: [00:25:55] So I think... We're venture back for that reason, the idea that we can put a Lomi in every house... That's expensive. And the speed that we're going at is like, it's shocking. And it's just like there's so many parts of making hardware, too, that are like just mind blowingly expensive. {laughter}

Phillip: [00:26:17] Oh, yeah.

Matt: [00:26:19] To bootstrap this would be awful. {laughter}

Phillip: [00:26:22] So and it's so interesting because from the outside looking in, you know, I'm just playing the surrogate for the listener of my perceptions of what Lomi or Pela might be. Oh you're a phone case company. No, it's bigger than that. Lomi, oh it's a compost bin. No, it's actually bigger than that.

Matt: [00:26:40] Yeah.

Phillip: [00:26:41] So I guess does the crowdfunding strategy for the product launch sort of undermine the sort of aspiration of what the consumer might see you as or does that not matter? Is it a great marketing validation model for you to say we're heading in the right direction more than anything else? You're not customer debt financing necessarily? You don't necessarily need it, right?

Matt: [00:27:05] No, no. Our access to capital so far has been great. Our investment partners are awesome. Yeah, I couldn't ask for better. They're really good. And yeah, it was more about let's really test this in the market. We've spent years working on this thing. Let's come up with like a half decent shitty first draft on like what would a launch campaign look like. And let's try that as a Crowdfund. Nice thing is that one of my partners here, Gareth, he's done like three or four big crowdfunding campaigns himself in other businesses. So, like, we knew that playbook as well. So we just put the campaign together and number one priority was let's give this a very meaningful market test to a cohort of customers that are going to be OK waiting to get this, like waiting seven months to get this. We waited to pull the Crowdfunding campaign off until we were super far along in manufacturing.

Phillip: [00:28:10] Yeah.

Matt: [00:28:10] So that's like an example. We're definitely not customer financed in that regard. Like, I'd already spent millions of dollars developing this thing. So when we hit Indiegogo, that was like one of our big messages to people like, "Look, we're not two guys in a garage. This isn't a pipe dream. We have supply chain. I have five people full time on the ground in Hong Kong making this thing. They're on my team. They're not outsourced. Those are my employees." So [00:28:36] Crowdfunding was a great way to validate. It was also a super public way to launch and claim the category. And it's a great way to build investor confidence. It was great for our team. [00:28:52] We're not a huge company, but we're still big enough that not everybody sees everything every day. So by going super public, our own team was like... The first 48 hours was hilarious, watching them all like refresh the campaign to see that we sold a million dollars in an hour and like people here were freaking out in the office. It just had a whole bunch of wins, man. Like, I would do it over again. Like, I don't think there was any downside to doing it that way.

Phillip: [00:29:25] Wow, I mean, big congratulations to what you've done, I think you in in the last six months in particular, and I've watched the sort of reorientation of the way that people talk about Pela, which is less about, you know, Matt being a brilliant leader or operator or cares a whole lot about this one topic around sustainability, but more as how do we see Pela and its family of brands as a platform for innovation? And that is very hard to execute and takes a lot of discipline for years and years to be sort of misconstrued as a phone case company. How satisfying is that for you to sort of watch? I don't know if you're like me. If you're like me, then like I crave validation from my peers that I'm heading in the right direction and I want them to be speaking my language. Is that satisfying it all for you or you just tuned out to that?

Matt: [00:30:35] No, what's super satisfying to me is so you mentioned this idea of like, category design earlier. So like [00:30:44] one of the core things with category design, as I understand it, is like creating your own vernacular. So, like, you create a way that people should speak about your business and your product, and then what's super satisfying to me is to actually see people echo that back. So Pela's got, call it, like I think about a million consumers, and they're loud. They're pretty passionate about the whole topic of waste and waste free living. It's really cool to see that echoed back. Your vernacular, like how you talk, be echoed back to you and then like how they share it with their friends and family. It's extra cool to see my own peers. Lomi definitely broke a whole new level of awareness for Pela. Like, for sure. And that was the intention was like do a massive launch. Show people were way more than a focus company. It's been super cool to see it all start to come together. [00:31:44] And I think when people really see what we're up to, it's kind of like it's going to blow some minds. So I definitely... Like I'm not in it for the validation, but I mean, any human being, it's really nice to see some stuff that you dream up come to life. I'd be lying if that didn't feel good, especially like internally it's really nice to see. We've got a few employees have been here for like three, four years and they were like the first five or six people. It's super cool to see their work, like finally hit it. And then to see, they get that validation, right? Yeah. It's a lot of fun. Honestly, man. I think it would be great if more entrepreneurs, especially in DTC, started looking at innovation as a legit competitive advantage. This is a place that yes, it's risky. It's way more risky than just sourcing stuff.

Phillip: [00:32:46] Of course.

Matt: [00:32:47] But if you're trying to build real value, I think it's the way to go. But honestly, my other business partner, Brad, his world, he came out of toys. In the toy world, you don't stop innovating ever. He would release like 20 products a year to find two or three winners. It was basically venture capital with kids. So it's his experience and his discipline that kind of added that to this company. And I would be lying if I didn't say that I probably fought that pretty aggressively for the first couple of years, like I didn't get it. Now I fully get it. I see why you constantly have to be trying to burn your own house down. That's it, it's like, how can I burn the house down and rebuild it before somebody else burns it down for me?

Phillip: [00:33:52] Wow, there's a show title, if I ever heard one.

Matt: [00:33:56] {laughter}

Phillip: [00:33:56] Giving you the last word because I certainly don't want to pontificate at the end. I couldn't be prouder to say that you and I had come toe to toe on stuff in the past ten years. Watching you succeed in this way gives me such joy. It's kind of an incredible thing to watch people who come from far flung places in the early stages of eCommerce and the Magento community succeed in different ways to see how all of our values have come back to alignment around building what's next in the world of eCommerce. And I think maybe if you could give me like a a little bit of your thoughts on what's next for the industry as a whole. Is this the glory days and we don't know it? Or are we right here at the beginning?

Matt: [00:34:44] Oh you're day zero. You're one hundred percent day zero. I really think that Harley and Tobi over at Shopify and everybody at Shopify, their team, I look at the way they speak. I think Tobi is probably the smartest man alive. He's got to be. The guy, like just emits an energy that when he talks, you're like you're definitely the smartest dude. Like you have to be. Not Elon, it's Tobi. I look at them for signals when it comes to commerce. And I really do believe that this is day zero. I think we're just getting started. I think we haven't even begun to scratch in areas of innovation. I tweeted this the other day, I think every entrepreneur is going to be a climate entrepreneur. One hundred percent. And I think that DTC is the best place for that to happen because making physical things, these are things that people interact with every day. People do not interact with carbon or greenhouse gases every day. They interact with consumables and consumer goods and like their clothing. And that's just one example, man. [00:35:46] There's so many problem sets that I believe that eCommerce and DTC intersect with that this is the point of intersection for major innovation in how we live and how we experience, the human experience. I think it's changing and I think DTC is like the intersection point to that. [00:36:08] Yeah, I just that's a belief.

Phillip: [00:36:11] There's the last word, Matt. What a ride. I know you're right at the beginning too. Congrats on launching Lomi. It's kind of an incredible thing to watch from the outside. And we're rooting for you. And if there's anyone that's building the future of commerce, I'd say it's you all. You embody a lot of what we believe the next generation of entrepreneur and business and category innovation should look like and yeah, it's a pleasure to have had you on the show. Thanks, man.

Matt: [00:36:38] Yeah, dude. This has been fun. I'm happy we got to do this. This was great. Thanks.

Phillip: [00:36:41] Thank you so much for listening to Future Commerce. See you next time.

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