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Unknown A
It seems like it was an insane decision to go to China with no money, no plan, no relationships, no language skills, slept in a bush and literally build your own factory.
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Unknown B
That was a disaster. When I say we were naive, I feel like that is even an understatement. But to be fair, success is a bad teacher. And in our business now I'm a huge believer in firing bullets and failing fast. And then if the bullet works, it's a cannonball. And we invest and we build the recipe around that.
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Unknown A
How big is the empire today?
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Unknown B
We're over two and a billion US.
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Unknown A
In revenue and it's public or it's not a public company. So here's what's fascinating to me. So I have like a love language when it comes to business. And my love language is self made. Dropped out of college, family business, multibillion dollar company with no outside capital. Like you hit all of the things on my little bingo card there, which is what got me interested. I want to start with the origin story. So here's the bullet points. Grew up on a dairy farm, started selling door to door hot air balloons, was in law school, then quit because he didn't like walking up a big hill every day, and then made a crazy rash decision, moved to China with no money, no plan, no relationships, no language skills, slept in a bush, somehow turned that into a billion dollar company. So that's the bullet points. Can you unpack that a little bit?
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Unknown B
That's quite accurate. That's quite a good way to summarize it. Quite quickly. If I was to frame up our probably first 10 years, it's that famous saying that success is going from failure to failure with no loss of enthusiasm. I think that actually really does sum us up. Grew up more or less on a farm and then we moved north for our schooling and my brother won the New Zealand science fair with a model hot air balloon. And then we decided, or he decided he was 12, that we should make these kit set balloons and sell them door to door on the festivals when we're at school. And I'm slightly younger than him, so he kind of hired me as the, when I say hire, I was the free labor to help make the hot air balloons. And yeah, we used to make these model foot air balloons and sell them door to door.
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Unknown B
I used to, when I was quite young, get my friends together and backpack around New Zealand and sell door to door. And I can tell you that learning how to sell door to door is a great life lesson because you never know who's behind that door. And you never know what response you're getting. And on top of that, selling a flying, burning plastic bag is particularly hard to sell. So it really hones your skills early on.
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Unknown A
What was your technique? So knock, knock.
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Unknown B
Yeah, I used to be like, we're just a small company trying to get off the ground, wink, wink, like, no pun intended. We were young kids, so that always helped. And, you know, we'd often like. We'd sort of build thesis around which neighborhoods were more likely to buy. It was usually not the richest neighborhoods. They were all maybe a little too smart. And so it was sort of somewhere in between. We'd always look for, you know, signs of children in the backyards of houses. And I always remember that one of my good friends, still one of my very good friends today, Fraser, he used to always outsell me. I don't think there was a day where I outsold him. And I always thought I was a much better salesperson than him when the door opened. But he just did not care about being rejected. He'd go from each house, he'd get yelled and shouted at and swear that, and he'd come out laughing and he'd be knocking on the next door within seconds.
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Unknown B
And I always had to build myself up after getting rejected, which was most of the time, to knock on another door. And it just kind of taught me, I guess, the power of just persistence. Right. And you kind of keep going. And if you keep going and have that level of grit and perseverance, then your chances of winning or your chances of success are much higher. So I was certainly learning that at a very, I guess, young age.
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Unknown C
All right, my friends. So a lot of you guys who listen to the show, you listen because you want to start a company, but you're not sure what idea to choose, or you may not even have an idea. And you like our podcast, My First Million, because we've done a lot of the work for you on researching all these business ideas. Well, my friends, we've made life a lot easier for you because HubSpot, they just put together an entire list of all the resources that you can use to find a market opportunity to validate for your next business idea. So if you're looking for a market size calculator or tools to identify market trends or a huge list of ideas to get started. So if you're interested, there's a link below. Click it and you could have access to the whole thing. It's completely free. Now back to the show.
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Unknown B
Yeah, from there, we kind of. Matt went to university as well. And then he dropped out after a year to set up and make or develop this hot air balloon through to a little bit more of a professional level. And Matt said, why don't we start. Why don't we explore going to India or China to try and manufacture our hot air blue. And given I was making them, I thought that was a great idea. And so Matt actually went off to India in China, did a little scowling trip, came back and he said, china, let's go to China. And by let's go to China, he said, you go to China. So I packed up, didn't go. In my second year law found the most entrepreneurial guy from my first year at university, a guy called Joe. Dragged Joe to China. And we had no money, really, no contacts.
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Unknown B
We went to a little place called Chanteau. It was the middle of nowhere. There were no other Westerners. And we had an apartment. I think it was like probably the equivalent of $8 a month to rent. It was the eighth floor, no lift. So whenever you're thirsty, had to get water. You had to like walk down eight flights of stairs to go and get water and come back up. And that's where we started. But we ended up getting ourselves into all sorts of trouble and strife. And there's a lot of funny stories.
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Unknown A
The story I had heard was that you guys, like, first night you like, slept in a bush. What happened there? And basically what was the plan? Were you just going to kind of go try to find a manufacturer, walk around, like, what were you thinking of doing?
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Unknown B
We were so naive. And on reflection, I look back on it, it's almost like we built a toy company from first principles because we did everything different to everyone else without even knowing it. So we didn't know that you could go and contract manufacture your product. We were planning on setting up our own little factory. And that's essentially what we did. But me and Joe got into some trouble and Joe had to fly home to New Zealand. So my brother came over. We ended up trying to see if we could get a hotel, but everything was way too expensive. So we decided just to sleep in the bushes at Hong Kong airport. And I remember just getting completely attacked by mosquitoes all night. And we didn't want to sleep in the airport because the floral lights were so bright. And so, yeah, we ended up sleeping in the bushes and getting attacked by mosquitoes all night.
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Unknown B
It was not fun. And then we headed up to China and we set up a little factory on the side of a river. It was a small kind of shed more or less in China. And my cousin Simon came up at that time as well. He was an engineer to help us, and he welded a production line and we bought. We pretty much spent all of the money we had on an injection molding machine. We employed a few people on the production line. We had a little old lady who used to cook for us every day. I think the budget was 2 RMB per meal, which is about 30 cents. And we started making our first product, and then we started making our second product out of there as well, which was a night Frisbee, which we got sued on. And we had no money to defend ourselves.
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Unknown A
So, stupid question, but why not? It seems like it was an insane decision just to go to China and literally build your own factory, Literally create a structure on the side of a river and weld it yourself together. Why did you feel like you needed to be in China instead of just doing it where you were?
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Unknown B
Well, we understood that most of the toys in the world were made in China. But when I say we were naive, I feel like that is even an understatement. Like we were trying to make our hot air balloon. But we didn't even realize that we couldn't sell it to any toy chains or large retailers around the world because, of course, didn't meet any of the regulatory standards. I mean, it had a burning can under it. So we were super naive. So then we started looking up products that we could maybe make in our little factory. And we saw this company in America making light up a frisbee with LEDs and it could be thrown at night. And we thought, oh, that's cool. So we made this night frisbee in our factory. And I started hustling to try and sell this thing. As in, like, I would email every buyer in the world of every major retailer in every country I possibly could.
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Unknown B
And I remember I sold it to a distributor called Shilling in the US and we spent what was a lot of money at the time, and I went to New York Toy Fair and we made this night frisbee. And we also made this other Pollock or copied this other Pollock called a money gobbler, which was a money bank in the shape of an animal. And you'd feed the coins into its mouth. It would go down the throat into the stomach. So we started making these two Pollocks. Matt decided he wanted to set up a wooden toy factory for this money gold blower. We had our production line for making this Frisbee. So I sold them to this company called Schilling So I go to New York Toy Fair to be on their booth to start selling these two products. And I start selling these products, and this guy comes flying onto the booth and starts yelling at our distributor.
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Unknown B
So he's obviously got wind that we've made a product that's identical to his. And he had multiple patents for how the LED connected to the fiber optics and how this all worked. And of course, we. Again, we were naive. We didn't even really know what IP was. So he comes and so Dave comes up to me off the booth. The owner of the distributors is saying that we need a. Pull that Frisbee off the booth. This is probably an hour into New York Toy show starting. So I'm pretty disappointed because one of our products is gone. But I'm like, that's okay. I'll sell the Money Gobbler. Well, if I thought the first guy was crazy. About three hours later, this lady, she has a whole business she's built over 25 years building these money animal banks. And she has this big booth on the ground floor of Javits.
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Unknown B
And she comes up and she screams onto the booth. And she's yelling and screaming and swearing at Dave. And Dave sort of. I can see this from where I am. And Dave sort of wanders over to me sheepishly and says, nick, you need to take the Money Gobbler off the booth as well. So within the first morning of New York Toy Fair, both our products have been taken off the booth of the distributor. I flew back to China. I said to my brother, I said, have you ever heard of this whole IP thing, this whole patent thing? I think we need to start innovating and coming up with our own ideas. And then we ended up getting into a lawsuit on the night flyer. They sued us. We had no money to defend ourselves. I remember going to Colorado because that's where they sued us to try and find a law firm firm to defend us.
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Unknown B
And I was going to all these firms and they were saying, well, that'll be a million or $2 million. We had like maybe a few thousand dollars between us at that stage. And I was thinking, how are we going to defend ourselves? I ended up actually hiring a lawyer, convincing him his name was Chad. He later got disbarred that we would write the whole suit. He just had to put his name to it. And Chad did the whole case for us, but didn't really do it. We did it ourselves. We learned how to become lawyers. So we did it incredibly cheaply. But he did. He ended up Getting disbarred later on. But that was our only way because, again, we had no money. And I was so enthusiastic. We had no other choice that we had to sell this product. And I remember selling the Night Frisbee to the department store chain in the us Coles with the K.
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Unknown B
I know we have Coles down here in Australia with a C. Never forget the buyer's name. I actually still work with her today. This is, you know, 19 years ago. Her name is Jen. Sarah. She was the buyer at Coles. And I would email her every single day. And one day I got an email reply from her. It was all in capitals. It said, nick, I do not have time for your daily email communication. Please stop emailing me every single day. And then I always wrote back, oh, so sorry, Jim. But, you know, I just think our product is really great. And at this stage, we knew we were in a little legal trouble, but we had to sell something to survive. So I was like, pushing and pushing. And then eventually I get this email back from her. It was just two words, nothing else.
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Unknown B
It said, send the sample. So we send the sample to her, and she ends up ordering a full container. I think it was 20,000 units this night Frisbee. So we're pretty happy at this stage. It was a big celebration. We never had a full container order of any product. And so we ship this full container of Night Frisbees. And of course, she gets enjoined in the lawsuit as well at Kohl's and didn't speak to me again for a long time. The irony is today she's the director of Family Dollar stores in the US and we're the second biggest toy supplier after fatal. So that's the funny thing.
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Unknown A
You're like trauma bonded.
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Unknown B
Correct. But we have so many of these stories. That is one of many, many, many in those early days. So we really were just scrapping every day to try and survive and sell something and just, like, live somehow. But we were living on less than a dollar a day.
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Unknown A
Okay, I have two things. One, let's do a detour to the dollar a day thing. Because my guy Diego, who helps me with research, he goes, you gotta ask him about the McBroke diet. And the McBroke diet. I said, what's that? He goes, apparently they were just eating off the do menu at McDonald's in China every day. And he had some trick about the french fries to get free french fries. So what. What is the McBroke diet? As far as it was.
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Unknown B
It was. We didn't eat McDonald's. McDonald's was a treat. So me and Nat were in China, and for Christmas, of course, I think my brother didn't come back to New Zealand for eight years. He lived in a factory for 10 years. He had a tiny little room in a factory for 10 years, which is crazy in itself. But for Christmas, we would celebrate by going to McDonald's. And probably the equivalent of a combo is probably $2.50 in China at that time. So that's how frugal we were. We wouldn't even go to McDonald's. So. But we'd go and we'd celebrate Christmas. I always remember going, merry Christmas, bro. Merry Christmas, bro. And, you know, finally eat some good food. I looked like, you know, I was so skinny at this point. But I'd always play a trick in order to get extra fries is I'd always eat half of them.
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Unknown B
And then I'd take them up to the counter and say, hey, you only filled my fries, you know, half full. And they'd give me another one so I could get more for free. But we were so. We were like, even, you know, when we'd go on the train, we'd use a concessionary or children's pass and hope we wouldn't get caught because it was half the price. But I look back on it, it was like, you know, a fear would only be 12 RMB or a couple dollars, and we'd be saving a dollar. So by getting a concessionary fear. And we did that for years.
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Unknown A
So what. What was driving this? Because, like, you lived in New Zealand. New Zealand's a beautiful place. I assume you could have just had, like, a normal life that was, like, comfortable, more comfortable. And I love, like, I'm a founder, I've been a founder, but I didn't do what you did. I didn't sleep in the factory on, like, a mat on the floor for eight, ten years. I didn't live off of the less than dollar a day. Like, were you guys just like, was it you're having so much fun or you just felt there was no other choice? Or what was the. What was the mindset that kept you going? Because it was like, like many, many years just scrapping.
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Unknown B
I reflect back on us, and it is a little bit hard to understand in all honesty, when you reflect back on it. But I think when you're in it together, you kind of hold each other accountable and you push each other because you don't want to fail. And I would say me and my brother are equally as competitive and So I don't think you want to let the other person down, in a sense. And so you just keep fighting because if one of you gave up, you're kind of emitting defeat. And so in a sense you hold each other accountable to continue to fight and push forward. And as well as that, I think we didn't really have another option. We didn't understand like back then that there was even such a thing as going and raising money to build a company or, you know, again, I look back at the extreme naivety.
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Unknown B
I used to write emails to my mum from China and she was beside herself that, you know, I was up there, I was so young, 18, and I read these emails and to understand how little we understood, even about the world, but just about business and how things worked is quite scary. And so I just think we didn't know any better. We just thought we'll just keep fighting and try and get these little wins and little wins and little wins. And, you know, we started to get, you know, a little win after little win. And then we started to get a little bit more momentum. And then you started to learn one of my favorite sayings is, you win or you learn, you never lose, you never fail.
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Unknown A
So, and so connect the dots. So now you're, you've painted the picture beautifully of the extreme naive approach, the scrapping, and then somehow, you know, fast forward the tape and the movie and you end up with this super successful toy company, I think, you know, the third most profitable toy company in the world, doing over a billion dollars a year of sales. Plus, like, forget the other stuff you've even done after that. But I'm just saying just the toy part, so connect the dots. Where did you start to really get the momentum or what were the breakthroughs, the epiphanies, the key, key breaks that got you to actually getting to that success?
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Unknown B
Well, there are a few stories along the way and I remember just sitting there every day harassing and thinking really big early. So thinking, I've just got to get Walmart, I've just got to get Kmart at that time, or I've just got to get these big retailers. And you know, one story, I remember ringing Walmart every single day. And because of the time zones, it was late at night and to month after month after month after month. And I always remember all the early names because I just see it in my memory. And I remember one night my brother was basically telling me to give up. He was like, you're not going to get warm ups. And eventually the Buyer Ryan Halford answered and I was on the phone to the warm up buyer from China. And again I was up with this young company.
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Unknown B
We're just in China, we're trying to get off the ground, we've got these products. And he said, do you have a showroom in Hong Kong? And I said I didn't know what a showroom in Hong Kong was, but of course I said, yes, I'll get back to you at the address. We started to learn that the toy industry at the time revolved around these showrooms in a place called Tim Sha Sui in Hong Kong. All the big companies had showrooms there and all the buyers from around the world congregated in Hong Kong twice a year to come to his showrooms. So I got on a train the next day to Hong Kong and had researched where these toy companies were and so knocking on toy company doors and trying to do a deal with them. I said, I'll bring the Walmart buyer and if you just give me some space to use and your address and then, you know, hopefully you could sell some of your products to them as well.
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Unknown B
And every company denied me and denied me and denied me. So I thought, okay, we need to rent a showroom. And at the time it was a lot of money, but we found these little glass cubicles in a place called South Sea center. And they were just a few meters by a few meters, like tiny little cubicles. But I think they would have been like, I don't know, two or three thousand US dollars a month to rent because Hong Kong was so expensive. And so at the time we didn't have that money, we were so poor. But I thought we don't have an option. We've got this chance to get the Walmart buy coming in. And so we just did. We have to do it. So we rent this little tiny cubicle and it kind of had curtains on the inside of it. And we, I, I found some shelving that someone was throwing out from another showroom.
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Unknown B
So I put this little shelving in there. We bought like a table and then I had a little roll up mattress and I would sleep in the showroom under the table each night because there's no other room to sleep. So I'd unroll the mattress under the table, sleep in that, and then I'd wash in the little bathroom in the, in South Sea center in the morning. But I had the showroom and I start kind of realizing that the buyers come to Hong Kong in January and October every year. So that was good because Now I have this kind of like base to like invite people to. So I get, you know, I get Walmart to come in. I actually got a guy called Frank D'Amico who is from Walmart Canada. And I'll never forget because he came in and I think he was so shocked that he'd given me a meeting when he saw this 2 meter by 2 meter showroom.
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Unknown B
And he came with this two merchandisers. I went to shake his hand, didn't shake my hand, he didn't even sit down and he just yelled at me and goes quotes across the table. And I'd filled out the quotes around two or three products. At the stage he kind of reads the quotes and I'd filled something out wrong and he just throws the quotes down on the table and just walks out and leaves us to Hong Kong merchandisers standing there staring at me. I think that was my second ever meeting and I'm just like in shock. I'm like, wow, where it's going to be? And he just storms out. And then I contacted his boss and said hey, I had this really like bad experience. This guy Frank, I genuinely think he was really rude and like I didn't. And his boss made him meet me again in their procurement in Walmart's procurement center in Shenzhen.
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Unknown B
So I was like, screw this, I'm going to go up and meet him again, meet him for a second time. And he ended up ordering. And at this stage we had a night ball along with our night at Frisbee. But I think he ordered us $70,000 of this night ball. But it was another good example of persistence. And then I remember one day I had a men who came out Australia, but I was sleeping under my table and the door was only about a meter from my head because this is such a little small showroom. And the buyer came an hour early and I was still asleep under the table and she was knocking on the door and I'm sort of like there like looking at her feet under the door thinking I'm still in bed under my table. So I had to wait for her to go away and then message her afterwards and say, hey, you didn't show up at 10:00 meeting.
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Unknown B
She said, oh, I thought it was 9:00am and so I had all sorts of experiences. But I used to crash buyers hotels. I used to post samples under there, you know, under their hotel room doors. But really we did what it would, what it would take and then I'd say the first break we got is and this was a crazy Story is there was a. I was in the UK at a company called Recreation, and they were selling our night sports balls at the time. So we developed this other product. It was instead of our night Frisbee, we'd made a night football lit up at night and a night soccer ball. So it sold to this company called Recreation. I met a guy called Sean on their booth and he developed a soccer Tamaguchi. And so it was. It was kind of like a Tamaguchi, but you trained your player and then through infrared, you could play against each other.
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Unknown B
And he had like the Manchester United license, and it was selling reasonably okay in the uk, but he was having troubles with manufacturing. And I was like, well, we can make that for you, like, no problem. And he was like, great, great, great. You guys could help me make it. Because we were really, you know, anything was sort of wink at the time. We were trying to find a way to win anywhere. So we're like, sean, we can make this. And then we started talking. Well, maybe, you know, David Beckham, he's moving to the U.S. to play in the U.S. what if we could get the David Beckham license and we could try and sell this in the US and he thought, this is a great idea. So we went and pitched. At the time, I think it was Simon, Simon Fuller, who started American Idol, had the David Beckham rise at the time.
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Unknown B
And I'm like a super young kid, right? And they said, well, we'll give you the David Beckham license, but it'll cost you a million and a half dollars. Of course, we don't have a million and a half dollars. But then we go to Walmart and Walmart, the buyer, her name, Danielle Primanel, never forget it. She loved David Beckham and he was moving to the US and she was just obsessed by David Beckham. And we probably blew a few bubbles. But anyway, as it turned out, Walmart turned around and ordered 2.2 million units of this David Beckham Tamaguchi, which I think they were like 14 bucks 50 or something. It was almost 30 million US dollars. So keep in mind, we'd probably never had an order more than $70,000 at this point. And our total revenue is like in the hundreds of thousands. Suddenly we get this order for almost US$30 million and then we're like, holy shit.
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Unknown B
We thought we were going to make a lot of money because we had huge margin. We were making this thing for $3, and we were going to make this thing for $3 or $3 20 or whatever it was. And sell it for $14.50. So we were sort of counting our pennies and super excited. We didn't even understand that sell through was a big thing. But then we were like, oh, no, we have to work out how to make this product. Like, you know, we've got our tiny little factory with, you know, 20 people in it. There's no chance we can make 2.2 million units. So when I'd first gone to China, I've been on a tour with. He's one of the wealthiest guys in Hong Kong. Like Francis Choi owns Early Light International. They're the contract manufacturer for Hasbro and Mattel and all toy companies.
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Unknown B
One of the first factories I ever toured, I somehow got in touch with his 2ic guy called Wilson. And he'd taken me on a Tour as an 18 year old with their factory. And you can imagine me coming from New Zealand and then going to these factories with hundreds of thousands of people and just being like, oh, what? This is like insane. So I still had this contact with Wilson from Early Light. So I got a meeting with Wilson. I said, hey, we've got this huge order, 2.2 million pieces. Can you help us make it? And he said, yep. And then I said, oh, and by the way, can you also pay for as well? He said, let me check with Francis. Come back to you? Came back to me, said, yeah, if you transfer the letter credit to us, you know, will help you pay for it as well.
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Unknown B
Great. So we start making this product. 2.2 million ICs, 2.2 million LCD screens, 2. So they all the components and then Walmart turns around and cancels. They cancel it from 2.2 million pieces down to 8. No, 1.2 million pieces. And I was like, no, no, no, no, they can't do that. We've got a letter of credit. They've made it or. And then I'm flying back and forth at this point. Sean's kind of like in the background on this, like, I don't know, 20 year old. And I'm thinking, there's no way. But I was thinking, well, it's still fine. 1.2 million pieces. We've got so much margin in this, we can still make like good money out of it. But then they turned around and canceled it all the way down to 300,000 pieces. Yet Francis was making all of his product. And I was just like, oh, I'm going back and forward.
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Unknown B
It reads like some kind of soap opera because Danielle got fired. Obviously part of this was part of it. And with Francis. I was like, there's no way I can tell Francis that, you know, that they've cancelled this many pieces and he's paying for it all. So I'm going back and forth to Walmart and I calculated that if I get the order back to 800,000 pieces, we could still pay Francis off because we had so much margin and still make like a million and a half dollars. And eventually I convinced Walmart to get the order back to $800,000, 800,000 or 900,000 pieces, whatever it was. And we shipped this Prolite and it was a disaster. Like it hit the shelf and it was culprit on the shelf. Like no one would buy it. I think they retailed it at $30. They discounted it to 25, then 20, then 15, no one would still buy it.
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Unknown B
Then $10, no one bought it. Then $5, no one bought it. And then they eventually sold it to the dollar and discount channels for like 50 cents on it, like 50 cents a piece. And then of course Walmart came back to us and said, you have to fund all the markdown money from $30 to, you know, 50 cents. And we were like, what's markdown money? And we were determined to keep our little bit of margin and refused to give them any money back. And so we had this. We were like, no, but you cancel these pieces and like this huge thing anyway, we got Blackball from Walmart for like five years. We never did business with Walmart after that. And it was not two years later that I met Danielle's boss at New York Toy Fair. Dear Laura Phillips. And I wrote this big long email of everything that happened and like, and we started to work together again.
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Unknown B
But that was sort of our. As crazy as it was, that crazy story was our first break to actually make a little bit of money. And then from there I started doing deals with US companies that only sold product in the US but didn't sell internationally. So I started doing deals with them because we were really bad at designing and the Valkin toys, terrible in fact. So we need a good product so I could open up these channels. So I do these deals with American companies like Zing or Zoca. I did deal with the Australian company called Yoho to take their products and sell them internationally and that kind of. And I'd tell a big story that I could get their products in everywhere that I have to go out and hustle. So we had a product called zds, which became really successful, and a product called Schnooks which was out of Australia that became really successful.
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Unknown B
So we started kind of taking other people's products.
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Unknown A
How did you figure out that model? Because, you know, did you see somebody else doing that and you're like, oh, that's much simpler than what we're trying to do. Or did you fall into it? Like, it seems like you didn't use a lot of, like, mentors. You did a lot of running around with a fork, sticking it into outlets, trying to figure out, you know, where the. Where, which ones are working.
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Unknown B
That is a great analogy. That's exactly what we did. We just, to be honest, we were making these products and our. The second product line we made were these night balls. But the product was so bad, Matte would move factory by this stage. And the engineering of them was so bad that they had these sort of foam EVA patches glued into this frame. But the production, I actually was getting quite a few orders. I was hustling around and getting orders, but Matt couldn't produce them because the production was so hard to do. And I get so mad at him that at one point I said, I'm coming back from Hong Kong. I was living in my showroom. And then from there I upgraded. I was living in a Dorm room with 18 people at a place called Tungshan Mansions in Hong Kong. So I wasn't exactly l life in Hong Kong.
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Unknown B
I was getting these orders and my brother couldn't produce them. So I was like, I'm coming back to, like, to China to take over the factory. And I learned two words of Chinese. One was kaiman, too slow. And one was quite a year. Let's go faster. And we ended up, like, I was like, on the production line pushing to get these balls out the door. And I remember they were coming off the end of the production line half mangled, and I was just like, ship them. Just ship them. Ship the balls. We've got to ship them. But I remember years later, like, you'd see these things on shelves and all the air had gone out of them. All EVA patches had heal off them, and they'll just these shrivel up little prunes that are called Mitchell Health.
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Unknown A
I love that you're honest about it because there's so many people. Because it's a very sexy thing to be like, you know, all that mattered was product. And we really just built a great product. And then everything worked because we built a great product. And like, I know, I know. I've been there. It's like, dude, the first version of all my products sucked. In fact, the tenth version still Kind of sucked. And I think, I love that you're kind of unabashed and honest about like, look, we weren't super innovative. We saw shit working and then we were like, cool. We could do lights on a Frisbee, lights on a ball like that. Okay, copy what works. And that your product kind of sucked and you were just like, basically you just kept doing door to door sales. Even like at a global level, you just started doing like door to sales.
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Unknown A
And literally it sounds like it was like distribution and salesmanship and marketing that was keeping you afloat at the time.
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Unknown B
Yeah, well, we would sell, I would sell a product to someone and then we, we wouldn't get a reorder. We didn't know what a reorder was because the product style through. And then we just sell a new product to a new customer and we wouldn't get. And I'd just held to another customer. And we didn't know for probably seven or eight years what a real. It was like when a product actually sold off the shelf and the customer came back to buy more of them. But we could continually hustle to all these different customers. But we did crazy things. Like we like a little back on it and it was kind of nuts. Like we sold this product, the night ball. We got a distributor in the US called Spin Master. They're one of the biggest toy companies in the world now. Very similar story to our own.
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Unknown B
Free Canadians built this, this, this toy company very similar to us. And Spin Master had agreed to take our night sports balls for distribution in the US And I'd kind of hustled a few retailers. And so it was this, it was this. Should we sell direct to retail? Should we use Spin Master? They'll really put lots of TV marketing on. TV marketing at the time was the thing. And they said, well, we'll run this test in Cincinnati. So we'll put your night balls into all the Walmarts in Cincinnati and we'll run media in that, in that city and then we'll decide whether to roll this thing out and whether or not it was dishonest. I think it was more desperation at the time. But of course I flew to where the test was. I got to New York and I couldn't get a flight to Cincinnati.
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Unknown B
Well, I could, but it was too expensive. It was summer holidays. I went down to the bus station. I remember the bus station in New York at the start of summer holidays. Just like nothing I've ever seen. It was absolutely chaos. But I got a Greyhound. Cincinnati, I think for like, 30 hours. It broke down, stopped. Different places grew. A Greyhound in Cincinnati stayed in this absolute, like, horrific place, but every day. And yes, this is a little bit dishonest, but we were desperate back then. I would bus. I'd get the bus schedule. I'd bust each Walmart. I'd give people cash to go buy a ball. I'd go in and buy them on different credit cards myself. I was so paranoid that we'd get caught just to help our test sales go up a little bit. And I'd buy all these night sports balls. But it was a long day because the walnuts were all so far apart.
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Unknown B
And I was taking this bus schedule to get to each one. I stayed there for a month, and I almost got killed in a place called over the Ryan. If you look it up, it was the most dangerous neighborhood in America at the time. Over the Rhine. It's, like, wild. It was over these railway tracks, and I managed to walk down there in the middle of the day, and it was the scariest thing in my life. And I had a guy come up to me and he said, what the fuck are you doing here, white boy? And. And I was like, I'm just a tourist. And I hadn't realized I was in this, like, area. And then I managed to somehow, like, weeks later, walk into it. I was walking back from downtown. There's no such thing as Uber back then, or taxi. So I was trying to walk back to where I was staying, which was very close to over the Rhine, and I walked in the wrong direction.
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Unknown B
I walked in there in the middle of the night, and I got chased and had to hide. It was very funny. But, yeah, we were doing this to get our test results up, which we had a good test, and then Spin Master rolled the product out. Of course, it wasn't a great product in terms of its construction. It was the same thing. But, my God, did we have to hustle? We had to strap and fight so hard literally, just to survive. But we got to a point where we were selling enough to each new customer of each new product, and we weren't getting reorders, but we were profitable. And it was actually funny because after the David Beckham thing, we made, like, that million and a half dollars or whatever it was. We got a little bit fat and happy, and we had a month where we lost $200,000.
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Unknown B
And I remember sitting. We sat down and we were like, oh, my God, we've lost money this month. And we were like, from this day on, we will never have a Day, a month, a week, a year, Will we lose money? Like if we're losing money in a month, we will like sit down, we will like eat nothing or we will like get rid of people or we will like live on nothing just to ensure that we're like profitable. Because people wonder how do we get to, you know, a few billion and a few billion dollars a year in sales now? And we've built it completely organically. And the truth is we just because we like, we're so frugal and we start building our business got more and more and more profitable just every year for 20 years. So it was almost this cognitive process to how do we remain profitable?
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Unknown B
And then that's just compounded over 20 years and we've just got more and more and more profitable to the point where percentage wise, by far the most profitable poor company in the world, where we run it like 40% net profits, which is unheard of in any industry in the world. And they're product industry in the world, let alone in software companies. So we just built a very, very different model. That's why I reflect on it now. It's almost like we built something from first principles. The way we set up factories, the way now we automate all of our production, the way we don't do domestic shipping, we do all fob. The way we centralize all of our content and data systems around marketing globally. We've almost built this company from a first principles approach because it's so different to how everyone else does it. But we did that more through naivety than through planning.
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Unknown A
So you're starting this kind of like 18 years old when you go to China. Do you remember how many years it took you to get to your first you where you made a hundred grand or when you made a million dollars? Like how many years was that?
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Unknown B
Well, it was probably a couple of years where we started to make money, but we still lived the same way because we needed that money to fund our growth effectively. You can't grow to billions of dollars a year in sales organically without borrowing money or going to a bank unless you're super profitable to continue funding that growth. And so we started to make money, but we never spent it. We still lived the same way. I still lived in a dorm room in Hong Kong. And so for years, for probably eight years, and as I said, Matt had. As we slowly moved and built bigger factories, Matt would always have a tiny little road, like a tiny little room in the factory. And that's where he lived in China with no Other like no interaction really with anyone else. And we were going crazy in those first years in China.
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Unknown B
Like, I look back on it and like we had some serious problems.
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Unknown A
And so you, you take it all the way. At some point you start figuring out toys that are new, novel, good products. Like I've bought your bunch of balloon products where you fill up. I don't know if it's like 100 or 500 now, like 100 water balloons at once. You can fill up in like takes like 15 seconds to fill them all up. So you eventually start making good products. How did that happen?
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Unknown B
So it was sort of a parallel path. We were taking other people's products and that was helping us really open up distribution. I would hustle and get them into all the retailers across all the countries. There's an email that I've seen internally that I had from like 20 years ago, and it kind of lists every country in the world and all the retailers and distributors I was working with at the time trying to sell the products to. So we're really like pushing out to everyone. And at the same time we were starting to learn how to make better products ourselves. We were sort of building a team in China and engineers and like some designers, and we're starting to sort of parallel path building our own products as well. But I think our big break after ZVS came when we did Robofish. And Robofish is still, we still sell about 8 million of them a year today.
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Unknown B
And this was a Chinese inventor. We ended up getting sued for this as well. We were at a five year lawsuit. But a Chinese inventor called Xiaoping and I met a guy in Hong Kong, a French guy who had a factory in China, was running a factory in China and he was doing some brokerings for some inventions. And he showed me this robot I should do. I thought, that's cool. Didn't think too much of it. Then he showed my brother and my brother loved it. He was like, we've got to make this Robofish Pomite. And part of the deal was we had to make it in their factory if we licensed it from, from them. So we licensed this fish. And it was like, it's got little carbon sensors. Very, very clever design. It has an electromagnetic coil in it. So when it touches water, it's all micro.
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Unknown B
It swims and looks like a, like a real fish swims in all directions. And it's water activated. So we start making this fish. And then the guy who was the inventor had worked in a US company before and he had Tried to sell as a mention to them that said no. He had signed a release on the invention saying, no problem, you can go sell it to anyone else. Of course Robofloos blew up, came up with the best selling toys in the world. And then he decided that actually the inventor had designed some schematics or diagrams why he was underemployment and he would sue us because they were still on his computer systems. And so we were in this long, long lawsuit. But even worse, we finally had like this massive hit. It was like the number one selling toy in lots of countries around the world.
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Unknown B
It took us to, I think we did like US$100 million. So this was like a big break for us. But unfortunately there's always a curveball. The factory that we were bound to make it with went bankrupt in the middle of production. But we had to design so much specialist production, not just the tools, but all of these fish were tested underwater for precious. They didn't leak. And there was just a ton of like specialized equipment that had been built to produce a Robofish. They were all slightly. The weights had to be perfect. So this whole factory gets shut down. And of course the wars in China mean that the factory workers are the first creditors essentially. So they send the army in to like stop anything or any assets being taken from this factory. So we're like peak Robofish production, peak demand. Finally we've got products that are selling and everyone's scrambling.
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Unknown B
There were retailers that wouldn't talk to me for like seven years. Actually, one of my good friends today, it's one of the biggest independent retail chains in the, in the uk called the Entertainer. And the son of the owner, Stu, one of my closest close friends today, he wouldn't even talk to me for eight years. Like I couldn't even get an appointment with him. But suddenly when Robofish took off, suddenly all these buyers were coming to us and hey, like, like that Robofish. So you gotta imagine we finally had this momentum and then this happens to the factory and we are like, we were like. And it was crazy. We could not get into the factory. So my brother, we had to do. And this again, there's so many of these stories, but we were like, we have no other option. We have to get our tooling, we have to get all our equipment.
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Unknown B
We have to get everything out of that factory and rerocate it to another factory. But the army was there. Everyone was there. Hey, you couldn't get in. So in the middle of the night, my brother got like, eight trucks. Got all of our team from one of our little factories, filled these trucks with people in, like, 2, 3am in the morning when there were less people, like, camped out at the factory, pulled up to the factory, paid a bunch of bribes to go in, took all the trucks into the factory. All our people went in, picked up all of the tooling and all of the equipment, loaded up all the trucks in the middle of the night, left, and we went and relocated to a new factory so we could continue production. So it was. It was crazy. But that was like a game. Like, nothing ever happens without a hiccup, right?
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Unknown B
Like, it was sort of like we finally felt like we had momentum, and then this happened. So how.
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Unknown A
How old are you now?
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Unknown B
39.
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Unknown A
Okay, you're 39. Do you still go as hard or, like, are you still as nuts as the early version of you? Like, do you still have the same drive, or are you human and you're like, you know. Yeah. I used to really be super, you know, super driven, super resilient, going. Going really, really balls to the wall. And now I'm, you know, tired and whatever, you know, I'm an old guy now. Like, do you still have it?
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Unknown B
I always still have it. I think we still are just as motivated today, if not more motivated than we have ever been. We see a pretty, pretty cool roadmap ahead of where we want to get to the next 10 years, particularly with Zuru Tech and building houses on production lines and Zuru Edge, all that.
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Unknown A
So let's talk about that. So could you just summarize? How big is the. How big is the empire today?
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Unknown B
So they're over two out of a billion US in revenue, but we're growing at about 25 to 30% year on year. So that's compounding. But I think the thing with us is our revenue is one thing. It's just how profitable we've built the business.
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Unknown A
And it's public or it's not? Not a public company.
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Unknown B
Not public.
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Unknown A
Okay. So privately held, super profitable company that's like a billion dollars a year of profit, basically out of the toy business. But then you have this diaper company. It's. You started. You started buying other companies, right?
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Unknown B
Not so much buying. I. I actually got Chrome. So I got sick in China and Hong Kong, and I had to have my bowel, my large intestine removed. This probably has something to do with living in China for all those years, eating incredibly poorly. I' but I had to move home to New Zealand to get surgery about six years ago. And it ended up being a great thing. So I was in Hong Kong. I came home for the surgery. I was meant to rest for a while. And I was sitting at home and I was getting restless trying to rest. As I had my bowel, my large bowel moved. And I had a friend who had started a small barker business, and he was doing like 50 grand a year, D2C in New Zealand. So really, really small. He'd been mapping away at it for three years.
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Unknown B
And I thought, well, I might as well help with this. But I always thought, like, toys is this industry where there really is a ceiling the size of the business. You can grow just because of this, the, you know, the addressable market, the size of the market. Also you've got brands like Hot Wheels, which are super hard to disrupt. And I was looking at FMTG, and I started to realize that there's like nine companies that dominate 80% of it globally. And when you build a toy business, you work in every material form. You work at speed. Like speed of innovation is your DNA. You build this muscle for speed and working fast and innovating because you reinvent 40, 50% of your entire product line every single year. But because you invent so much of your product line every year, it becomes really hard to keep growing, right, because we have to reinvent to catch up every year.
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Unknown B
And so I started to form this thesis about six years ago. I thought, man, we're so good at automating. And we sort of. I would classify Zuru today as more automation company than anything else. Like, the product is almost secondary. We build incredibly sophisticated automation. We had a huge automation team. So whether that's building a house on production lines with robots or a Dart Blaster with robots, it's, you know, a big part of what we do. So, you know, I was like, we've built this automation muscle and the speed of innovation muscle. And I feel like these big FMC companies, they. One, they don't innovate. Two, they have a lot of duopolies. So if you look at pet food, it's Mars and Nestle. If you look at Baby, it's Kimberly Clark and Procter and Gamble. If you look at beauty of personal care, it's L'Oreal and Procter and Gamble, a little bit Unilever.
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Unknown B
So there's a lot of. If you look at laundry, it's pretty much just Procter and Gamble, tiny bit of Unilever. So all these duopolies and monopolies across the board. And through that, they were delivering much margin to their retail partners. They really held the power. And I remember mapping out Walmart's revenue and I mapped it against the top eight FMCG companies in the world. So Walmart did more revenue than all of them combined.
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Unknown A
But then what's that acronym you're saying? What mcg, what is that?
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Unknown B
FMCG Fast Moving Consumer Goods. So fmcg, cpg, Consumer Packaged Goods. So, so if I looked at Procter and Gamble, Nestle Mars, all the biggest FMCG companies, collectively their revenue is less than Walmart who does 611 billion. But then Walmart makes only a fraction of the profit. They're all public companies and the big FMCG companies make the lion's share, 75% of the profits. So I thought is there a world in which we can be disruptive in fmcg fast moving consumer goods? Can we deliver more margin to our retail partners? Can we innovate faster, bring our speed of innovation mindset to these categories and can we reach customer in a far more efficient way? And can we move at the speed of culture? And obviously at the time digital and data driven advertising was starting to become a bigger thing and targeted advertising, I was still looking at ad and I was thinking well you've really got a mum, a mum who's an incredibly targeted audience or a parent who's an incredibly targeted audience.
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Unknown B
How can we serve them an ad every single day in a targeted way rather than just wake up media. So that's a super efficient way to reach our customer. What if we build a better product, deliverable margin and position it at a better price? And that was kind of my overall thesis. Can we do this and can we run our same kind of first principles toy model like fob so we don't hold products super lean, large advertising dollars spent but in a really centralized, controlled way. And I thought okay, I can do this. So I worked with my, with my friend and I said okay, let's launch this dipole brand in New Zealand as a test market and within one year I think we're taking 40% market share in New Zealand launching a diaper. And I remember meeting Greg for, and who is CEO of Walmart at the time and he's a New Zealander and I met him in New York and I was like Greg, you know toys is great.
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Unknown B
And it's been, it's this incredible university for us because it really allows us to, you know, it's, we built skill sets that is very hard to build in any other industry. And I said we're going to take on dieters. And he turned to me and he said, nick, ever heard of Coke and Pepsi? Like you were saying that it was going to be that hard to crack, like Pampers and Huggies are going to be that hard to go and disrupt. And I said, I get you, but I think we can do this. I'm going to give it a go. So we launched in New Zealand. The second biggest brand in New Zealand was Treasures. Huggies was number one. Treasures was a local brand. Their share just plummeted. They ended up going out of business and having to sell the brand for pennies on the dollar.
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Unknown A
And you're spending a ton on Facebook ads or what are you doing to find Facebook?
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Unknown B
And then it progressed to Instagram. Now it's progressed to TikTok. Like it sort of always progresses, right, like, so you've at the speed of platforms, but you've also got to move at the speed of cultures. How do you move at the speed of trends to build content to move at the speed of culture?
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Unknown A
Was that a new newish skill set for you? Because it seems like the toy company was retail driven.
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Unknown B
Yeah, well, YouTube was starting on this thing that it was mainly TV advertising for toys at that time. So it was still TV was predominant and then it kind of switched to YouTube. So today we don't spend any money on TV and toys. It's all YouTube, it's all TikTok, it's all YouTube shorts. So it really, like the platforms change in how you reach people, but. So I had this thesis, but we just quickly took all this market share in new zeal and I was like, holy shit, we can make an incredible volat. But to be fair, success is a bad teacher. Like we just got the success out the gate. Rascals just. We launched better, it just took off. And so I packaged up that case study, went to Australia, went to Coles and I said, hey, look at what we've achieved in New Zealand.
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Unknown B
Look at all the margin we're delivering. Look at the category share we've driven. We helped foodstuffs reverse their category share decline. Like they were getting hammered by the competitor Woolworths here we inverted that. We took them the other way with him one year. So Coles was like, love it launched with Coles. Same thing. We won Coles Non Food Supplier of the Year award in the first year and just help them like take heaps of category share. So I was like, wow, this really works. Took that model, went to the us, went to Walmart, was like, hey, Walmart. We could help you disrupt, you know, your two big suppliers here and they gave us a Dallas test. Same thing. We became actually last year Walmart's fastest growing brand. Total boss. All categories with Rascals went to Target, did the same thing with our brand Millie Moon.
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Unknown B
Millie Moon actually just overtook private label and Huggies is the second biggest sub brand in Target in under or about three and a half years, which is incredible. So it was sort of this like wake up moment that wow. And I think last year we produced 2 billion diapers. And this is all in, under this is all in about five and a half years. We build this business so well over a billion dollars in retail sales last year and diapers in, you know, five years. So from start to go, a billion dollars a year should I say, and growing incredibly fast. Like this year it'll grow 30% again. So this was sort of an eye opener for me and I thought wow, we can do this in all FMCE categories. So I started testing in New Zealand and losing like we tested infant formula. Did it work?
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Unknown B
We tried femcare fails. We tried like oat milk fail. I did all these little things. I started failing and I was like oh. But my partner at the time, Jamie had a background in luxury PR and beauty and was huge beauty enthusiast. I said hey don't do that. Let's start a beauty brand. And we started Monday. Haircare and which is the little pink bottle Forbes called it last year the most famous shampoo and conditioner bottle in the world. But we launched that peak Covid and that was the second one it just took off. We I think in Australia we won product launch of the year and we had five of the top 10 in total here Care we overtook penten and sales.
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Unknown A
What do you think is the difference between the ones that worked and the ones that didn't? Is it category? Some categories were just more ripe was it? You nailed the packaging and the positioning and that's actually the thing that matters most is it luck.
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Unknown B
Diapers was is driven by price and performance and we were the first one in the world to take a China diaper to the world. And China's making the best diapers in the world. So in China there's like a thousand domestic brands all competing. So the technology and non wovens and substrates and SAP and machine technology has just gone like that because of all the domestic competition. So we took the best product in the world to market at the best price in a category which is price and performance driven. So it's either you gotta be Price and performance driven in a performance driven category or you've got to be innovation driven. So we launched Dummy Yum. Which is super innovative to victory product. Like really innovative and that was just pure innovation that made that like take off. So innovation or it's got to be design and creative.
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Unknown B
So Monday was, you know, it's still a bottle of shampoo but incredible design and creative. And then we just owned TikTok as in it is the number one haircare brand in the world on TikTok and by a long way. And it was just the right design, creative positioning, branding, marketing. And it just took off. And I think last year in the US it was second only in total growth in hair care to Procter and Gamble's total hair care portfolio, just the Monday brand. And so then I started to learn kind of which categories would work for us and we've gone super deep in those categories and we applied our same model. So building all the factories in diapers. We built a factory I think to us nine months to reduce and we're doubling the size of it right now. So we'll have 4 billion diaper capacity by next year.
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Unknown B
And beauty we built the whole factory, everything under one roof. Injection molding, roto molding, filling, mixing all of it. We built all the lab in Shanghai. We put L'Oreal formulation specialists over Unilever formulation specialists. So as soon as we found something that was working, so I was outboard sourcing to begin with. Then we do the Zuru thing which is go super deep, automate everything we possibly can, put all AGVs in. So every little part of it we want to like automate as much as possible. And then pet food I started at the same time. I bought a young guy who won New Zealand's high school entrepreneurial program out, a guy called Alistair. He's incredible. I said let's start a pet food business together. Actually we work with supermarket and we said let's do pet food. And so now we're getting huge momentum there. One of our brands, I think bonkers was drove 30% of all cat treat growth in America last year.
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Unknown B
And then we experimented in supplements which has been a little bit hard. I built a brand with the Kardashians called Docent company. We ended up selling that last year. It just, it worked everywhere else in the world. It failed in the US and so as soon as we don't have the scale of the US it sort of lets exit it and supplements. We're sort of struggling with our brand habit which is sort of Ticking away and then very much home care. We're building a bunch of brands as well, so sort of. And convection. So we've built this what I call our five vertical strategy. And we're going very, very deep within all of these verticals. And I think all of them individually can be bigger than our toy company within, you know, two or three years.
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Unknown A
What's, what's the dream like? So why, why go so hard? Why do so many, right? Like you could just off the toy company, you could be sitting on a boat you own, looking at an island you own with a, you know, a beautiful drink in your hand. Is that just you? You love the game. You have some dream. You want to be a hundred billionaire. What's the, what's driving. Doing more and more and more?
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Unknown B
I think we love it. Number one, love having a thesis. Love competing. For me, it's sport, right? Like it is sport, having a thesis, going into something, working it out. And as we build these things, you know, toys, business, the edge business, FMCG business, you know, as you become more successful, you think, how can I solve bigger problems? And the same person, Greg Foreign, always said, you got to wrap your business in a bigger purpose as well. And I thought, we thought, how do we solve bigger problems? Because we're almost in a privileged position now, right? How do we go on and actually solve bigger problems? Which is why we've started building Zuru Tech over the last, what's actually been eight or nine years.
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Unknown A
Can you explain what that is? So it's a crazy moonshot idea. I think you have, you either have or are building the largest factory in the world, period. What do you. What is the, what is that idea? What is Zurutech?
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Unknown B
So Zuru Tech, the thesis really was, if you look at the construction industry, it's been done the same for hundreds of years. It's also the biggest segment or market in the world. Construction, property development. And the idea was, how do we build the first factory in the world that has a customized input, so the design of a building and a fully automated output. So how do we build buildings for a small fraction of the cost of what you build a building for today? And we're now, we started off, so we built a software which is called Dreamcatcher, which is built on Unreal Engine. It has an incredibly simple UI sort of user interface, but the logic layer or the coding lab, although that is incredibly, incredibly complex. We've cataloged every building code in the world, so you can drop a pin on any location in the world that Maps the terrain, it does the building code.
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Unknown B
And then you can design your house or building or whatever building you want. In our Dreamcatcher software, we've also built our own AI assistant or on our own large language model called Quera, which is basically training. It's training our model on all the great architects. So you can talk to your building and it builds it in front of you. You can put a 2D plan in, you can decide on this room. I want it to be Stockholm style and furniture and it maps all the furniture and does it for you. So it's incredibly intuitive software. Basically a 10 year old can design on Dreamcatcher. And then it does all the structural side, it does all the evp, the mechanical, the electrical, the plumbing. It does it all in a super intelligent way. Wherever you've dropped the pin, where you're building the building, it works out the orientation of the building for the sun, it works out how many H VAC units you need, it works out how many solar panels you need.
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Unknown B
So basically then the software translates every part into our factory. Our factory builds every single part and it's completely automated. And the factory is designed from start to finish. So originally we built a 1/5 scale factory. So that's to test the software with the hardware and how that all integrates together. So it builds these mini houses that 1 5th in every dimension. And then we, once we got that working, we built it's about a three hectare factory and it's a test production line. And that right now is producing. That's. We're testing the software at full scale with full scale houses. And we're building a house about every two weeks right now, which is test. And then we have like 100 little changes and we go in software changing it. And then we bought a factory or a, or a building. It's 25 acres in size, which is our first commercial factory for producing commercial houses.
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Unknown B
And in phase four, we'll be building one of the biggest factories in the world. I think second only to Boeing is the plan. So that's all planned out now. But we are building a house for $500 a square meter. And it's the best quality in the world. Aerated concrete, ceramic tile. But we have innovated every single part of the process. So we have the wall module, the tile module, the window module, the lighting module, the smart home module. And every single team I think is the best in the world of what they're doing. So it is a huge project. It is a massive undertaking. I think we have about 700 software and hardware engineers working on it.
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Unknown A
Are you self funding this or did you raise money for this?
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Unknown B
Correct. Yeah, no, we self fund it. So we are getting very close now to a final product. We think we're five test hours away from getting it very close to perfect. And then it should be transformational in terms of how the world builds. And anyone can use Dreamcatcher, the software. So you could go on to Dreamcatcher and there might be a million different two bedroom houses that have been designed by people on the platform and you can look through them, you can put a price on selling your own design. You can go through them in real time, you can stage furniture. We'll have a marketplace. IKEA could digitally scan all of their furniture into our marketplace. Artists could digitally scan all their art. And so you can put it in your house, you can go around in real time and see it. And so the software is really, the software is really incredible.
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Unknown B
You know what, what, what, what we've built. So super exciting that we're getting so close now. And the houses that we're producing each couple of weeks are really incredible.
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Unknown A
I mean this is a insanely cool idea just to basically, it's like if you go to the website, it looks like you're looking at the Sims, the video game. You could just kind of zoom around a house, you can move things, whatever, but you're saying there's a button where you just basically click print. And then the house gets built in an automated factory which is just a, a kind of mind blowing idea. How much are you going to put into this funding wise? Like you must be push. This must be like you must be putting hundreds of millions of dollars. Is that, is that right or am I overestimating?
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Unknown B
It's spending a lot for sure. So the software. So we have three offices in India on the software side, Pune, Kata and. And we have two in Italy, Milan and Monna. The reason in Italy is we actually acquired years ago the software part of it. It was two guys, Martin and Alicio, their parents, both architects that decided that architectural software was built on incredibly old software stacks. And so they were like, well, gaming engines are like going like this. And so they decided to build software or architectural software on Unreal Engine. And so we acquired them. And that's sort of the reason I think we have about 160, 160 or so people sitting in Italy on the software side. And then they work with India on the software side. And then in China we've built all the hardware side out. So we have three sites where we're doing all of the hardware and automation development, but we kind of parallel.
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Unknown B
Our automation team has sort of grown in parallel. We, you know, they automate. For example, we produce 57 million dark and water blasters a year, but we produce a dark blaster from a plastic granule through to finish product with no people. Our competitors, like Hasbro, they outsource to factories who still produce with drills on production lines. We're now building our automation 2.0, where we're using vision and machine learning so we can actually change out any model of blaster on the same production line. It can see the molds and it can see the shape and where all the screw holes are, and it adapts completely. So we've kind of paralleled, like, parallel our automation with building a housing project, but also taking all that expertise and building across our Zuru Age and toys business, which makes us so, so disruptive. But the big difference is when we automate a polite in FMCG or toys, you're making the same product over and over and over again.
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Unknown B
With robots, this is incredibly complex because you're building a tailored product for every building site in the world and every building code in the world, and it's different every time. And so having that fully automated output with a fully customized input has never really been or has never been done before in the world.
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Unknown A
Dude, you're a madman. Do you even, like, who are your peers? Like, who do you relate to? Do you just read, like, an Elon Musk biography and you're like, oh, that's the only other guy in the world who I have something in common with? Like, is that somebody you admire?
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Unknown B
We have a huge admiration for Elon. We've been big Tesla backers and fans for a very long time. In fact, I would say my priority. I had a chance to meet him, and then I had to fly home for an emergency. And so I actually don't know him. But my brother, My brother was very similar to Ewan. So my brother is sort of the driver behind Zuru Tech and our building project. He's very similar in his way of thinking. I think Elon calls it the Idiot index, for example. Right. And the Idiot index is when you look at the cost of a rocket. Well, he looked at the cost of what a rocket used to cost to build, and then he looked at the cost of the materials, and it's like hundreds of times the cost of materials to build a rocket. And he's like, well, then he takes a first principles approach.
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Unknown B
He Breaks it down and he works out effectively how to build a rocket at a price that makes sense based on the cost of the raw materials. I mean, we're having a similar approach to how we build a building. Whether it's one story or 100 stories, it's look at the cost of materials out of the ground and look at the final cost of the building. The idiot index is really high. And so it's same or similar type of thinking. So how do you go back to your first principles approach and do it from the ground up in a completely different way?
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Unknown A
Did you see the other day, I think yesterday or two days ago, boom, Supersonic did their first supersonic flight. I don't know if you followed this startup.
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Unknown B
I did, yeah.
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Unknown A
He kind of had a similar story where he worked at Groupon, basically, and he's like, you know, a product manager at Groupon selling coupons on the Internet. And then, you know, for fun was basically having a, you know, a hobby of flying and then gave himself a year to, from a first principles point of view, understand how planes work and figure out if there was some business he could build in the plane, you know, around planes, because he just loved planes. And while he was building his spreadsheet, he was just like, I don't get it. There's no reason we shouldn't be flying supersonic speeds right now. And then he took it to like, professors and others. He's like, where is the error in my calculations? Because this is telling me we should be doing supersonic. And they were like, no, there's no theoretical errors. Just no one's doing it.
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Unknown A
Like, there's no courage is the limit. Not like there's not a materials problem, there's a courage problem, there's an entrepreneurship problem. And seeing that go, you know, yesterday to doing their first supersonic flight was super inspiring.
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Unknown B
Incredible.
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Unknown A
So you, you're doing all this stuff. Do you like, have hobbies? Do you do stuff outside of this? What's like, what is fun for yours? This is like my cup is full with this sport.
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Unknown B
Definitely sport we love. It's love competing, really. So anything that has a competition element is something that I get a lot of enjoyment out of. So, yeah, certainly tennis, golf just sport in general is something that enjoy doing. But yeah, as you get older, like, obviously we don't. I used to think you wake up every day with that pit in your stomach because you're wondering what's going to go wrong today and what do we have to solve today? So, you know, obviously we don't have that issue any longer and definitely get to spend more time with family. I finally had my first child last year, so that's congrats in a big change. It definitely changes your perspective on things, I think which is, which has been really good. I always sort of kick the can, delayed it as long as possible, thinking it would slow me down.
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Unknown B
But it's definitely been one of the best things.
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Unknown A
So do you when you start these new companies? Because I always find this interesting whenever you have like a serial entrepreneur, people have different approaches. So some people, they, you know, they have their main thing and they leave and they say I'm going to go on a sabbatical basically for a year, figure out my next thing. Other people, they take some percentage of their time, they're devoting it to new ideas and they go, they roll up their sleeves and they're super like on the ground figuring out the new idea. Other people, they recruit an operator and they just give the operator kind of like the idea maybe a little bit of a plan and then let the operator run and they kind of are there as more of a chairman or a board member from afar. When you did like the diaper brand and these other ones, were you like boots on the ground like every day figuring it out or did you do the operator model?
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Unknown A
What did you do?
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Unknown B
Definitely boots on the ground. What I would say is in our business there's a through line through it, all right? We're essentially making a product whether it's a house, a bowl of shampoo, a laundry pot or a dart blaster. I mean it's essentially still making product, building factories, selling it into to retail. So we've built such a big flywheel. Like if you look at our Shenzhen office, we have three and a half thousand people there, right? It's such a big flywheel that it just becomes easier and easier to plug into that flywheel regardless of what category in. Yes, they're all different industries, but we're still effectively trying to make the best product in the world at the best price. We set ourselves the goal of making a product to $0. I know that's impossible, but that's our goal. How do we make the proper $0 and how do we make it the best in the world?
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Unknown B
So there's a through line through it all. So very much boots on the ground. I believe leadership has to be on the dance floor, have to have your hands dirty. That's where you get the most insight. And in our business now, I'm a huge believer in firing bullets and failing fast. So I always say, get an actionable insight. Where's an insight? Find an insight somewhere in the world. And an insight forms a bullet. And a bullet is a minimal viable investment into testing something. And then if the bullet works, it's a cannonball. And we invest and we build the recipe around that. And once the recipe is working, you can pull a lot more things into that recipe and build that recipe out. So our mindset around fast fail, we actually have what we call fast starts now in fmcg. So we're trying to build minimal viable products to test quickly, as fast as possible.
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Unknown B
And so we can really speed. Like speed of innovation is probably the biggest thing for us. And we're trying to test more things in these categories faster and learn what works and what doesn't. Because in my experience, things either just like, hit the ground and start working or they don't. And then we have a mindset around continuous improvement. So we call it 2% improvement a week. The power of compounding. I know 2% improvement a week is nothing you can measure, but that's the mindset. That's what we put into our DNA. And we always say to the team, we suck now compared to where we'll be in the future. So we have this relentless mindset of being able to look back on ourselves a year ago and be like, we weren't even good then. And I think that compounding improvement is such a big part of what we do.
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Unknown B
And then from, you know, when I look at team members, I'm trying to. People say they try and build talent density in their business. Yes, we try and build talent density, but for us, we're trying to build, like, grit density. And I say when we hire, we're looking for grit smarts and someone with a bias to action, like real doers, right? People that just like, we fast bail, we go in, we do it, we are the winner, we learn. If it doesn't work, we're getting heaps of insights out of that on how to improve next time. So our mindset or our DNA in the business works across any of those verticals or categories that we're in. We have the same mindset and the same approach and the same DNA as to how we approach them.
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Unknown A
If you were interviewing me, how would you figure out if I have any grit?
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Unknown B
I. I think actually, like looking back at your history is, it's kind of like we often find, like, people that really great competitive sports people, and they really love to win. And we're highly competitive. Like, I Want to understand how competitive you are, how much you really want something. And to be honest, it can be really hard. Like, we've built this loop process in our business, similar to the Amazon loop. So where, you know, half we're hiring and looking at, you know, whether you fit and can do the actual job, but the other half is really, do you align to our DNA? And so we have a loop. We have, you know, eight people. You know, half of those people will interview or questions around, you know, our DNA, and really trying to go deep on understanding if that person fits our DNA. And so we're really trying to build up, you know, not only our talent density, but our grit density.
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Unknown B
But certainly it's something that I find is really important. All our best people have just incredible grit and incredible bias for action. Sure, they're smart, but they just get shit done. And, you know, we decide something in a meeting, and they're already kind of actioning it in that very moment. And that's kind of our culture. It's kind of that saying as well. Right. That lazy people work a little bit and expect to be winning, whereas winners work as hard as they possibly can and worry that they're being too lazy. And I feel like that's super true. Right. Like, people that, like, work hard, they're always worrying that they're not doing enough or they're being too lazy. And it's kind of those people, that's kind of like the mindset we're looking for. Yeah.
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Unknown A
I think Elon has a good question he uses in interviews. He says, tell me about. He just start. Sits down. He just says, tell me about the hardest problem you solved and how you did it. And, you know, you could get so much from one question, because what's the hardest problem they solved? You know, it'll show you the scope and the trust they had in prior roles. Like, were they just nibbling on tiny little issues, or were they actually, like, biting into really meaty things? Yeah. And like, yeah, can they talk about the details? The paths that didn't work? The paths that did work? Because that's the person who was actually doing the work. There's so much, like, resume lying where somebody says, oh, yeah, we did this. Like, cool. Tell me how you did it. They don't know because they weren't the one doing those parts of it. Correct.
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Unknown B
Correct.
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Unknown A
Nick, this was awesome, and I really appreciate you coming on. I know you don't do a lot of podcasts, but your story is honestly incredible. I think as much as you're building in the factories. I think you can. You doing a podcast like this can build 10,000 new entrepreneurs with more grit, with more resilience just by sharing the story, because you're showing, you know, what's possible. You're showing what you did, how it all turned out, and how you approached it. And so I think, you know, a simple hour like this can do a lot for a lot of people. So I really thank you for doing it.
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Unknown B
It was a lot of fun. And, yeah, I don't often share our story all that often, but, yeah, I totally agree. If it can help inspire people, and I always say it right, it's not really how capable you are, it's how willing you are. And I think it's the willing people that stick at it for a long, consistent period of time and continually improve that actually are the most successful. It's not necessarily about how smart you are. It really is just grit and perseverance, and you end up getting there. So I think that's the big lesson for any entrepreneurs out there, really.
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Unknown A
Right on. All right, thank you so much. That's a wrap, Sa.