How Shoppable Reached Profitability with 20 Employees and $5M Raised (Interview with CEO Heather Udo)

Introduction and Company Overview

Nathan Latka

00:00Hello, everybody. My guest is Heather Marie. She is the founder and CEO of a company called Shoppable, a technology company that helps media companies, brands, and retailers bring the checkout experience to anywhere a consumer discovers or engages with their products. While the Shoppable... Sorry. While with Shoppable, she won the 2013 Women in Digital Award from L'Oreal and was named one of the 10 most powerful millennials in Manhattan. I love that title by Gotham Magazine and

00:27one of the 11 tech gurus changing the luxury game by Refinery29. The company was a 2014 Webby Award honoree for online shopping, a 2016 Webby Honoree for technical achievement, and named one of the 100 Brilliant Companies by Entrepreneur Magazine. Heather, are you ready to take us to the top?

Heather Udo

00:45Yep, absolutely.

Nathan Latka

00:46My gosh, you're winning awards all over the place. So do you own New York City yet?

Heather Udo

00:50Not yet, just a small part of it.

Nathan Latka

00:52It's a small goal, right? Small goal. Exactly. So tell us about the company. Tell us, you know, what it does specifically.

How Shoppable Works and the Core Technology

Heather Udo

01:00Yeah. So we, you know, kind of taking it from the top here, we created a technology that essentially lets you purchase anything that you see anywhere online. So if you think about ecommerce, in general, you can of course purchase things directly on any retailer's website. But if you think about everything else that exists from social media, to blogs, to publishing content, to ads, videos, everything else you see as consumers were discovering products so many other places.

01:36And prior to Shoppable, there was no way to really make anything shoppable unless it was a shop itself. So what we're doing is we've created patent pending technology that we're bringing to all these different locations outside of traditional retail shops to create shoppable experiences.

Nathan Latka

01:55So, like, you have this beautiful chicken and egg problem. Right? Like, it won't work unless you get a lot of these retailers actually using it. So as a consumer like me, when I go and see my friend wearing a pair of jeans on Facebook, I can click it and buy it from whatever the jean company is, right? How do you solve that?

Solving the Chicken-and-Egg Marketplace Problem

Heather Udo

02:09Yep. Yeah, great question. So we, when I first started the company in 2011, I have to go way back, but when I first started it, that was definitely a huge problem, which was how do we, you know, decide who to go, which one to get first, and, you know, of it was we found, we kind of pitched the concept to a number of different retailers, got their kind of loose buy in enough to say, you know,

02:39these brands are coming on board, and then bring them to find our launch partner. And we actually launched the technology with the Wall Street Journal during the holidays, and by having them on board, they actually, you know, as someone with the Wall Street Journal of that caliber of branding and that type of company was able to bring in a bunch of retailers and advertisers that they already work with, and then that kind of helped fulfill the

03:06need of the products out of the gate for that particular partnership, and it really created this amazing flywheel type of experience where once they were onboarded in general for them, they were onboarded for the next company and the next company and the next company. So you have to start somewhere and start small, but we've grown tremendously since then.

Nathan Latka

03:25So in last year, 2016, how many just individual transactions were processed through your platform would you estimate?

Heather Udo

03:31We don't share specific transaction level, but as far as like on the product catalog side of things, we have grown to just under 30,000,000 products across the whole platform.

Nathan Latka

03:45Yeah. But see, Heather, I'm going to ask this question again because that doesn't necessarily mean anything. Like here's what I mean. I go to your website and I see the marketplace with most popular stuff listed here. But then I look at your Alexa ranking, and it's super low, which means people necessarily aren't seeing these. The key to making your thing work is they have to see this Ralph Lauren black and white striped scarf on somebody on

04:05Instagram or on Facebook? You have to make the sale happen there, which is maybe why you don't share transaction numbers. How do you solve that problem?

Heather Udo

04:16Well, we solve it by... So we actually are not about bringing people to shoppable.com, it's about bringing the technology to where consumers already are, so integrating the technology across a number of other different websites.

Live Demo: Dove.com Powered by Shoppable

Nathan Latka

04:30Can you give me an example? I would love to actually see that.

Heather Udo

04:34Yeah. Sure. So like going to, like, going to... Let's go to, like, dove.com is it? Dove. Is it easy? Yeah. Do And v

04:44then if you click the product tab.

Nathan Latka

04:48Yep.

Heather Udo

04:49And then just click on anything.

Nathan Latka

04:51Okay. Okay, So got

Heather Udo

04:55while it might take you a second to load, once you get into product detail pages, everything you see here is powered through Shoppable. So without Shoppable, an incredible brand like Dove didn't have the ability to sell products from Walmart and Walgreens and Target and all their favorite retailers on their own website. They had to redirect consumers off their site, and weren't able to make that final, make that connection directly for their customers. So they've integrated Shoppable

05:29technology, If and you click through, I can't see what you're looking at,

Nathan Latka

05:34but I'm you buying the white beauty bar right now because this face needs more beauty, baby.

Heather Udo

05:41That is a very popular product. So you go through that and you'll see all the way through to the checkout experience.

Nathan Latka

05:47Yep.

Heather Udo

05:49You're able to stay directly within that experience where you're getting all that product information, where you've seen that product.

Nathan Latka

05:49Got on the back

05:57end, like less, this Yeah. This is like less about sorry. I had this misplaced in my brain. This is less about influencer marketing, buying stuff you see on Facebook and social media, and more about letting these brands that didn't have sophisticated back ends to even have their own merchandise on their website and you giving them the toolset to be able to do that.

Customer Segments: CPG Brands and Publishers

Heather Udo

06:16Yep. Yeah. It's, well, it's, we bring the technology to a number of different types of companies. One, you know, big category for us are major Fortune 100 brands and CPG companies like like the Dove example we're looking at. But yeah, we've done stuff, shoppable things with other types of publishers like I mentioned, the Wall Street Journal and Conde Nast and Time Bank and

Nathan Latka

06:41What would Wall Street Journal sell? Like their digital publication or their print publication?

Heather Udo

06:46Digital.

Nathan Latka

06:46Okay. Interesting.

Heather Udo

06:47All digital.

Nathan Latka

06:48Interesting. And so what's your business model? How do make money?

Business Model: Annual SaaS License Fee

Heather Udo

06:52So we charge a, it's basically SaaS. So we charge an annual license fee for access to the technology and creating a shoppable experience on someone's site or app or video ad, etc.

Nathan Latka

07:06And is that license, I imagine you have all kinds of cohorts, big and small. So I'll just ask a generic question. What's the average Shoppable customer paying you?

Heather Udo

07:16We don't share that outside.

Nathan Latka

07:19Give a big range that stays vague, as vague as you want to have it.

Heather Udo

07:25It's I mean, it's an annual license and it's typically in the 5 figures.

Nathan Latka

07:31Okay. Got it. And is it being, you know, way more than 5 figures or way less than 5 figures dependent on like what specific metrics? Is it number of SKUs? Is it number of average checkouts? What are the levers that you pull there?

Heather Udo

07:44So it depends upon a few different things. Part of it is SKUs. Part of it is the size of the site and API calls. You know, some are obviously significantly bigger than others.

Nathan Latka

07:44Yep.

Heather Udo

07:44And then other things, you know, like service tiers, things like that.

Nathan Latka

08:00Got it. Okay, now that we kinda know more about how the business operates, tell us the juicy stuff, the story. So 2011 was launch date,

Founding Story: From Affinity Labs to Shoppable

Heather Udo

08:08Well, we started in 2011. We launched in 2012.

Nathan Latka

08:11So what were you doing before 2011?

Heather Udo

08:13Before 2011, I was... So I was post acquisition at monster.com.

Nathan Latka

08:20Oh, okay.

Heather Udo

08:20Just before that. So I had been, on the founding team of, a digital media company called Affinity Labs. And, there... I was there... CEO is Chris Michael, and you know, was his idea and his genius behind everything,

Nathan Latka

08:39At when it age brought me up 60, were at Monster?

Heather Udo

08:42No, at Affinity Labs.

Nathan Latka

08:43At Affinity, okay.

Heather Udo

08:44It was pre Monster, yeah. And then, but I was there from the time it was a PowerPoint and led sales and business development and account management and sales ops, know, it was kind of a team of one for a while. Then monster.com acquired that company in, well don't quote me, but a couple years.

Nathan Latka

09:03What? Are we talking like 2008, 2005?

Heather Udo

09:072000, yeah, want to say 2008, 2009, around that time.

Nathan Latka

09:12Okay, so just to be clear, you were in the, did you do the agency right out of college?

Heather Udo

09:17No. It wasn't an agency. It was digital media. It was a digital media

Nathan Latka

09:17Sorry.

09:20I keep saying agency. Yeah. Digital media. That was called Affinity. Did you do that right out of college?

Heather Udo

09:25I did, yes.

Nathan Latka

09:26Okay. So college, Affinity, Digital Media, you're bought by Monster. Is there an earn out? Do guys have to all stay on?

Heather Udo

09:34So it was it was all cash, but then additional incentives afterwards. So I stayed... I I made it two years after the acquisition.

Nathan Latka

09:43That's pretty good. Most don't make it that long.

Heather Udo

09:47I think of the original... I'm trying to think of, like, the five people that were there at the beginning. I... There may have been one other person still there when I left, but they may have all gone too. I may have been the last one of the five. So I stayed there until I was ready to leave and had been, you know, doing an enormous amount of research on the idea of Shoppable, which I, you know,

10:10kind of stumbled across through an moment while I was working for for Monster during that time in my life.

Financial Preparation Before Launching Shoppable

Nathan Latka

10:16Got it. And what... You know, part of what I wanna understand is like what was in your brain when you thought about leaving Monster to take the risk to start Shoppable. Financially, did you already kind of build up a pillow, like a buffer from the Monster acquisition and from just saving your salary? Were you really going balls to the wall, you had nothing and you had to make Shoppable work?

Heather Udo

10:36Oh, no, no, the former, 100%. You know, I I I think I think a lot of entrepreneurs, like, tell a certain story and not the truth behind things, and it does no one else justice. And, you know, I try to to to say the truth about every single detail that you can. So no, I... Post acquisition, you know, I knew I knew at some point I was gonna start my own company. Even before I took the

11:03position with Affinity Labs, I thought about starting a completely different company at that point in time. Didn't do it. So after the acquisition, you know, obviously paid off any debt and anything like that and...

Nathan Latka

11:15What debt did you have?

Heather Udo

11:18Student loans and...

Nathan Latka

11:18How much?

Heather Udo

11:18I don't even remember at that point in time. I had just graduated, then it was two years later, so it wasn't... I I... And this was now, I don't know, I feel like ten years ago.

Nathan Latka

11:28Are we talking though, like, are we talking like $10,000 or $100,000?

Heather Udo

11:32No. Probably closer to like 10. Wasn't that... It wasn't that much. But, you know, paid off everything and then

11:39set aside

11:41a portion of cash knowing that I'm going to be doing this relatively soon.

Nathan Latka

11:47Tell me your secret formula. What portion of cash did you make sure you put away so you could live with the rest?

Heather Udo

11:52I assumed that you could go, you know, I think it depends on what people want, but I wanted to make sure I could go for two years without taking a dime.

Nathan Latka

12:01Yep.

Heather Udo

12:01And I want to kind of overestimate what everyone else says. And then just plan because they... You know, if nothing else, you're sitting on extra cash, which is, you know, never a bad place to be in, but you also don't wanna be desperate as an entrepreneur either. So I set that aside, and then while I was still at Monster making a nice corporate salary, getting sales bonuses and things like that, I took that opportunity to, you

12:25know, continue to set stuff aside, start to, you know, pay out for certain things that I needed to do on the weekend to prepare to quit my job. And then I also downsized from my nice condo in the SoMa District.

Nathan Latka

12:40What did that cost?

Heather Udo

12:41The condo I was probably paying, at that point in time, it was a one bedroom in SoMa for like 2,400. Crazy. Something like that.

Nathan Latka

12:48What'd you downsize

Heather Udo

12:48I

12:51moved to Sausalito. So I moved across Golden Gate Bridge and lived in a tiny one bedroom that, like, it sat on the hill. I had, like, a tiny water view, but, like, floors so thin that you could hear your neighbors walking, and I'm pretty sure the guy hit the ceiling with a broom whenever I walked across the apartment.

Nathan Latka

13:09What would you pay for that?

Heather Udo

13:11Probably paid around a thousand dollars or something. Yeah. It wasn't a lot, but it was enough to know, okay, I need to start downsizing, gonna get rid of, I'm gonna have no income pretty soon

Nathan Latka

13:11Yep.

Heather Udo

13:11And just prepare for that. So that was kind of the prep.

Nathan Latka

13:26I want to pull this out of Heather's story because she talks about it like it's vanilla. But one, people rarely talk about this. And two, people assume she mentioned she put away and Heather, correct me if any part of this I'm repeating is wrong because I want to get it right. She put away two years of what if she had no salary, what her living expenses would be that she could live and not have to worry.

13:44So she's giving herself basically a two year run on Shoppable. Once she had that put away, she's going, okay, now I have two more triggers I have to pull before I jump in full fledged. One, save some of my monster salary as risk capital, right, that I can throw at Shoppable, right, so I don't have to give up equity to investors. And then two, you can also limit your expenses, people. So many entrepreneurs I talk to,

14:04Nathan, don't have any money. I don't have any money. Baloney. You have it, right? There's two ways that you can increase your buffer. One is save more money. The second is live on less. Heather did both, and that's one of the reasons, I think, that's one of the things that makes entrepreneurs successful because you do that in business as well.

Heather Udo

14:18Yeah. No, it's a huge thing. And honestly, going from someone right out of college to a great job and then post acquisition money. It was very, I had to change so many habits because I, and habits that you, I probably shouldn't have had in the first place, but, you know, the bill comes at dinner and you just add the tip and you sign it and it goes away, and someone's like, how much did that cost? I

14:41couldn't tell you because I wasn't paying attention to those details because at that point in my time, at that point in my life, I just kind of was a little too fast and loose with money. So I had to stop those types of things, stop any online shopping, but for someone for starting an online, you know, ecommerce business, it was incredible.

Nathan Latka

14:41You're AB testing.

Heather Udo

14:41Was it was incredibly difficult. I had to make... Manage return policies. And

15:04anytime I was testing, I had to make sure it went back again.

Nathan Latka

15:07That's so funny.

Heather Udo

15:09But yeah, you definitely have to change your habits and...

Nathan Latka

15:12So fast forward, Heather, we're running out of time. Fast forward on the Shoppable story. So Bootstrapped or have you raised capital?

Funding, Profitability, and Team Size

Heather Udo

15:18No, we've raised about 5,000,000.

Nathan Latka

15:20Okay, you raised 5,000,000 and what year, I assume you probably did that in many rounds, what was the most recent?

Heather Udo

15:26That was last July, August, thereabout.

Nathan Latka

15:29Okay. So about a year ago. That's So right now you're either raising another round of capital or you're selling to Shopify. Which one is it?

Heather Udo

15:38Not selling to Shopify. It's neither and not not

Nathan Latka

15:41Come on, Heather. Come on.

Heather Udo

15:42Yep.

Nathan Latka

15:43She's smiling. I don't believe you. Alright. Just kidding. What are you... So are you guys... Are you breakeven right now or are you still burning cash?

Heather Udo

15:50No. We're above breakeven.

Nathan Latka

15:53That's great.

Heather Udo

15:54The goal was, you know, and part of this was my strategy is I don't want to be one of those companies that's making announcement after announcement, taking cash, and then giving up equity forward. I don't think that venture capitalism, you know, is a metric for success. I'd rather have the equity and have, you know, take care of the team and the original investors and give out as little as possible and create a real business that's generating

16:16revenue.

Nathan Latka

16:17Yep. What's your team size to date?

Heather Udo

16:19We're about 20.

Nathan Latka

16:20Okay. 20. All based in San Fran?

Heather Udo

16:23No. All based in New York now.

Nathan Latka

16:24Oh, New York now. Okay. Very good. Okay. You made the you were talking about SoMa and moving over the Golden Gate Bridge. At some point you moved to the East Coast.

Heather Udo

16:31I did after I made it. I was in Sausalito for about six months and waking up early every morning, calling on retailers and media companies in New York, and it was just taking forever. It was going so slow, so I went on a business trip to New York. And on the second day, second or third day I was I was here, I, you know, it became so obvious. I said, like, I...

Nathan Latka

16:58You didn't leave did you?

Heather Udo

16:59No. I mean I came back and got my stuff and came back thirty days later. It just became so obvious that this type of business needed to be based in New York and we can move so much faster.

Platform Scale: Products and Merchants

Nathan Latka

17:08Yep. So where are you at? Last few questions here. Where are you at today in terms of, you said 30,000,000, I think you said SKUs or products on your platform. But how many merchants is that across? Can I just pull that number off your Shoppable thing?

Heather Udo

17:22Yeah. We're about 400 and some merchants.

Nathan Latka

17:26Yeah. Four thirty eight is what you've got listed here. Then you...

Heather Udo

17:28That sounds right.

Nathan Latka

17:29What's the difference between merchants and brands? You say 2,000 brands.

Heather Udo

17:33So one merchant could have hundreds of brands. So a merchant could be someone like Saks Fifth Avenue, whereas a brand could be someone like Theory.

Nathan Latka

17:44Oh, I see. Yes.

Heather Udo

17:46Does that make sense?

Nathan Latka

17:47It makes perfect sense. Yep. And then can I do, you mentioned earlier your kind of annually, and this is kind of a general thing you threw out, but you said annually these folks, it depends, but they'll pay on average low 5, maybe high 5 figures per year? So can I add a minimum which would be, call it a grand per month, comes out to about small, small 5 figures per year? But a grand per month multiplied

18:08by 438 and assume you're doing somewhere north, way north of 500,000 per month in revenue? More. Way more, right?

Heather Udo

18:17Yes.

Nathan Latka

18:17I'm trying to be respectful that you don't want to tell me the exact number but also put a floor so people understand some of your success.

Heather Udo

18:24Yeah, yeah, yeah. That's fair.

Nathan Latka

18:26Do you want to make that more specific?

Heather Udo

18:28No, I don't want anything out there.

Nathan Latka

18:31Keep it keep it quiet. That's smart. Look, sometimes it's smart. Sometimes it pays off to be. It all depends on your strategy. But that's good stuff.

Heather Udo

18:38It's good to control the information.

Famous Five: Books, Tools, and Habits

Nathan Latka

18:40It one hundred one hundred percent is. All right. Let's wrap up here with the famous five. Number one, what's your favorite business book?

Heather Udo

18:48I would say Never Eat Alone by Keith Ferrazzi.

Nathan Latka

18:51Number two, is there a CEO you're following or studying?

Heather Udo

18:55I would say Jennifer Hyman from Rent the Runway.

Nathan Latka

18:59Yes, so good.

19:00Number three, is there a favorite online tool you have, like Acuity Scheduling?

Heather Udo

19:04Right now it's still Boomerang for Gmail.

Nathan Latka

19:07Yep.

19:08Number four, how many hours of sleep do you get every night?

Heather Udo

19:10Usually about six.

Nathan Latka

19:12Okay, that's pretty good. And what's your situation? Married, single, do you have kids?

Heather Udo

19:15Engaged. Getting married in three weeks.

Nathan Latka

19:17Oh, congratulations. That's so exciting. Great. Okay, So no kiddos yet, right?

Heather Udo

19:21None.

Nathan Latka

19:22All right. And do you mind me asking how old you are?

Heather Udo

19:2532.

Nathan Latka

19:25Okay, so last question. Take us back twelve years. What do wish your 20 year old self knew?

Advice to Her 20-Year-Old Self

Heather Udo

19:31I would say just how long everything takes. I mean, everything, I think patience is incredibly important and preparation is important, which we've been, but yeah, I think having an idea of how long certain things take would certainly be a helpful thing to know.

Nathan Latka

19:51There you guys have it from Heather. Things take longer than you expect. You got to be patient. And she was right out of college, went to work, again, at an early agency that was acquired by... Or digital marketing that was acquired by Monster, in about five people before it was acquired. She stayed there for two years, saved up, saved up, saved up, knowing she wanted to take the risk of Shoppable, which she did in 2011, launched

20:15officially 2012, has now a team of 20 based in New York City. They've raised about 5,000,000, have over 438 merchants with over 2,000 brands using their platform paying anywhere between $10,000 and $90,000 per year, some smaller, some more, but doing well north of $500,000 per month in revenue. Heather, you're on a tear. Thank you for taking us to the top.

Heather Udo

20:37Alright. Thank you.