The Darth Vader Instant Pot and How Funding Rounds Aren't Just about Fun(ish) Parties
And Sarah Silverman's Texas raisins
Hey Gobbledeers,
How’s it going? If you live anywhere near NYC, it’s probably going better than last week when we had the smoke apocalypse. Yes, that was last week. Life moves very, very fast, doesn’t it?
Allow me to apologize here for not fulfilling the promise I never made to you of publishing this newsletter every Wednesday. If you have not noticed, today is Thursday. The reason, though, is a good one and sorta kinda related to this newsletter - I was actually with a client this week who met me through Gobbledy and brought me in to help their team focus their messaging. Here’s the good news - you can hire me, too! It’s easy! (I’m at jared@sagelett.com)
And thank you, thank you, thank you, to Gobbledy reader and Calendly CMO Jessica Gilmartin for mentioning this humble publication in an interview with Marketing Brew on Tuesday of this week. I was - truly - touched.
OK, that’s the most self-promotion I’ve done collectively in my life, and it’s making my fingers sweat. Also, why am I promoting it here, when all of you have already subscribed? I have no idea.
To the hundreds of Marketing Brew readers who have joined the Gobbledy family: Welcome!
Now on to the usual nonsense.
Everything Is Positioning…
A few days back when I was on the ol’ Peloton and choking on the air, I was watching the new Sarah Silverman stand-up special on HBO. No, HBO Max. That wasn’t it. HBO. No, dammit, I already said HBO. MAX. It was on MAX.
(Slogan…MAX: We know you already downloaded this app, despite what your TV keeps asking you to do.)
She’s telling a story about a friend of hers who didn’t appear to know that prunes were dried plums and discovered that that was because bags of prunes are now labeled as “dried plums.” Silverman says:
“Big Prune” was probably like, “We need to rebrand. We’re the shit fruit.”
It’s smart. I’d love to be in that pitch meeting:
“Pete whaddya got?”
“Texas raisins”?
Of course…they went with dried plums. There should be a warning on the label:
“Warning - These are prunes, though, right?”
1) I love that this is a standup bit about positioning.
2) Texas raisins. Har.
Heh heh, Baking
Speaking of (Instant) Pot…
If you were an early employee at a software startup and remained an employee of that software startup for a few years, you may have witnessed something like this:
Two 26 year old dudes wrote some software that solved a problem for a handful of people.
Those two 26 year olds decided that one of them would be the CEO and the other would be the CTO, and then they hired a sales guy and more people started buying the software (I’ll call that ‘Product 1’) because it did that one thing incredibly well. Like really incredibly well.
So time goes by and the thing is a hit because the target market is super clear, and customers love the software. And then they expand to new markets and it’s still going well and VCs throw a crap-ton of money at them with the (explicit? tacit? I have no idea) understanding that they will grow as fast as possible.
And to grow as fast as possible they need to create a new product (‘Product 2’) to sell to those people who loved the first product, only those customers don’t want the new product because it was rushed into production and 1/20th as good and 1/100th as unique as Product 1.
And then they raise more money because they’ve hired a lot of people to sell Product 2. And they create a 3rd piece of software (Product 3) and God knows that Product 3, besides being an obvious copycat of something else, displays none of the magic of Product 1 and also now makes people consider whether they should even keep Product 1 because Product 3 sucks so badly.
So now they have to both fire a bunch of people to reduce costs and also raise more money to keep things going. And they have to tell the VCs (or at this point, private equity? maybe?) that with some more cash they’ll be able to turn this thing around because the sales guy was an idiot and with a new sales guy everything will be good.
And it won’t be good.
And the 2 founders will sit together (either in a conference room in their now-half-empty office) or - if PE guys fired them - on a beach in Bali) and one of them will say, “y’know, we never should’ve taken all that cash. We should’ve just built our business on Product 1. Product 1 was amazing. People loved it. Couldn’t stop talking about it. If we had just slowly grown Product 1, we’d - perhaps ironically, perhaps not - be sitting on a beach in Bali talking about how amazing our company is.”
(I say ironically, as they may actually have personally made more money by taking the money and driving the company into the ground than if they took the slow-and-steady-wins-the-race approach).
I bored you with all that because the company that makes the Instant Pot declared bankruptcy earlier this week.
The speed at which Instant Pot grew and then collapsed is really only matched by the speed at which the Instant Pot turns a pile of dried beans into a pile of wet beans.
The Instant Pot (both the Darth Vader and non-Darth Vader editions) was cult hit for the company, and the founder decided to sell to private equity and merge the business with the company that makes Pyrex (and some other stuff) back in 2019 and the talk was all, “we’ll expand to Asia and we’ll make the supply chain more efficient.” Adorable!
The new CEO called the company a “product phenom” (sounds like a compliment but is actually an insult) and pushed the company to create new products, including “an electric Dutch oven, stand mixer and coffee maker.”
You may be aware that there are other coffee makers in the market. And the thing that made the Instant Pot actually unique - cooks foods quickly that generally can’t be cooked quickly, which is why “instant” was in the name - is actually sorta by definition the exact opposite of what a Dutch oven does for a living (instantly slow braise your brisket for 7 hours, instantly.)
And that is why they were screwed. They thought they could non-instant their way to success.
I bring all of that up because Instant Pot was such a perfect example of how the financial structure of a company has a tremendous impact on the growth and marketing decisions of the company.
And I know that many marketing folks are, let’s say, less-than-comfortable with the finance part of the business. And many finance folks are, let’s say, less-than-patient with the marketing folks. And founders mostly like to talk with the company about raising money when it’s all, “let’s have a party!” and not, “hey, raising this money means we’re going to have to do a bunch of risky stuff we weren’t planning on doing!”
As I wrote here about the conundrum of having to grow quickly:
Companies under $100 million in ARR are typically very afraid of getting stuck in a market that is too small, so they position themselves against a market that’s too big, and they struggle to grow because the pain they solve is not obvious.
The ability to grow your business slowly, focusing methodically on one market and then expanding slowly to new markets, is a gift you’re given when you don’t take outside funding.
When you do take outside funding, the gift you’re given is that the founders have enough cash to go live in Bali if everything blows up (if they were smart enough to ignore the advice that founders shouldn’t sell shares when they raise a round).
This is not to say that trying to grow like crazy without regard to logic isn’t fun. It sure is! Let’s make a Darth Vader air fryer (or whatever.) But the financial structure of the company is going to dictate your product and marketing choices far more than anyone likes to talk about.
(apologies for dangling the preposition)
Next week - some Gartner charts that a bunch of you have been sending me. I love it - thank you!
And as always, thank you for subscribing and spending a few minutes with this each week. It means a lot.
If you want to talk about your website messaging, Darth Vader, or whatever, I’d love to chat for 30 minutes. Here’s my Calendly link.
And here’s my “Share Gobbledy” link: