Ep4 – The Next Big Thing – How Unbound gets 100% YOY growth without conventional ad channels

E

The Next Big Thing discusses topics that other hardware entrepreneurs will find useful, such as prototyping and manufacturing, tools the companies use to keep them moving forward, sales channels that have been effective (as well as others that have been complete failures), and managing cash flow.

In Episode 4 we chat with Polly Rodriguez, the CEO of Unbound. We discuss the catalyst for starting the business–her cancer diagnosis–and the battles she has had growing the business going head to head with the New York MTA for a sexist stance on advertising.

Product: Sexual health products from a company that describes itself as “your self-deprecating best friend who’s full of jokes, sex positive information and vibrators”

Growth: 100% YOY

Founded: 2013

Location: New York City, New York

Sales channels: 100% online direct to consumer

Team: 8

“Our hypothesis was that the sexual wellness category overall was underserved–in particular for women.”

Talk me through the founding story of Unbound.

I met my co-founder in 2014 and we were originally a subscription box. Our hypothesis was that the sexual wellness category overall was underserved–in particular for women. We both grew up in the Midwest and had our own horror stories of shopping in the category for the first time.

For me, I went through a cancer diagnosis when I was 21 and I had to go through radiation. My doctor sat me down prior to going through it and said that I would never have children. And that was all that they mentioned. They failed to mention that I was also going to go through menopause, and that I would probably need to use lubricant for the rest of my life–really important information.

It was one of the first, but certainly not the last instances in which I realized that female sexuality–and pleasure more specifically–is often overlooked or not considered when we think about sexual health and wellness overall. Sarah Jane [Polly’s co-founder] and I started building the business together and bootstrapped it for the first two and a half to three years. We eventually evolved to eCommerce and then raised a seed round of capital and vertically integrated.

Today we’re direct to consumer and all the products on our website are manufactured by us.

“Selling over 2,000 different third party products allowed us to have an acute understanding of what we were and were not seeing in the marketplace in terms of quality of product, feature set and price.”

Why was it two or three years before you went direct to consumer rather than immediately?

One, we were first time founders who don’t come from a background in which we knew anybody in venture capital. We knew we were going to need a substantial amount of capital to vertically integrate and it took us a very long time to even get meetings with investors. Two, because of the stigma related to the category. And three, because I think we’re first time female founders who didn’t really know what we’re doing. I think most founders don’t really know what they’re doing, but, I think we had to prove to investors that we could execute and we understood the business.

Selling over 2,000 different third party products allowed us to have an acute understanding of what we were and were not seeing in the marketplace in terms of quality of product, feature set and price. So it was a little bit of a blessing and a curse.

“I would be foolish not to bring up Donald Trump as a real reason as to why I think women started to create these companies.”

Do you feel the stigma that is attached to running a sexual-wellness company has evolved since you started the company?

Absolutely. I think it has been a combination of events both within the industry and outside of it. So within the industry, we’ve seen more and more female founded businesses that are making and designing these products who historically might’ve been afraid of the stigma associated with starting a company in a category related to sex.

I also think when we look on a macro level I would be foolish not to bring up Donald Trump as a real reason as to why I think women started to create these companies. There’s been this third wave of feminism in which women are wanting to start businesses that are addressing parts of their lives that for one reason or another they feel are overlooked. There has also now been successful startups, whether it’s Thinx or Lola, that are tackling other aspects that are specific to female health and wellness. 

“A little game I like to call ‘credit card roulette.’ I literally had 5 credit cards in my name, which is honestly mentally overwhelming at times.”

How did you guys initially fund Unbound?

A little game I like to call ‘credit card roulette.’ I literally had five credit cards in my name, which is honestly mentally overwhelming at times. I think it’s hard for founders who don’t come from a background where mom and dad can write you a check to keep you afloat. It is hard not to be overwhelmed by the amount of debt that you get into in order to buy the inventory, to prototype, to do all the things we needed to do.

And so for the first two and a half, three years, I was working two part time jobs in addition to trying to get Unbound off the ground. And I think there’s a massive problem in terms of how we can create opportunities for founders that don’t come from a background where they can have friends and family write them checks for their business idea. 

The ‘friends and family’ round as a term frustrates me at times because most people don’t come from a background where their network can fund their startup idea.

At what point during this process of getting a company off the ground did you realize you’re actually onto something?

Honestly, I think since day one there are different levels of validation. One thing we knew for certain was that this was a category where there’s not a lot of customer data. There’s not a lot of information out there. You can’t go get a market report like you can for many other verticals in consumer products. And so we knew out of the gate we were going to have to build a really close rapport with our customers and especially the early adopters.

I think also partially because we were two Midwestern women; we were just constantly on the phone and talking to our early customers, and the validation we were getting about the brand we were building was overwhelmingly positive. So that validated the idea if you approach this category–which, historically people are shopping for at stores on the side of the highway next to a truck stop–and you bring an elevated brand approach that’s based on values, it would resonate.

“The ‘friends and family’ round as a term frustrates me at times because most people don’t come from a background where their network can fund their startup idea.”

With product companies two of the most common variables focused on are brand and quality. Do you feel that one is more important than the other with Unbound?

I think the brand overcomes the psychological barriers that we have to overcome with every single customer, which are: Is it normal? Is it weird for me to be curious about shopping in this product category? The brand addresses those questions, but the product ultimately is the most important thing. The industry from a supply side is really interesting. The top four players combined make up less than 10% of market share, which effectively means it’s just an incredibly fragmented space. And historically, it was one in which similar to many consumer product categories, distributors played a massive role. And so in our category, because of the cultural stigmas associated with it, there’s historically just been a lack of competition. And whenever there’s lack of competition, you’ll find really high pricing because people aren’t innovating and competing to create an efficient price point.

What we found was that distributors were taking 40 to 50% off the end margin to reallocate to these really small mom and pop shops, which oftentimes didn’t even have a POS system or cash register and were operating in ‘all cash’ because of  the barriers that are ingrained in the industry. So we found this huge opportunity to just create quality products with real customer service that were affordable and didn’t cost $200. When I say it like that sounds quite obvious, but I think when we got into the industry and saw all the crazy barriers and obstacles that you have to overcome, we started to realize why there hasn’t been more competition historically.

Let’s focus on the barriers and hurdles. What’s been the biggest challenges of building Unbound?

I knew it was going to be tough, but I thought it would be tough in the sense of how I’ll explain to my mom what I want to do. I didn’t realize that I would go to try to open a checking account and get turned down or I would want to use Stripe as a payment processor and I couldn’t because we violate their terms of service or I can’t advertise on any platform. Facebook, Instagram, Snapchat, Twitter, the subway, all of those ban this category specifically.

And it’s incredibly frustrating because they ban the products that are for women, but they don’t ban any of the products that are for men. Everything from Viagara to penis pumps are not facing these obstacles and barriers. But when you’re a product that caters to women, you are banned.

That’s where brand really came in, in terms of how we can create a brand that people are going to tell their friends about because in the early days, the only way we could grow was by word of mouth. I think that’s also a reason as to why we’ve been around for a long time, because it’s been a slower, more gradual growth curve as opposed to the hockey stick growth curve because there are no paid acquisition channels that we can use outside of press and AdWords.

“Ultimately the MTA said that they would work with us but then double-backed and have now created a new policy in which sexual wellness products for women are still banned, but the erectile dysfunction companies of the world are all allowed.”

The first time Unbound came onto my radar was when the New York MTA refused to put your ads on display and you went head to head with them. What happened there?

It was the same week that an erectile dysfunction company called Hims had a massive campaign that went up in the New York subway. It’s funny to see how the New York subway has evolved. When I first moved to New York 10 years ago you only advertised on the subway if you were kind of sleazy. It has totally shifted where now when you get on any New York subway, it’s just plastered with the latest startup that closed a round of funding.

When we saw that these erectile dysfunction startups were able to advertise with really–in my opinion–phallic imagery of cacti, we were like, ‘Okay, well if they’re gonna do this, they’re definitely going to let us.’

The MTA also went through a similar ordeal a couple of years ago with Thinx, which is a period proof underwear company, where they banned their ads and the New York public was outraged. Understandably so. And so the MTA came back and said, okay, we’ll allow Thinx to advertise. We had all these data points that made us think that we would be able to advertise. Then when we submitted the ads–which were not outrageous, there was no nudity, no photography of the product; they were illustrations from female artists that were depicting women in different environments–they were rejected.

Because our brand is so tied to values, our community speaks out about stuff like this. And so it was really amazing to watch them go head to head with the MTA. Ultimately the MTA said that they would work with us but then double-backed and have now created a new policy in which sexual wellness products for women are still banned, but the erectile dysfunction companies of the world are all allowed. It’s frustrating that the only people that can’t advertise are the products that actually cater to women who are trying to learn more and own their sense of sexuality. It’s definitely been frustrating but I’m hopeful that we will be the first to break through because when we do, I think that will enable a level of growth that will be really amazing. I believe that Unbound should be a household brand name in the same way that Trojan or Playboy or Viagra are household brand names.

It sounds like you’re at an impasse with MTA. How do you see it playing out? 

I think we’re lucky. I mean, we’re not lucky, but we worked really hard to get to profitability and we’re at a sustainable place right now.

I talked to a lot of founders who are paying over a hundred dollars to acquire a customer, but we’ve created a model in which, because we have an organic following, we can stay at this steady state forever, ideally. But the thing that is frustrating is knowing that we could be growing a lot faster, but we can’t.

When I talk to founders, Instagram is–without question–always the number one customer acquisition channel and it’s really frustrating to not have that available to us. So I think we just have to keep trying and not give up. Hopefully, Facebook will do the right thing and update the policies so that they’re not allowing for one gender but not the other.

“It’s insane. Our ROI last month was over 2,000%.”

For the acquisition channels that are at your disposal right now, which one has been the most successful?

It depends on how you’re defining success. AdWords does incredibly well for us because every single millennial, Gen Z, Gen X and baby boomer is Googling their sexual health and wellness questions. So it’s a combination of really investing in long tail searches and understanding the psychology behind how people turn to the internet to answer their questions about sex.

Then, just content and SEO because we’ve been around for a really long time we’ve written a lot of content that is now served on the first page of search results. And part of the SEO is also PR. I think having a narrative and doing things like a PR campaign, or going head to head with the MTA, has been a really great channel for us, but it’s not as scalable or predictable. It’s exhausting when you’re having to come up with a different PR story every six months as a team of eight people but those are the ones that have definitely worked best.

For Ad Words what ROI you seeing?

It’s insane. Our ROI last month was over 2,000%.

It’s interesting because I would say around 80% of that are brand term searches–which again, I think goes back to our Instagram following and our email. We write really good emails and our Instagram is hilarious. I think we use that as the top of the funnel awareness and therefore, 80% of all outward ROI to come from people that are already searching for Unbound means that we’re creating awareness through those channels that then is converting eventually when people decide that they have an intention to purchase. So we focus on that.

Then also–really weird long tail searches. The amount of stuff I know about weird esoteric sexual Google searches is not something I thought that I would become an expert in, but I certainly am now.

I’m going to flip the question on its head now. Of all the channels that are at your disposal, which ones have been complete failures?

We haven’t really had the luxury of failing.

We did some stuff with podcasts, but for us, we’re an impulse purchase and I just think podcasts are a little over-hyped. It depends on what type of product you are. It’s funny to listen to the True Crime podcasts and then the ads that you get served in the middle of that is ‘Have you thought about getting a security ‘whatever’ for your online safety and identity?’ That stuff probably works well. But for us podcasts didn’t perform as well as we thought they would.

Let’s talk about how the business runs and operates. What tools do you use to keep the business going and how do you use those tools?

Well, I’m an Excel junkie. My background is in management consulting and so I think everybody should be able to create pivot tables. The visualization of data and the ability to export data and then manipulate it and understand it is so important, so everybody on our team uses Excel for almost everything. In terms of other tools: 

“The reason I got so excited about starting Unbound was because it felt really scary. It felt like, ‘Oh my God, what am I gonna tell my parents?’”

What do you think other consumer facing companies can learn from the evolution to more female-focused companies?

The reason I got so excited about starting Unbound was because it felt really scary. It felt like, ‘Oh my God, what am I gonna tell my parents?’ It was that level of stigma that feels genuinely really scary to dive into this and tie my name to vibrators. That was how I realized it was a good idea. If it doesn’t feel a little scary, somebody is probably already doing it. 

One of the most difficult things that I try to talk to other founders about is: are they trying to dig into something that is overlooked because of cultural stigma in a way that doesn’t make sense? Looking at opportunities through that lens or, similarly, regulatory issues that are going to be really gnarly to figure out, but once you figure it out, you’ll have an amazing business because you’ve built a moat around figuring out either a cultural stigma or regulatory barrier. 

Build a brand that’s based on values. For the first one to two years, we were not a political brand. There’s that famous quote–I don’t know if it’s accurate–where Michael Jordan says, “We’re not political because Republicans buy basketball shoes, too.” In the beginning I took that stance – Who am I as a brand to have political beliefs? After Donald Trump got elected, we very deliberately made a decision to be political. I was terrified. I asked – Are we going to lose a bunch of customers? Are we going to alienate a massive potential customer base within the United States? The reality was that those people weren’t shopping with us, anyway. In fact, by taking a stand and having really specific values, we were able to double down and give somebody a reason to talk about our brand to another person.

The thing I’ve learned most is just leaning into those scary feelings because if it makes you feel scared or nervous, there’s opportunity in it. So I think that’s one thing I’d encourage other people to think about.

“I remember when the first products we ever made were hit by a tsunami at the manufacturer’s facility and overnight, $20,000 worth of inventory just evaporated.”

What’s been your biggest learnings since starting the business?

Oh my gosh. So many. I didn’t know anything about supply chain, everything from how to split shipments–some of it by air and some of it by sea to optimize your costs–forecasting and predicting, knowing lead times, to diversifying your supply chain so that you’re never beholden to any one manufacturer. 

There are things that you just learn the hard way. I remember when the first products we ever made were hit by a tsunami at the manufacturer’s facility and overnight, $20,000 worth of inventory just evaporated. Nobody tells you to plan for that type of stuff. There is always that element of expecting the unexpected and you’re going to consistently run into problems that you have no idea how to solve. That’s where your team comes into play and where trust comes into play and you have to lean on the people around you to figure it out together.

Give yourself extra lead time because you’re going to need it no matter what.

“Other things that get me really excited is thinking about the values we have, which is de-stigmatizing some things specifically for women. I think there’s a huge opportunity to do that in the cannabis space.”

Aside from getting ads in the New York public transit system, what’s next for the business?

There’s a massive opportunity to create better products for men as well. Other things that get me really excited is thinking about the values we have, which is de-stigmatizing some things specifically for women. I think there’s a huge opportunity to do that in the cannabis space. I do not know whether or not that will be the route we take, but I think we’ve built a brand organically based on just word of mouth and values and good product and I think that can be extrapolated to so many other vice-like verticals. 

Then the other one is international expansion. The fixed costs of doing that are so high that we need to get a little bigger before we start focusing on other countries and geographies because you have to open distribution centers and hire teams on the ground in those places and that’s not cheap.

If you had to give advice to other early stage founders starting a hardware business, what are a few of the things you would point them towards concentrating on?

Definitely teach yourself to 3D print. I cannot tell you how many YouTube videos I’ve watched on how to create CAD files. 3D printing saves so much time and money when it comes to prototyping because there’s so much of it that you just need to see, you need to hold it, you need to know the product. 

And I think that dovetails into my second point, which is: you have to know the category better than anybody else. I talk to a lot of founders who just want to build X consumer product because they think they can make a cool one. The first thing I ask is, ‘Is anybody else already doing this? What is the market landscape and have you tried 50 different products that already exist?’ Overwhelmingly I’m surprised by how many people come back and say, ‘I don’t think anything’s out there’. You have to know the industry inside and out because you have to be able to deliver something that doesn’t already exist or you have to deliver it in a mechanism or a vehicle or a channel that doesn’t already exist. 

It was a blessing and a curse not raising VC funding because we sold other people’s products for three years and we sold over 2,000 different products. So I knew exactly what types of SKUs didn’t sell and why.

I think just in terms of trying to cut down costs – 3D printing and then also just becoming like a world class expert in the category is central.

Interested in getting inventory financing like Unbound? – Connect with the team here.


About the author

Andrew McCalister

Add comment

Leave a Reply