In San Carlos (CA), we meet CEO and Co-Founder of NatureBox, Gautam Gupta. Gautam talks about his story how he came up with the idea and founded NatureBox, how the current business model works, as well as he provides some advice for young entrepreneurs.

INTRODUCTION

Martin: This time we are at San Carlos, at NatureBox. Hi, Gautam! How are you and what do you do?

Gautam: Great!! Well, I am doing great! Thanks so much for paying us a visit. So I am the co-founder and CEO of NatureBox. NatureBox is a company that aims to make snacking smarter, more delicious and easy.

Martin: Why did you start this company?

Gautam: Well I started the company for a couple of different reasons. First and foremost it speaks to a personal mission of mine and something that I’ve been interested in for over a decade now. Unfortunately growing up until the age of eighteen I really struggled with obesity. And I had really bad eating habits, but luckily I started learning about nutrition and in the six months before going off to college I was able to lose seventy pounds and really radically changed the way I was eating, learned a lot about why the people eat the way that they do, and that was always a personal interest for me.

So starting NatureBox was a chance to really sort of give back and do something that I thought could create change and impact in the rest of the world and that also because I had a friend of mine from college, who wanted to start the company together. We are both passionate about food and nutrition, so it was a great opportunity to work with people, that you like working with and do something that you are passionate about.

Martin: Good. What did you change in your diet?

Gautam: Well, I went form one end of the spectrum, where I was eating very unhealthy foods; I was eating a lot of candy, drinking soda, ice cream. And I really went to the middle of the spectrum. I don’t think I went to, sort of like everything organic type of diet, but I just was more careful about what I was eating and I noticed that through that, through exercise was able to lose the weight very quickly. And I think, the importance of that to me was that those small changes actually can make an impact, and the importance of diet. We talk a lot about sort of diet versus exercisein this country, but diet is incredibly important. So for me it was a learning experience of truly how important these things can be.

BUSINESS MODEL

Martin: Let’s talk about the business model of NatureBox. Actually what are the customers or the target segments that you are targeting?

Gautam: Yes, so this is really anyone who likes to snack. So we have customers from all walks of life, all across the United States. We have customers in all fifty states. They range from young millennials, who might be buying the snacks, so that they can have something to eat at work all the way to a mom with school aged kids, who’s looking for a ways to get rid of junk food at home, and certainly everything between. So the target customer is really someone who has an interest, passion around snacking, but trying to find a way to snack a bit healthier, trying to find a way to have healthier snacks delivered to them in a more convenient way.

Martin: Do you only sell to individuals or also to corporates?

Gautam: We do sell to corporate customers as well, but the bulk of our business is really selling to individuals. Now those individuals are eating our snacks in both the home and the office, but it is really focused around the individual consumer.

Martin: Cool. Great. Can you please walk me through the value chain and what are the major issues that you see over there?

Gautam: For sure. So one of the important decisions that we made very early into starting NatureBox was that we wanted to build a brand, which means that all of the products that you buy form NatureBox come under our brand and that they are developed in-house. And they are unique to what you would find in your neighborhood grocery store.

And so the really value chain is about how do we bring these unique proprietary products to the consumer in a much more faster and much more efficient way. And so we’ve built a lot of technology in the front end of that process, which is around data and how we can better understand you as a consumer, what foods you like, what foods you don’t like and bring that data to the product development process. And then really going further down the value chain, we’ve built supply chain infrastructure and software that allows us to get these natural products to you such that they are fresh and that every month if you choose you can have something new and you can kind of always be discovering new snacks from NatureBox. So we have built a lot of technology in the back end of the business that really allows us to serve customers all across the country, create products in twelve to fourteen weeks from idea to the product in hands of a customer and then constantly use that real time feedback from the customer to get better at what we do.

Martin: And when I am looking at the total value chain is it true to say that you are owning or working on the first parts which is basically the customer interaction, the branding, the marketing, the logistics, part of, and the rest you are just buying from suppliers in the US or somewhere else?

Gautam: Well, we scout the world to find producers that are really great at what they do. So for example, the dried pineapple product that we have comes from a producer that has been growing pineapple for decades and they are really exceptional at what they do. So we work with producers all across the country to source the ingredients and to produced products for our end customer, but every step in that process is being owned and developed and controlled by NatureBox. And because we are direct to consumer it’s not just sort of the branding and the marketing, but it’s also the physical distribution and getting those boxes in the hands of the customer.

Martin: I mean you are something like subscription model, like order a box, get it every month and it will be whatever I like. You have like hundreds of different ingredients. Are you sending me the same stuff every month or is there some kind of variety in there?

Gautam: Yes, so the way it works for the customer is the customer signs up for membership and that membership is incredibly flexible. So you can choose to have any number of snacks sent to you at any frequency. So if you want monthly or every week shipments we make that possible for you. And then you actually look through our catalog of over a hundred and twenty different products and you choose exactly the products that you want. Now you can change those products at any time. So, let’s see, you are on a monthly shipment frequency, if you choose five products today that you want this month, you can come back and change those products next month and there is no limit to sort of how often you can change that selection.

So what I think we’ve really done and we’ve been a leader in this space of becoming more than a subscription box. We are really a membership model that allows you as a consumer to have a great amount of flexibility and you choose every aspect of the NatureBox experience.

Martin: Good. And how did you find those suppliers? I mean, basically the question is how’s the sourcing model?

Gautam: Yes. Well, we have a really talented team of product developers, whom we’ve hired from great brands like Trader Joes, Dean and Deluca, William Sonoma – great food brands and retail brands. And they are really tasked to be out there in the market place. Obviously leveraging the decades of experience that they have but also really scouring the world and talking to suppliers. And this is a really fun job, because they get to try snacks all day and luckily I sit right next to them so I get to spy on some of the selections they have. But it’s a really fun job, and I think the simple answer is we’ve hired people that are incredibly good at what they do and we’ve empowered them with all of the data that we have on the customer and we have loads of it. Millions and millions of data points on our customers, given our direct to customer relationship and we’ve gotten out and said “Here is the data, here is what they like”, find products that are better, that meet their needs and as soon as we launch those products we are able to funnel the feedback to them, so that they know how the products are performing.

Martin: But currently you are only selling like one hundred twenty snack products. Is there any other way of natural, organic products you would like to sell, because I assume there is more of an organic biased customers segment?

Gautam: Well, I think it’s a customer’s segment that is looking for better options, wether that’s organic, natural or whatever it might be. Obviously the food landscape is moving so quicklyin this country and in the way our approach to product is we want to empower the consumer with choice and transparency. So we make it very easy to find the products that are right for you, whatever that may be. And I think that landscape is changing so quickly and one of the advantages of our model is that we can stay on top of that rapid pace of change.

But we launch five new products each month so we have a hundred and twenty active products today, but we’ve actually launched well over two hundred over the last couple of years and we continue to launch four to five new products every single month.

Martin: And how are you balancing adding new products and on the other hand still having enough volume per product so you have good purchase prices?

Gautam: Well, I think because we have a hundred and twenty products and because we are dedicated to snacks, we are able to leverage that scale. But at the end of the day its really what the consumer wants. And I think that’s the disruption in the NatureBox business model is that we are focused on selling products that you want to buy and wether that means we need 120 of them or 150 of them, whatever that number may end up be in the future. Our mission is to make sure that you seeing products that you’ll enjoy and we are developing products that are based on your needs. And so while scale is important and certainly we grow, we hope to take advantage of economies of scale, but really what we wake up in the morning focused on is how to find products that our customers will really love and enjoy and that will keep them coming back.

Martin: Lots of people know about the advantages of a subscription model, like steady revenue and so on. What are the disadvantages of having something like this and how do you manage that?

Gautam: I think there are many advantages of the subscription model, but obviously one of the things that we have to do as a subscription business is continue to earn our customers trust every single month, every single week and, I think that places a great amount of importance on customer experience. And so we are not a business where if we sell you a NatureBox that that is success. For us it’s really about retaining that long term relationship with the customer and creating value in the NatureBox membership. For us that comes down to: “Can we understand your needs better than anyone else?” And so I think the value of that is that we can build a business that hopefully continues to get better and better over time, because we continue to aggregate that data and get better at understanding your needs every single time you order from us.

But it is also a complicated business and so every month we have to earn your trust and we’ve got to give you a reason to keep coming back. We have to build the supply chain that enables consistency and being able to get this large number of orders and get these personalized orders to your door every single month with a great sort of level of predictability and consistency. And so I think those are some of the challenges, but for us, we see so much value in being able to have that relationship with the customer and we feel like we are really scratching the surface of what that could be.

Martin: Is there anything besides the purchase history and maybe some customer service interaction where you can learn from your customers and improve your product offering?

Gautam: Well, actually all of our customers have the ability to rate and review the products that they have tried and that’s really important to our business model. We have millions of snack ratings which is a customer coming in and saying I tried this product and here is how I liked it, or maybe I didn’t like it and because that data is being funneled in real time, I think that is incredibly important and that’s a huge driver of how we think about the business.

Of course in addition to that data we serve our customer base on a very active basis. We have a customer service team that’s talking to our customers every single day. So we are obviously getting data in a variety of different ways and I think the ability of a customer to rate and review is incredibly important.

Martin: Let’s look at the customer acquisition part; what channels are you using for acquiring customers and which one are performing better, which one are worse and why?

Gautam: Customer acquisition is definitely developed over the years and I’d say that as the brand gets more known and gets sort of out there, what we are seeing is word of mouth and our current members, referring their friends continues to be a huge driver in the business. But in addition to that we’ve started to experiment in offline marketing channels – TV, radio, things like these. And we’ll continue to evolve customer acquisition based on who our target customer is and what media they are consuming. I think online, social media is a great channel in general and part of what our focus is how do we continue to evolve that customer experience, so we continue to get more and more word of mouth.

Martin: When you started was there some way how you validated your product in the end that you said “Ok, I would be my first customer and my co-founder as well?” Did you somehow validated before you started building the box and finding the supply and so?

Gautam: Yes, actually my co-founder Ken and I thought that this was really important. We thought that we would be customers but we didn’t know of anyone else that would be a customer.

So we spent a weekend, sort of, putting a concept together and this was very early into our brainstorming of what NatureBox could be. So we put a box together we shot a photo of it and then we put that photo on our website and we drove some traffic through Facebook to that website. We just wanted to see if anyone would buy this, sort of a snack membership. Would anyone find that concept interesting and it turned out that by the end of that weekend we had over a hundred people signed up for the NatureBox subscription. And these were people that we didn’t know.These weren’t our family or friends, they were just people who saw our ad on Facebook and at the end of the weekend we said ok, well that’s a pretty good sign. It’s not just the two of us. There’s at least a hundred people, there might be a thousand and maybe there might be, tens of thousands eventually and so that’s what compelled us to start the business and we did it before we had anything. I mean we didn’t have a product, I mean worse than that, we didn’t even know how to build a product, so we had those hundred people sign up so, ok, we might have an idea here.

Martin: How much did this test coasted approximately?

Gautam: It cost less than 10,000 dollars. I mean it was very inexpensive, including the cost of the advertising and the traffic. So it was a pretty fast way to get to an answer, considering that we kind of put this together over the course of a weekend and luckily there were more than a hundred people, eventually there was more than a hundred people that signed up so.

Martin: And after this, how did it went further? So what was the next step?

Gautam: Well the next step, the immediate next step was, we had taken money from these hundred people so we had to make a decision were we going to send them something or we are going to refund their money.

So the immediate next step was – well we should send them something and so had to go and figure out, how do we put this box together? Neither of us had come from the food world. It sounds like a simple challenge but it was a pretty daunting challenge at the time, because we didn’t know anything about food, we didn’t know where to buy food, so we cobbled together these hundred boxes and we found that actually people are giving us feedback and, the next month, they stayed on, they wanted to get the next month’s box. And we said ok, that’s kind of interesting, so I guess we have to go and put another box together. And we did that for a couple of months and we started trying to figure out how we could scale this business. What if a thousand people wanted to buy a NatureBox, how would we we do that, because we were doing that out of our apartment?

So it took us the entire weekend to pack a hundred boxes. So we thought ok, if a thousand people want to do this there is no way we could do it out of our apartment . We better find way to solve the problem. So we just started talking to people and I think we’ve been so lucky. In the course of running this business whenever we had challenges and problems we’ve looked to people – advisors, friends that may have solved that problem in their own businesses and we have been incredibly lucky. We had so much great advise from people, in those early days. We talked to anyone who would pick up the phone. We’ve got some great advice and we started finding, vendors that would work with us, we found a facility that would work with us. We didn’t have to pack these things in our apartment and it kind of went from there.

Martin: So your Mom was happy that you are not packing a thousand packages on weekend?

Gautam: Yes, exactly! I mean literally, the first weekend we were so tired from packing these boxes, it took me entre weekend and we looked at it and said if we needed to pack a thousand we need like a hundred people and a warehouse of a size of a football field, given how little we knew about how to make this process more efficient. So we were very happy when we found partners that could help us, help us scale the business.

ADVICE TO ENTREPRENEURS FROM GAUTAM GUPTA

Martin: Great. Gautam, you said you’ve got lots of advice from other people, haven’t you? What would you tell somebody who just wants to start a company and says what is your advice? What advice can you share with me?

Gautam: Yes, I think starting a business is obviously difficult. And I think for anyone that’s asking for advice, they are doing the first steps been accomplished, which is don’t be afraid to ask for help, don’t be afraid to ask for opinions, thoughts. And I think what you learn as you start a business you are going to get a thousand opinions and a thousand different pieces of advice and your job is to figure out what to do. And so people are very willing to tell you what they think, and so don’t be afraid to ask.

I think as you build the company it’s really important to be self-aware in terms of what skills you have and what you don’t have. What things and what things you don’t know. And I think the reason for that is that helps you think about what pieces of the team you need to bring on and really who you need to hire. At the end of the day, business is so much about the team and people and so it’s really critical to surround yourself with people that both complement your skillset and also enjoy working together and people that you want to be in the trenches with because it’s going to be hard and there are going to be many, many bad days.

And then I think beyond that at every stage of the business you are going to have different challenges, and you are going to be fixed on different things. In the beginning you are going to be really focused on the customer and on the product and trying to figure out how do you to get that product market fit. But, as you scale the business, that’s going to change. You might be focused on recruiting; you might be focused on building culture and so, I think the one piece of advice is think about what the biggest challenges that you have today and focus on those, and be mindful that those are going to change. Every three to six months those challenges are probably going to change and that’s a good thing. It means you are solving those problems. But I think that’s really important as you start putting the business plan together.

Martin: Here in Silicon Valley and also in Germany and UK, it is quite hard to hire really good people. How do you recruit and find those people?

Gautam: Well,I think recruiting is a full time job and you have to treat it like full time job. And I think that even when you are starting out to the size of our business today, I still spend a lot of my time on recruiting. It’s just an essential part of being a founder. You have to always be thinking about the team and how you can add capabilities to that team. But I think what you have to, sort of understand is what are you looking for, so it goes back to mapping out the skillsets that you need and the experiences that you need, what your values are, so you find people that complement those values, and people that you can work well with and then I think it’s about figuring out, how you create a compelling story.

And what you may find is that there are so many people in Silicon Valley, in Germany, wherever it might be that it’s really about finding the right person and creating a story that’s fits to them. I think part of that story is what you want to achieve as a business, but part of that story is how they can create impact. I think most people want to work in places where they can be successful, and they can create impact. And they know they are creating a difference, they don’t just want to be a cog in a wheel and I think that’s really important to create a story that shows them where they create impact. That means that picture is not always perfect and I would be very afraid of hiring someone that expects to come into a workplace where there is absolutely no problems and no issues, because that’s just impossible. You want to hire the person who is excited about those problems, because in those problems they see the opportunity to grow and to be successful.

Martin: Great. Gautam, thank you so much for your time and next time when you are thinking about losing some weight or staying healthy maybe NatureBox is the option of choice. Thank you so much!

Gautam: Thank you! Thanks.

Martin: Thanks!

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